DEF 14A 1 prox2001.txt UNIT CORPORATION 2001 PROXY 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: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a- 6(e)(2) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to '240.14a-12 UNIT CORPORATION ________________________________________________________________________________ (Name of Registrant as Specified In Its Charter) ________________________________________________________________________________ (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: ___________________________________________________________________________ (2) Aggregate number of securities to which transaction applies: ___________________________________________________________________________ (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ___________________________________________________________________________ (4) Proposed maximum aggregate value of transaction: ___________________________________________________________________________ (5) Total fee paid: ___________________________________________________________________________ [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ___________________________________________________________________________ (2) Form, Schedule or Registration Statement No.: ___________________________________________________________________________ (3) Filing Party: ___________________________________________________________________________ (4) Date Filed: ___________________________________________________________________________ (Unit LOGO) UNIT CORPORATION NOTICE OF THE ANNUAL MEETING OF OUR STOCKHOLDERS AND PROXY STATEMENT Meeting Date...... Wednesday, May 2, 2001 Meeting Time...... 11:00 a.m. Meeting Place..... Tulsa Room - Ninth Floor Bank of Oklahoma Tower One Williams Center Tulsa, Oklahoma 74172 (Picture of Rig 201) Daybreak on Unit Drilling Company's Rig 201 in Wyoming. Rig 201 recently completed drilling the deepest well in Wyoming. Dear Stockholder: On behalf of the board of directors and management, I would like to invite you to attend our Annual Meeting of Stockholders to be held on Wednesday, May 2, 2001 at 11:00 a.m. This year's meeting will be held in the Tulsa Room on the ninth floor of the Bank of Oklahoma Tower, One Williams Center, Tulsa, Oklahoma. By attending the meeting you will have an opportunity to hear a report on our operations and to meet our directors and officers. Information about the meeting, including the various matters on which you as a stockholder will act, may be found in the attached Notice of Annual Meeting of Stockholders and Proxy Statement. Whether or not you plan to attend the meeting in person, it is important that your shares be represented and voted. Please sign, date and return the enclosed proxy in the envelope provided. I look forward to your participation and thank you for your continued support. Dated this 16th day of March, 2001. Sincerely, King P. Kirchner UNIT CORPORATION 1000 Kensington Tower I 7130 South Lewis Tulsa, Oklahoma 74136 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To Be Held On May 2, 2001 -------------------------------------------------------------------------------- Unit Corporation, a Delaware corporation, will hold its Annual Meeting of Stockholders in the Tulsa Room on the ninth floor of the Bank of Oklahoma Tower, One Williams Center, Tulsa, Oklahoma, on Wednesday, May 2, 2001 at 11:00 a.m., local time. At the meeting we will: . elect three directors for a three-year term expiring in 2004 (Item No. 1 on the Proxy Card); . ratify the selection of PricewaterhouseCoopers LLP, Tulsa, Oklahoma, as our independent auditors for our fiscal year 2001 (Item No. 2 on the Proxy Card); and . transact such other business as may properly come before the meeting or any adjournment(s) thereof. Only stockholders of record at the close of business on March 16, 2001, the record date, are entitled to notice of and to vote at the meeting or any adjournment(s) of the meeting. A complete list of such stockholders will be open for examination by any stockholder for any purpose germane to the meeting at our office at 1000 Kensington Tower I, 7130 South Lewis, Tulsa, Oklahoma 74136, for a period of ten days prior to the meeting. Our Proxy Statement and Annual Report are submitted with this notice. Dated this 16th day of March, 2001. By Order of the Board of Directors, Mark E. Schell Secretary and General Counsel YOUR VOTE IS IMPORTANT Whether or not you plan to attend the meeting, we urge you to vote. PROXY STATEMENT ANNUAL MEETING OF STOCKHOLDERS MAY 2, 2001 -------------------------------------------------------------------------------- This Proxy Statement and the accompanying proxy card are being mailed to our stockholders in connection with the solicitation of proxies by the board of directors for the 2001 Annual Meeting of Stockholders. Mailing of this Proxy Statement commenced on or about March 22, 2001. Table of Contents Page ------------------------------------------------------------------------------- Questions and Answers....................................................... 1 Item 1: Election Of Directors............................................... 3 Board and Committee Information............................................. 5 Directors' Compensation and Benefits........................................ 5 Ownership of our Common Stock by Beneficial Owners and Management........... 6 Executive Compensation...................................................... 8 Termination of Employment and Change in Control Arrangements................ 10 Report of the Compensation Committee........................................ 13 Report of the Audit Committee............................................... 14 Compensation Committee Interlocks and Insider Participation................. 15 Performance Graph........................................................... 16 Item 2: Ratification of Appointment of Auditors............................. 17 Other Matters............................................................... 17 QUESTIONS AND ANSWERS ================================================================================ Q: Who Can Vote? A: You can vote if you were a stockholder at the close of business on the record date, March 16, 2001. On that date, there were 35,902,914 shares outstanding and entitled to vote at the annual meeting. Q: Who Can Attend The Meeting? A: All stockholders can attend. Q: What Am I Voting On? A: You are voting on: . The election of three nominees as directors for terms that expire in 2004. The board of directors' nominees are Earle Lamborn, William B. Morgan, and John H. Williams. . The ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors for 2001. The three nominees for director who receive the most votes will be elected. For the other proposal to be approved, more votes must be cast for it than against it. Q: How Will The Proxies Vote On Any Other Business Brought Up At The Meeting? A: By submitting your proxy card, you authorize the proxies to use their judgment to determine how to vote on any other matter brought before the annual meeting. We do not know of any other business to be considered at the annual meeting. The proxies' authority to vote according to their judgment applies only to shares you own as a stockholder of record. Q: How Do I Cast My Vote? A: If you hold your shares as a stockholder of record, you can vote in person at the annual meeting or you can vote by mail. If you are a street-name stockholder, you will receive instructions from your bank, broker or other nominee describing how to vote your shares. The enclosed proxy card contains instructions for mail voting. The proxies identified on the back of the proxy card will vote the shares of which you are the stockholder of record in accordance with your instructions. If you submit a proxy card without giving specific voting instructions, the proxies will vote those shares as recommended by the board of directors. Q: How Does The Board Recommend I Vote On The Proposals? A: The board recommends you vote for each of the proposals. Q: Can I Revoke My Proxy Card? A: Yes. You can revoke your proxy card by: . Submitting a new proxy card; . Giving written notice before the meeting to the company's secretary stating that you are revoking your proxy card; or . Attending the meeting and voting your shares in person. Q: Who Will Count The Vote? A: Mellon Investor Services LLC, our transfer agent, will count the vote. Representatives of Mellon Investor Services LLC will act as the inspectors of election. Q: What Is A "Quorum"? A: A quorum is the number of shares that must be present to hold the annual meeting. The quorum requirement for the annual meeting is one-half of the outstanding shares as of the record date, present in person or represented by proxy. If you submit a valid proxy card or attend the annual meeting, your shares will be counted to determine whether there is a quorum. 1 Abstentions and broker non-votes count toward the quorum. "Broker non- votes" occur when nominees (such as banks and brokers) that hold shares on behalf of beneficial owners do not receive voting instructions from the beneficial owners by ten days before the meeting and do not have discretionary voting authority to vote those shares. Q: Will Broker Non-Votes Or Abstentions Affect The Voting Results? A: Although abstentions and broker non-votes count for quorum purposes, they do not count as votes for or against a proposal. As a result, abstentions and broker non-votes will not affect the voting results on the election of directors or the ratification of the appointment of auditors. Q: What Shares Are Included On My Proxy Card? A: Your proxy card represents all shares registered to your account in the same social security number and address. Q: What Does It Mean If I Get More Than One Proxy Card? A: Your shares are probably registered in more than one account. You should vote each proxy card you receive. We encourage you to consolidate all your accounts by registering them in the same name, social security number and address. Q: How Many Votes Can I Cast? A: On all matters you are entitled to one vote per share. Q: When Are Stockholder Proposals Due For The 2002 Annual Meeting Of Stockholders? A: If you want to present a proposal from the floor at the 2002 annual meeting, you must give us written notice of your proposal no later than February 14, 2002. Your notice should be sent to the General Counsel and Secretary, Unit Corporation, 1000 Kensington Tower I, 7130 South Lewis, Tulsa, Oklahoma 74136. If instead of presenting your proposal at the meeting you want your proposal to be considered for inclusion in next year's proxy statement, you must submit the proposal in writing to the General Counsel and Secretary so that it is received at the above address by November 30, 2001. Q: How Is This Proxy Solicitation Being Conducted? A: We hired Regan & Associates, New York, New York, to assist in the distribution of proxy materials and solicitation of votes for a fee of $3,500, plus out-of-pocket expenses. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of- pocket expenses for forwarding proxy and solicitation materials to stockholders. In addition, some of our employees may solicit proxies. Regan & Associates and our employees may solicit proxies in person, by telephone and by mail. None of our employees will receive special compensation for these services, which the employees will perform as part of their regular duties. 2 ITEM 1: ELECTION OF DIRECTORS ================================================================================ Item 1 is the election of three directors to the board of directors. Our board is composed of eight members and is divided into three classes with each director serving for a three-year term. At each annual meeting, the term of one class expires. The term of service for those directors serving in Class II expires at this meeting. We know of no reason why any nominee may be unable to serve as a director. If any nominee is unable to serve, your proxy may vote for another nominee proposed by the board, or the board may reduce the number of directors to be elected. If any director resigns, dies or is otherwise unable to serve out his or her term, or the board increases the number of directors, the board may fill the vacancy until the next annual meeting. Information concerning each nominee and each continuing director is provided below. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF ELECTING THE THREE NOMINEES. NOMINEES FOR DIRECTOR -------------------------------------------------------------------------------- Terms Earle Mr. Lamborn has been actively involved in the oil field expiring Lamborn for over 49 years, joining Unit's predecessor in 1952 at Age 66 prior to its becoming a publicly-held corporation. He annual Director was elected Vice President, Drilling in 1973 and to his meeting since current position as Senior Vice President, Drilling and (Class II) 1979 director in 1979. William B. Mr. Morgan was elected a director of Unit in February Morgan 1988. Mr. Morgan has been Executive Vice President and Age 57 General Counsel of St. John Health Systems, Inc., Tulsa, Director Oklahoma, since March 1, 1995 and, since October 1, since 1996, the President of its principal for-profit 1988 subsidiary Utica Services, Inc. Before that, he was a Partner in the law firm of Doerner, Saunders, Daniel & Anderson, Tulsa, Oklahoma, for over 20 years. John H. Mr. Williams was elected a director of Unit in December Williams 1988. Prior to retiring on December 31, 1978, he was Age 82 Chairman of the Board and Chief Executive Officer of The Director Williams Companies, Inc., where he continues to serve as since an honorary director. Mr. Williams also serves as a 1988 director of Apco Argentina, Inc., Westwood Corporation and Willbros Group, Inc. In addition, Mr. Williams also serves as a director of the Gilcrease Museum and is a Trustee for the Tulsa Performing Arts Center Trust. 3 CONTINUING DIRECTORS -------------------------------------------------------------------------------- Terms King P. Mr. Kirchner, a co-founder of Unit, has been the expiring Kirchner Chairman of the Board, Chief Executive Officer and a at Age 73 director since 1963 and was President until November 2002 Director 1983. Mr. Kirchner is a Registered Professional Engineer annual since 1963 within the State of Oklahoma, having received degrees (Class III) in Mechanical Engineering from Oklahoma State University and in Petroleum Engineering, with honors, from the University of Oklahoma. Following graduation, he was employed by Lufkin Manufacturing as a development engineer for hydraulic pumping units. Prior to co- founding Unit he served in the US Army during the Korean war and after that as vice-president engineering and operations for Woolaroc Oil Company. Don Cook Mr. Cook has served as a director of Unit since Unit's Age 76 inception. He is a Certified Public Accountant and was Director a partner in the accounting firm of Finley & Cook, since 1963 Shawnee, Oklahoma, from 1950 until 1987, when he retired. J. Michael Mr. Adcock was elected a director of Unit in December Adcock 1997. He is an attorney and currently manages a private Age 52 trust that deals in real estate, oil and gas properties Director and commercial banking as well as other equity since 1997 investments. He is Chairman of the Board of Arvest Bank, Shawnee, and Mid America Healthcare, Inc. Between 1997 and September, 1998 he was the Chairman of the Board of Ameribank and President and Chief Executive Officer of American National Bank and Trust Company of Shawnee, Oklahoma, and Chairman of AmeriTrust Corporation, Tulsa, Oklahoma. Prior to holding these positions, he was engaged in the private practice of law and served as General Counsel for Ameribank Corporation. Terms John G. Mr. Nikkel joined Unit in 1983 as its President and a expiring Nikkel director. From 1976 until January 1982 when he co- at Age 66 founded Nike Exploration Company, Mr. Nikkel was 2003 Director an officer and director of Cotton Petroleum Corporation, annual since 1983 serving as the President of Cotton from 1979 until his meeting departure. Prior to joining Cotton, Mr. Nikkel was (Class I) employed by Amoco Production Company for 18 years, last serving as Division Geologist for Amoco's Denver Division. Mr. Nikkel presently serves as President and a director of Nike Exploration Company. Mr. Nikkel received a Bachelor of Science degree in Geology and Mathematics from Texas Christian University. John S. Mr. Zink was elected a director of Unit in May of 1982. Zink For over 5 years, he has been a principal in several Age 72 privately held companies engaged in the businesses of Director designing and manufacturing equipment used in the since petroleum industry, construction, and heating and air 1982 conditioning services and installation. He holds a Bachelor of Science degree in Mechanical Engineering from Oklahoma State University. He is also a director of Matrix Service Company, Tulsa, Oklahoma. 4 BOARD AND COMMITTEE INFORMATION ================================================================================ The board held seven meetings during 2000. No director attended fewer than 75% of the board meetings and the meetings of committees on which he served during the year. The board has standing Audit and Compensation committees. The board determines the membership of each committee from time to time. Only directors who are not officers of the company serve on the committees. The following table identifies the membership of the Audit and the Compensation committees and the number of committee meetings held during 2000. A summary of each committee's responsibilities follows the table. Director Audit Compensation -------- ----- ------------ John S. Zink X X William B. Morgan X John H. Williams X Don Cook X X J. Michael Adcock X X Number of meetings in 2000 2 2 The Audit Committee: . Appoints the independent auditors subject to ratification by the board. . Reviews our annual financial statements. . Consults with our personnel and the independent auditors to determine the adequacy of internal accounting controls. The Compensation Committee: . Approves the compensation of the Chief Executive Officer and our other officers. . Administers our stock option plans. . Reviews and, in some cases, administers our various benefit plans. DIRECTORS' COMPENSATION AND BENEFITS ================================================================================ . We pay non-employee directors an annual fee of $18,000, payable in four installments, and an annual fee of $2,000 for each committee on which he served. Each non-employee director also receives $1,000 for each board meeting attended and $500 for each committee meeting attended. . We reimburse all non-employee directors for travel expenses incurred attending stockholder, board and committee meetings. 5 . Each non-employee director automatically receives an option to purchase 3,500 shares of common stock on the first business day following each annual meeting of our stockholders. The option exercise price is the fair market value of our common stock on such date. Payment of the exercise price may be made in cash or in shares of common stock that have been held by the director for at least one year. No stock option may be exercised during the first six months of its term except in the case of death. Each option has a ten-year term. In 2000 stock options were granted for an aggregate of 17,500 shares at $12.1875 per share. An aggregate of 60,500 shares are subject to currently outstanding options. OWNERSHIP OF OUR COMMON STOCK BY BENEFICIAL OWNERS AND MANAGEMENT ================================================================================ The following table sets forth information concerning the beneficial ownership of our common stock by each director, each executive officer named in the Summary Compensation Table and by all directors and executive officers as a group. Except as otherwise noted, all shares are directly owned. STOCK OWNED BY OUR DIRECTORS AND EXECUTIVE OFFICERS AS OF MARCH 00, 2001 ---------------------------------------------------------------------------- Aggregate Number of Percent of Outstanding Name of Beneficial Owner Beneficially Owned Shares Common Stock (1) ------------------------ ------------------------- ---------------------- King P. Kirchner 965,173 (2)(3) 2.688 Don Cook 26,638 (4) * Earle Lamborn 286,708 (2)(3)(6) * William B. Morgan 13,600 (4) * John G. Nikkel 417,448 (2)(3)(6)(7) * John H. Williams 1,000 * John S. Zink 64,500 (4) * J. Michael Adcock 896,291 (4)(5) 2.495 Philip M. Keeley 134,968 (2)(6)(7) * Larry D. Pinkston 102,216 (2)(3)(6) * All Directors and Executive Officers as a Group (11 individuals) 2,944,397 (2)-(7) 8.195 * Less than one percent Notes to table: --------------- (1) The number of shares includes the shares presently issued and outstanding plus the number of shares that any owner has the right to acquire within 60 days after March 16, 2001. For purposes of calculating the percentage of the common stock outstanding held by each owner, the total number of shares excludes the shares which all other persons have the right to acquire within 60 days after March 16, 2001, pursuant to the exercise of outstanding stock options. 6 (2) Includes shares of common stock held under our 401(k) thrift plan as of March 2, 2001 for the account of: King P. Kirchner, 9,825; Earle Lamborn, 12,670; John G. Nikkel, 30,372; Philip M. Keeley, 10,683; Larry D. Pinkston,19,541; and directors and officers as a group, 83,150. (3) Of the shares listed as being beneficially owned, the following individuals disclaim any beneficial interest in shares held by spouses or for the benefit of family members: King P. Kirchner, 28,828; John G. Nikkel, 83,149; Earle Lamborn, 164,518; and Larry D. Pinkston, 2,000. (4) Includes shares subject to unexercised stock options under the Company's Non-Employee Directors' Stock Option Plan to each of the following which may be exercised at the discretion of the holder: Don Cook, 21,000; William B. Morgan, 7,500; John S. Zink, 23,500; and J. Michael Adcock, 8,500; all non-Employee Directors, as a group, 60,500. (5) Of the shares listed as being beneficially owned, 885,791 shares are owned by a trust of which Mr. Adcock is one of three trustees. (6) Includes shares subject to unexercised stock options under our stock option plan to each of the following which may be exercised within 60 days at the discretion of the holder: Earle Lamborn, 51,500; John G. Nikkel, 85,000; Philip M. Keeley, 29,500; Larry D. Pinkston, 35,800; and directors and executive officers as a group, 220,100. (7) Includes 7,149 shares and 2,862 shares beneficially owned by Mr. Nikkel and Mr. Keeley, respectively, held by a private company over which Mr. Nikkel and Mr. Keeley share voting and investment power. The following table sets forth information concerning the beneficial ownership of our common stock by stockholders who own at least five percent of our common stock. STOCKHOLDERS WHO OWN AT LEAST 5% OF OUR COMMON STOCK ----------------------------------------------------------------------------- Amount and Nature of Name and Address Beneficial Ownership (1) Percent of Class ---------------- ------------------------ ---------------- Dimensional Fund Advisors Inc. 1299 Ocean Avenue 11th Floor Santa Monica, CA. 90401 1,820,100 5.09076 Forstmann-Leff Associates, LLC 590 Madison Avenue New York, New York 10022 4,540,534 12.7 Notes to Table: --------------- (1) Beneficial ownership is based on the Schedule 13G most recently filed by the stockholder. Beneficial ownership may under certain circumstances include both voting power and investment power. Information is provided for reporting purposes only and should not be construed as an admission of actual beneficial ownership. 7 EXECUTIVE COMPENSATION ================================================================================ The following Summary Compensation Table shows compensation information for the Chief Executive Officer and each of our other four most highly compensated executive officers for services in all capacities in 1998, 1999 and 2000. SUMMARY COMPENSATION TABLE ------------------------------------------------------------------------------ Long Term Compensation ----------------------------- Annual Compensation (1) Awards Payouts ------------------------------ --------------------- ------- (a) (b) (c) (d) (e) (f) (g) (h) (i) ----------- ------ ------- ------- ------- ---------- ---------- ------- ------ Other All Annual Restricted Securities Other Name and Compen- Stock Underlying LTIP Compen- Principal Salary Bonus sation Award(s) Options Payout sation Position(s) Year ($) ($) ($)(2) ($) (#) ($) ($)(3) ----------- ------ ------- ------- ------- ---------- ---------- ------- ------ King P. 2000 265,000 0 0 0 0 0 8,480 Kirchner 1999 250,000 0 0 0 0 0 7,200 Chairman 1998 250,000 0 0 0 0 0 6,000 and CEO John G. 2000 265,000 108,333 9,644 0 20,000 0 10,405 Nikkel 1999 250,000 108,333 7,011 0 0 0 8,000 President 1998 250,000 71,666 7,225 0 40,000 0 5,833 and COO Earle 2000 179,000 71,666 2,733 0 10,000 0 10,500 Lamborn 1999 170,000 71,666 1,949 0 0 0 8,000 Sr. Vice 1998 170,000 58,333 1,766 0 15,000 0 9,154 President -Drilling Philip M. 2000 179,000 71,666 7,481 0 10,000 0 10,500 Keeley 1999 170,000 71,666 7,841 0 0 0 8,000 Sr. Vice 1998 170,000 50,000 7,434 0 15,000 0 8,025 President Exploration & Production Larry D. 2000 133,000 39,000 5,134 0 7,500 0 7,377 Pinkston 1999 122,500 39,000 0 0 0 0 6,816 V. P., 1998 122,500 33,333 0 0 12,000 0 7,182 CFO and Treasurer Notes to Table: --------------- (1) Compensation deferred at the election of an executive is included in the year earned. (2) The amount listed under the Other Annual Compensation column represents the dollar value associated with the use of a company vehicle by the named executive officer. (3) "All Other Compensation" represents Unit's matching contributions to Unit's 401(k) thrift plan for the named executive officer. 8 Stock Options The following table provides certain information regarding stock options granted to each of the named officers during 2000. OPTIONS GRANTED IN 2000 -------------------------------------------------------------------------------- Potential Realizable Value at Assumed Annual Rate of Stock Price Appreciation for Individual Grants (1) Option Terms (3) -------------------------------------------------- ----------------- Number of Percent of Securities Total Options Underlying Granted to Options Employee In Exercisable Experation Name Granted (#) 2000 (2) Price ($/Sh) Date 5%($) 10%($) -------- ----------- -------------- ------------ ---------- ------- -------- King P. Kirchner n/a n/a n/a n/a n/a n/a John G. Nikkel 20,000 13.7 $16.6875 12/19/10 209,894 531,912 Earle Lamborn 10,000 6.8 $16.6875 12/19/10 104,947 265,956 Philip M. Keeley 10,000 6.8 $16.6875 12/19/10 104,947 265,956 Larry D. Pinkston 7,500 5.1 $16.6875 12/19/10 78,710 199,467 (1) All options were granted on December 19, 2000 at an exercise price equal to the closing market price of the common stock on that date. The options vest in 20% annual increments commencing 12 months after their date of grant. All options vest immediately in the event of a "change in control," as defined in the plan. (2) Based on a total of 146,000 options being granted to certain employees during fiscal 2000. (3) Caution is recommended in interpreting the financial significance of these figures. They are calculated by multiplying the number of options granted by the difference between a future hypothetical stock price and the option exercise price and are shown pursuant to rules of the Securities and Exchange Commission. They assume the value of the Company Common Stock appreciates 5% and 10% each year, compounded annually, for ten years (the life of each option). They are not intended to forecast possible future appreciation, if any, of such stock price or to establish a present value of options. Also, if appreciation does not occur at the 5% or 10% per year rate, the amounts shown would not be realized by the year 2010. Depending on inflation rates, these amounts may be worth significantly less in 2010, in real terms, than their value today. 9 The following table shows options that the named officers exercised during 2000 and the number of shares and the value of options outstanding as of December 31, 2000 for each named officer. AGGREGATE OPTION EXERCISES IN 2000 AND FISCAL YEAR END OPTION VALUES ------------------------------------------------------------------------------- (a) (b) (c) (d) (e) --------- ----------- -------- --------------------- --------------------- Number of Value of Securities Unexercised Underlying In-the-Money Unexercised Options at Shares Options at FY-End Acquired FY-End ($)(2) on Value --------------------- --------------------- Exercise Realized Exercis- Unexercis- Exercis- Unexercis- Name (#) ($)(1) able able able able --------- ----------- -------- ---------- ---------- ---------- ---------- King P. n/a n/a n/a n/a n/a n/a Kirchner John G. 0 n/a 135,000 50,000 2,034,474 469,065 Nikkel Earle 0 n/a 51,500 21,000 783,149 178,907 Lamborn Philip M. 0 n/a 42,500 21,000 634,323 178,907 Keeley Larry D. 0 n/a 35,800 16,200 539,521 141,001 Pinkston Notes to Table: --------------- (1) Value realized equals fair market value of the stock on date of exercise, less the exercise price, times the number of shares acquired. (2) The value of unexercised in-the-money options at year end assumes a fair market value for the Company's common stock of $18.9063, the average of the high and low prices of the Company's common stock on the New York Stock Exchange on December 29, 2000. Value is calculated on the basis of the difference between $18.9063 and the option exercise price multiplied by the number of shares of common stock underlying the options. Long term Performance Plans and Pension Plans We do not currently have any long term performance plans or pension plans. TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS =============================================================================== Stock Option Plan. Our stock option plan contains a provision vesting all stock options in the event of a "change-in-control" of us. A "change-in-control" is deemed to have occurred at such time as any person or group, other than Unit or an Exempt Person, is or becomes the beneficial owner, directly or indirectly, of our securities representing 50% or more of the combined voting power of our then outstanding securities. An Exempt Person is generally defined to be any person (or estate or trust of such person) who, on the date of 10 the plan, owned securities representing more than 20% of the combined voting power of our then outstanding securities, and any spouse, parent or issue of such person. Separation Benefit Plan. On December 20, 1996, effective as of January 1, 1997, the board adopted the Separation Benefit Plan of Unit Corporation and Participating Subsidiaries (the "Plan"). The Plan is generally applicable to all of our full time salaried employees and to the employees of our two principal subsidiaries, excluding any employees who are also our directors, who have been with their employer for at least one year. Subject to the terms of the Plan, any eligible employee whose employment is terminated is entitled to receive a separation benefit in an amount calculated by dividing the eligible employee's average annual base salary in effect immediately prior to such employee's separation by 52 to determine a weekly separation benefit amount. The number of weekly separation benefit payments then payable to an eligible employee is calculated based on the employee's years of service in accordance with a schedule set forth in the Plan. Employees who voluntarily leave their employment are not entitled to receive a separation benefit unless they have completed at least 20 years of service. Any eligible employee who has completed 20 years of service or more is vested in his or her separation benefit, subject to fulfilling the other requirements of the Plan. Separation benefit payments are limited to a maximum of 104 weekly payments. The Plan also provides that, unless otherwise provided by our board of directors prior to a "change-in-control" of us, as defined in the Plan, all eligible employees shall be vested in their separation benefit as of the date of such "change-in-control" based on their years of service. As a condition to receiving the separation benefits, employees must sign a separation agreement waiving any claims the employee may have against our subsidiaries or us. Senior Management Separation Benefit Plan. On October 28, 1997, the board adopted the Separation Benefit Plan for Senior Management. This plan is similar in terms to the benefits and requirements described above for the Separation Benefit Plan, with the exception that the compensation committee determines who will participate in this plan. In addition, the committee is given the authority to increase (up to a maximum of 104) the number of weekly separation benefit payments a participant would otherwise be entitled to receive under the plan if the participant is involuntarily terminated. Currently, only Messrs. Kirchner, Lamborn and Nikkel are participants in this plan. Change Of Control Arrangements We have entered into key employee change of control contracts with each of Messers. Nikkel, Lamborn, Keeley, Pinkston and Schell. These severance contracts have an initial three-year term that is automatically extended for one year upon each anniversary, unless a notice not to extend is given by us. If a change of control of the company (as defined below) occurs during the term of the severance contract, then the contract becomes operative for a fixed three-year period. The severance contracts generally provide that the executive's terms and conditions of employment (including position, work location, compensation and benefits) will not be adversely changed during the three-year period after a change of control. If the executive's employment is terminated by the company (other than for cause, death or disability), the executive terminates for good reason during such three-year period, or the executive terminates employment for any reason during the 30-day period following the first anniversary of the change of control, and upon certain terminations prior to a change of control or in connection with or in anticipation of a change of control, the 11 executive is generally entitled to receive the following payment and benefits: . earned but unpaid compensation; . up to 2.9 times the executive's base salary plus annual bonus (based on historic annual bonus); and . the company matching contributions that would have been made had the executive continued to participate in the company's 401(k) plan for up to an additional three years. In addition, the severance contract provides for a continuation of various medical, dental, disability and life insurance plans and financial counseling for a period of up to three years, outplacement services and the payment of all legal fees and expenses incurred by the executive in enforcing any right or benefit provided by the severance contracts. The severance contract provides that the executive is entitled to receive a payment in an amount sufficient to make the executive whole for any excise tax on excess parachute payments imposed under Section 4999 of the Code. As a condition to receipt of these severance benefits, the executive must remain in the employ of the company and render services commensurate with his position. The executive must also agree to retain in confidence any and all confidential information known to him concerning the company and its business so long as the information is not otherwise publicly disclosed. As of the date of this proxy statement, no amounts have been paid under the severance contracts. For purposes of the severance contracts a change of control is generally defined as: (1) Any individual, entity or group acquiring beneficial ownership of 15% or more of either the outstanding shares of the company's common stock or the combined voting power of the outstanding voting securities of the company entitled to vote generally for the election of directors; (2) Individuals who constitute the board on the date hereof cease to constitute a majority of the board, provided that an individual whose election or nomination as a director is approved by a vote of at least a majority of the directors as of the date hereof will be deemed a member of the incumbent board; (3) Approval by the company's stockholders of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the company or the acquisition of assets of another entity, unless following the business combination: . all or substantially all of the beneficial owners of the company's outstanding Common Stock prior to the business combination own more than 60% of the outstanding common stock of the corporation resulting from the business combination; . no person, entity or group owns 15% or more of the outstanding voting securities of the corporation resulting from the business combination; and, . at least a majority of the board of the corporation resulting from the business combination were members of the company's Board prior to the business combination; or (4) Approval by the company's stockholders of a complete liquidation or dissolution of the company. 12 REPORT OF THE COMPENSATION COMMITTEE =============================================================================== The following report of the compensation committee shall not be incorporated by reference into any of our prior filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that incorporated future filings or portions thereof (including this proxy statement or the "Executive Compensation" section of this proxy statement), except to the extent that we specifically incorporate this information by reference. The compensation committee is responsible for setting and overseeing the compensation of our executive officers. The committee is composed entirely of independent outside directors. There are no interlocking relationships between any of our executive officers and any entity whose directors or executive officers serve on the committee. The members of the committee are John S. Zink, Don Cook, J. Michael Adcock and John H. Williams. Objectives and Considerations The objectives of the committee in determining executive compensation are to retain and reward qualified individuals serving as our executive officers. To achieve these objectives, the committee relies primarily on salary, annual bonuses (awardable either in stock or cash) and awards under our stock option plan. In making its decisions, the committee takes into account the conditions within our industry, our income and cash flow and the attainment of any designated business objectives. Individual performances are also reviewed, taking into account the individual's responsibilities, experience and potential, his or her period of service and current salary and the individual's compensation level as compared to similar positions at other companies. The committee's evaluation of these considerations is, for the most part, subjective and, to date, it has not established any specific written compensation plans or formulas pursuant to which the executive officers' annual compensation is determined. Base Salary We do not currently have an employment agreement with any of our executive officers. In determining the base salaries for the executive officers for 2000 the committee relied primarily on its evaluation of the compensation being paid to individuals holding comparable positions in the industry. In doing so, the committee relied, to a large extent, on the results of the Peat Marwick Oil and Gas Compensation Survey 1999 Report, which surveyed the compensation and benefit programs of a number of oil and gas, related companies, one of which was us. It was the committee's objective to set the executives' base salary at approximately the competitive mid-range reflected in the survey. Within this range, the committee then made any adjustments based on individual performance evaluations. Taking these factors into consideration, the committee decided to increase the 2000 salaries of the following named executive officers by the percentages indicated: John Nikkel 6%; Earle Lamborn 5.3%; Philip Keeley 5.3% and Larry Pinkston 8.6%. Bonuses Executive officers are eligible to earn annual bonuses either in cash or in stock. Stock bonuses are awarded pursuant to the bonus plan approved by our stockholders on May 1, 1985 and, as amended, on May 3, 1995. The amount and type of any bonuses awarded to executive officers is determined solely at the subjective discretion of the committee. The committee does not base its decisions on predetermined formulas, 13 choosing instead to rely on its evaluation of the various considerations set forth above. In addition, when appropriate, bonuses are awarded to recognize short-term individual performance. Stock Options Stock options are granted under the stock option plan approved by our stockholders on May 2, 1984 and, as amended, on May 3, 1989 and May 3, 1995. The committee believes that stock options provide an incentive for the executive officers to maximize long-term stockholder value. Historically, although not required, stock option grants are made at 100% of the market price on the date of grant. Options become exercisable in annual 20% increments after one year and have a ten-year life. The number of options that are granted to an executive officer is based on the individual's performance and level of responsibility. Option awards will vary in size based on position level (more senior managers receive a higher multiple). Stock options are granted to the executive officers at the discretion of the committee. The committee's decisions with respect to awarding stock options are generally made late each year thus allowing the committee to evaluate our annual results as part of its decision making process. Chief Executive Officer Mr. Kirchner's salary and bonus are determined by the committee substantially in accordance with the policies described above relating to all executive officers. Based on its review, the committee choose to raise Mr. Kirchner's 2000 salary by 6%. 1993 OBRA - Executive Compensation Tax Deductibility Beginning in 1995, the Internal Revenue Code, Section 162(m), limits our ability to deduct, for federal income tax purposes, certain non-performance based compensation in excess of $1 million per year paid to individual officers named in the Summary Compensation Table. Based on the amount of compensation paid to each of the named officers in fiscal 2000, it does not appear that Section 162(m) will have a significant impact on us in the near term. However, the committee will continue to monitor whether its executive compensation plans should be amended to meet the deductibility requirements of the tax law. Members of the Compensation Committee: John S. Zink Don Cook John H. Williams J. Michael Adcock REPORT OF THE AUDIT COMMITTEE =============================================================================== The following report of the audit committee shall not be incorporated by reference into any of our prior filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that incorporated future filings or portions thereof, except to the extent that we specifically incorporate this information by reference. In accordance with its written charter adopted by the board of directors, a copy of which is appended to this proxy statement, the audit committee of the board assists the board in fulfilling its responsibility for oversight of the quality and integrity of our the accounting, auditing and financial reporting practices. During the current year, the committee met two times, and the committee chair, as representative of the committee, discussed the interim financial information contained in each quarterly earnings announcement and Form 10-Q with the CFO and independent auditors prior to public release. 14 The board and the audit committee believe that the audit committee's current member composition satisfies the rule of the New York Stock Exchange that governs audit committee composition, including the requirement that audit committee members all be "independent directors" as that term is defined by applicable NYSE rule. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the committee reviewed the audited financial statements in the Annual Report with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The committee reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the our accounting principles and such other matters as are required to be discussed with the committee under generally accepted auditing standards, including Statement on Auditing Standards No. 61. The committee has discussed with the independent auditors the auditors' independence from management, including the implications of the new SEC regulations regarding the provisions of non-audit services by the independent auditors and determined that the provisions of the non-audit services was not inconsistent with the independent auditor's status as independent auditors. In addition, the committee received the letter from the independent auditors required by the Independence Standards Board, Standard No. 1. Based on the above-mentioned review and discussions with management and the independent auditors, the committee recommend to the board that our audited financial statements be included in its Annual Report on Form 10-K for the year ended December 31, 2000, for filing with the Securities and Exchange Commission. The following table sets forth the aggregate fees billed to us for the fiscal year ended December 31, 2000 by our principal accounting firm, PricewaterhouseCoopers L.L.P.: . Audit Fees - Fees for the year 2000 audit and reviews of the Form 10-Q are $96,500, of which $25,500 had been billed through December 31, 2000. . Financial Information Systems Design And Implementation Fees - $0.00 . All Other Fees - $78,518 Members of the Audit Committee: Don Cook J. Michael Adcock William B. Morgan John S. Zink COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION =============================================================================== During 2000, the following directors (none of whom was or had been an officer or employee of the company or any of its subsidiaries) served on the compensation committee: Jack Zink, Don Cook, John Williams and J. Michael Adcock. There are no committee interlocks with other companies within the meaning of the Securities and Exchange Commission's rules during 2000. 15 PERFORMANCE GRAPH =============================================================================== The performance graph and the related disclosure contained in this section of the Proxy Statement shall not be incorporated by reference into any of our prior filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that incorporated future filings or portions thereof (including this proxy statement or the "Executive Compensation" section of this proxy statement), except to the extent that we specifically incorporate this information by reference. The following graph reflects a comparison of the cumulative total return (change in stock price plus reinvested dividends, assuming $100 invested on December 31, 1995) in our common stock during the five-year period from December 31, 1995 through December 31, 2000, with the Standard & Poor's 500 Composite Index and the S&P Oil - Integrated Domestic Index. The comparisons in this table are required by the Securities and Exchange Commission and, therefore, are not intended to forecast or be indicative of possible future performance of our stock. DOLLAR VALUE OF $100 INVESTMENT AT DECEMBER 31, --------------------------------------------------------------------- 1995 1996 1997 1998 1999 2000 ------- ------- ------- ------- ------- ------- Unit $100.00 $207.89 $202.63 $ 88.17 $161.85 $398.69 S&P 500 $100.00 $122.96 $163.98 $210.85 $255.21 $231.98 S&P Oil-Integ. $100.00 $126.47 $150.47 $122.16 $151.68 $177.36 16 ITEM 2: RATIFICATION OF APPOINTMENT OF AUDITORS =============================================================================== The board has unanimously selected PricewaterhouseCoopers LLP as our independent auditors for our 2001 fiscal year. The board is asking you to ratify and approve this action. A representative of PricewaterhouseCoopers LLP, who will attend the annual meeting, will have the opportunity to make a statement if he or she desires to do so and will be available to answer appropriate questions. Although the law does not require such ratification, the board believes that you should be given the opportunity to express your views on this matter. However, even if you ratify the selection, the board may still appoint new independent auditors at any time if it believes that such change would be in the best interest of the company and its stockholders. Failure to ratify such selection is not binding on the board. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL, WHICH VOTE WILL ACT TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP. OTHER MATTERS =============================================================================== Certain Transactions Between the Company and Its Officers, Directors, Nominees for Directors and Their Associates Since 1984, one of our subsidiaries, or its predecessor, has formed employee- limited partnerships for investment by certain of our employees and directors. The limited partnerships participate with Unit Petroleum Company, a subsidiary of ours, in its exploration and production operations. Since January 1, 2000, Mr. John G. Nikkel, a director and our President, invested $60,000 in the Unit 2000 Employee Oil and Gas Limited Partnership and $80,000 in the Unit 2001 Employee Oil and Gas Limited Partnership. In addition, Nike Exploration Company, which is owned 71.4% by Mr. Nikkel, invested $76,000 in the 2000 program and $100,000 in the 2001 program. Mr. King Kirchner, a director and our Chief Executive Officer, invested $25,000 in the 2001 program. With respect to their review and approval of any material transactions between us and any related party, including, if applicable, those discussed above, our board of directors considers the terms that are or would be available to us in similar transactions with non-affiliated parties dealing at arm's-length. Compliance with Section 16(a) of the Exchange Act Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and officers and persons who own more than 10% of a registered class of our equity securities to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission and the New York Stock Exchange. These persons are required by Securities and Exchange Commission regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on our review of the forms received by us with respect to fiscal 2000, or written representations from certain 17 reporting persons, we believe that each of our directors, officers and greater than 10% owners have complied with all Section 16(a) filing requirements. Matters Which May Come Before the Meeting The board does not intend to bring any other matters before the meeting, nor do we know of any matters that other persons intend to bring before the meeting. However, should other matters not mentioned in this proxy statement properly come before the meeting, the persons named in the accompanying proxy card will vote on them in accordance with their best judgment. Form 10-K Annual Report to the Securities and Exchange Commission COPIES OF OUR ANNUAL REPORT (FORM 10-K) FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO: MARK E. SCHELL, SECRETARY, UNIT CORPORATION, P. O. BOX 702500, TULSA, OKLAHOMA 74170. 18 Appendix A UNIT CORPORATION Audit Committee Charter Purpose ------- The primary purpose of the Audit Committee (the "Committee") is to assist the Board of Directors (the "Board") of Unit Corporation (the "Company") in fulfilling its responsibility to oversee management's conduct of the Company's financial reporting process, including by overviewing . the financial reports and other financial information provided by the Company to any governmental or regulatory body, the public or other users thereof, . the Company's systems of internal accounting and financial controls, and . the annual independent audit of the Company's financial statements. In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company and the power to retain outside counsel, auditors or other experts for this purpose. The Board and the Committee are in place to represent the Company's shareholders; accordingly, the independent auditor is ultimately accountable to the Board and the Committee. The Committee shall review the adequacy of this Charter on an annual basis. Membership ---------- The Committee shall be comprised of not less than three members of the Board, and the Committee's composition will meet the requirements of the Audit Committee Policy of the New York Stock Exchange. Accordingly, all of the members will be directors: . Who have no relationship to the Company that may interfere with the exercise of their independence from management and the Company; and . Who are financially literate or who become financially literate within a reasonable period of time after appointment to the Committee. In addition, at least one member of the Committee will have accounting or related financial management expertise. A-1 Key Responsibilities -------------------- The Committee's job is one of oversight and it recognizes that the Company's management is responsible for preparing the Company's financial statements and that the independent auditors are responsible for auditing those financial statements. Additionally, the Committee recognizes that financial management, as well as the independent auditors, have more time, knowledge and more detailed information concerning the Company than do Committee members; consequently, in carrying out its oversight responsibilities, the Committee is not providing any expert or special assurance as to the Company's financial statements or any professional certification as to the independent auditor's work. The following functions shall be the common recurring activities of the Committee in carrying out its oversight function. These functions are set forth as a guide with the understanding that the Committee may diverge from this guide as appropriate given the circumstances. . The Committee shall review with management and the independent auditors the audited financial statements to be included in the Company's Annual Report on Form 10-K (or the Annual Report to Shareholders if distributed prior to the filing of Form 10-K) and review and consider with the independent auditors the matters required to be discussed by Statement of Auditing Standards ("SAS") No. 61. . As a whole, or through the Committee chair or the Committee's designee, the Committee shall review with management and the independent auditors the Company's interim financial results to be included in the Company's quarterly reports to be filed with Securities and Exchange Commission and the matters required to be discussed by SAS No. 61; this review will occur prior to the Company's filing of the Form 10-Q. . The Committee shall discuss with management and the independent auditors the quality and adequacy of the Company's internal controls. . The Committee shall: . annually request from the independent auditors a formal written statement delineating all relationships between the auditors and the Company consistent with Independence Standards Board Standard Number 1; . discuss with the independent auditors any such disclosed relationships and their impact on the independent auditor's independence; and . recommend that the Board take appropriate action in response to the independent auditor's report to satisfy itself of the auditor's independence. . The Committee, subject to any action that may be taken by the full Board, shall have the ultimate authority and responsibility to select (or nominate for shareholder approval), evaluate and, where appropriate, replace the independent auditor. A-2 UNIT CORPORATION PROXY FOR ANNUAL MEETING OF STOCKHOLDERS MAY 2, 2001 THIS PROXY IS SOLICITED ON BEHALF OF UNIT CORPORATION'S BOARD OF DIRECTORS The undersigned hereby appoints King P. Kirchner and Mark E. Schell, and each of them, proxies for the undersigned, with full power of substitution, to vote all shares of Unit Corporation Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Stockholders of Unit Corporation, Tulsa, Oklahoma, on Wednesday, May 2, 2001 at 11:00 A.M., or at any adjournment thereof, upon the matters set forth on the reverse side and described in the accompanying Proxy Statement and upon such other business as may properly come before the meeting or any adjournment thereof. Please mark this proxy as indicted on the reverse side to vote on any item. If you wish to vote in accordance with the Board of Directors' recommendation, please sign the reverse side; no boxes need to be checked. ________________________________________________________________________________ COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE (Continued, and to be marked, dated & signed on reverse side) Please mark your vote as __ indicated in |__| this example Item 1 - Election of Directors Item 2 - Approval of Auditors FOR all nominees WITHHOLD FOR AGAINST ABSTAIN listed below AUTHORITY __ __ __ (except as marked to vote for |__| |__| |__| to the contrary) all nominees listed below PLEASE MARK THIS BOX IF YOU PLAN __ __ __ TO ATTEND THE MEETING |__| |__| |__| COMMENTS/ADDRESS CHANGE Please mark this box if you have __ Nominees: Earle Lamborn, William B. written comments/address change |__| Morgan, John H. Williams on the reverse side. Withheld for: (Write that nominee's name in the space provided below.) Receipt is hereby acknowledged ___________________________________ of the Unit Corporation Notice of Meeting and Proxy Statement. "By checking the box to the right, I consent to future __ access of the Annual Report, |__| Proxy Statements, prospectuses and other communications electronically via the Internet. I understand that the Company may no longer distribute printed materials to me for any future shareholder meeting until such consent is revoked. I understand that I may revoke my consent at any time by contacting the Company's transfer agent, Mellon Investor Services, Ridgefield Park, NJ and that costs normally associated with electronic access, such as usage and telephone charges, will be my responsibility. Please disregard if you have previously provided your consent decision. Signature(s) __________________________________________________ Date: _______________________ Note: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.