As filed with the Securities and Exchange Commission on May 4, 2011.

Registration No. 333—          

 

 

United States
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM F-4
REGISTRATION STATEMENT

Under
The Securities Act of 1933

Precision Drilling Corporation

(Exact name of Registrant as specified in its charter)

N/A
(Translation of Registrant’s name into English)

Alberta, Canada		1381		Not Applicable
(State or Other Jurisdiction of		(Primary Standard Industrial Classification		(I.R.S. Employer Identification No.)
Incorporation or Organization)		Code Number)

4200, 150 — 6^th Avenue S.W.

Joanne L. Alexander, Esq.				Risë B. Norman, Esq.
Precision Drilling Corporation				Simpson Thacher & Bartlett LLP
4200, 150 — 6th Avenue S.W.				425 Lexington Avenue
Calgary, Alberta, Canada T2P 3Y7				New York, New York 10017
(403) 716-4500				(212)-455-2000

     Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

     If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

     If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

     If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

     Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) o

     Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) o

 

Proposed Aggregate

Proposed Maximum

Title of each class of Securities to

Amount to be

Offering Price Per Note

Aggregate Offering Price

Amount of Registration

be Registered

Registered

(1)

(1)

Fee

6.625% Senior Notes due 2020

US$650,000,000

100

%

US$650,000,000

US$75,465

Guarantees of 6.625% Senior Notes due 2020 (2)

N/A

N/A

N/A

N/A (3)

(1)		Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(f) under the Securities Act of 1933, as amended (the “Securities Act”).
(2)		See inside facing page for table of registrant guarantors.
(3)		Pursuant to Rule 457(n) under the Securities Act, no separate filing fee is required for the guarantees.

     The registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

TABLE OF ADDITIONAL REGISTRANT GUARANTORS

				Primary Standard
Exact Name of Registrant		State or Other		Industrial
Guarantor as Specified in		Jurisdiction of		Classification				I.R.S. Employer		Addresses and Telephone
its Charter (or Other		Incorporation or		Code				Identification		Numbers of Principal
Organizational Document)		Organization		Number				Number		Executive Offices
DI Energy, Inc.		Texas			1381			74-2175411		10350 Richmond Avenue, Suite 700 Houston, TX 77042 (713) 435-6184
DI/Perfensa Inc.		Texas			1381			76-0378440		10350 Richmond Avenue, Suite 700 Houston, TX 77042 (713) 435-6184
Grey Wolf International, Inc.		Texas			1381			76-0000351		10350 Richmond Avenue, Suite 700 Houston, TX 77042 (713) 435-6184
Grey Wolf International Drilling Corporation		Canada			1381			Not Applicable		4200, 150 — 6th Avenue, S.W. Calgary, Alberta, Canada T2P 3Y7 (403) 716-4500
Grey Wolf Supply Inc.		Texas			1381			27-0185992		10350 Richmond Avenue, Suite 700 Houston, TX 77042 (713) 435-6184
Murco Drilling Corporation		Delaware			1381			72-0512163		10350 Richmond Avenue, Suite 700 Houston, TX 77042 (713) 435-6184
Precision Completion & Production Services Ltd.		Delaware			1381			98-0679637		10350 Richmond Avenue, Suite 700 Houston, TX 77042 (713) 435-6184
Precision Directional Services, Inc.		Texas			1381			45-0603611		10350 Richmond Avenue, Suite 700 Houston, TX 77042 (713) 435-6184
Precision Diversified Oilfield Services Corp.		Alberta, Canada			1381			Not Applicable		4200, 150 — 6th Avenue, S.W. Calgary, Alberta, Canada T2P 3Y7 (403) 716-4500
Precision Drilling Canada Limited Partnership		Alberta, Canada			1381			Not Applicable		4200, 150 — 6th Avenue, S.W. Calgary, Alberta, Canada T2P 3Y7 (403) 716-4500
Precision Drilling Company LP		Texas			1381			76-0590999		10350 Richmond Avenue, Suite 700 Houston, TX 77042 (713) 435-6184

				Primary Standard
Exact Name of Registrant		State or Other		Industrial
Guarantor as Specified in		Jurisdiction of		Classification				I.R.S. Employer		Addresses and Telephone
its Charter (or Other		Incorporation or		Code				Identification		Numbers of Principal
Organizational Document)		Organization		Number				Number		Executive Offices
Precision Drilling Holdings Company		Nevada			1381			74-1987143		10350 Richmond Avenue, Suite 700 Houston, TX 77042 (713) 435-6184
Precision Drilling, Inc.		Delaware			1381			26-4435759		10350 Richmond Avenue, Suite 700 Houston, TX 77042 (713) 435-6184
Precision Drilling LLC		Louisiana			1381			72-1433406		10350 Richmond Avenue, Suite 700 Houston, TX 77042 (713) 435-6184
Precision Drilling Oilfield Services Corporation		Texas			1381			26-3638348		10350 Richmond Avenue, Suite 700 Houston, TX 77042 (713) 435-6184
Precision Limited Partnership		Alberta, Canada			1381			Not Applicable		4200, 150 — 6th Avenue, S.W. Calgary, Alberta, Canada T2P 3Y7 (403) 716-4500
Precision Oilfield Personnel Services Ltd.		Alberta, Canada			1381			Not Applicable		4200, 150 — 6th Avenue, S.W. Calgary, Alberta, Canada T2P 3Y7 (403) 716-4500

 

SUBJECT TO COMPLETION, DATED MAY 4, 2011

 

PRELIMINARY PROSPECTUS

 

US$650,000,000

PRECISION DRILLING CORPORATION

 

 

 

Offer to Exchange all outstanding US$650,000,000 6.625% Senior Notes due 2020 (the “outstanding notes”) for an equal amount of 6.625% Senior Notes due 2020, which have been registered under the Securities Act (the “exchange notes”).

 

The Exchange Offer

 

 

The Exchange Notes

 

 

Resales of Exchange Notes

 

 

All untendered outstanding notes will continue to be subject to the restrictions on transfer set forth in the outstanding notes and in the indenture. In general, the outstanding notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act, and applicable state securities laws. Other than in connection with the exchange offer, we do not currently anticipate that we will register the outstanding notes under the Securities Act.

 

 

 

 

You should consider carefully the risk factors beginning on page 9 of this prospectus before participating in the exchange offer.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the exchange notes to be distributed in the exchange offer or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

Your ability to enforce civil liabilities under the United States federal securities laws may be affected adversely because we are incorporated in Canada, most of our officers and directors and some of the experts named in this prospectus are not residents of the United States, and many of our assets and all or a substantial portion of the assets of such persons are located outside of the United States.

 

Each broker-dealer that receives exchanges notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of the exchange notes received in for the outstanding notes where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. Precision Drilling Corporation has agreed that, for a period of 180 days after the expiration date, it will make this prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.”

 

The date of this prospectus is          , 2011.

 

TABLE OF CONTENTS

 

 

This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any of the exchange notes to any person in any jurisdiction where it is unlawful to make such an offer or solicitation. The information contained or incorporated by reference in this prospectus speaks only as of the date of this prospectus or the date of such incorporated document unless the information specifically indicates that another date applies. No dealer, salesperson or other person has been authorized to give any information or to make any representations other than those contained or incorporated by reference in this prospectus in connection with the offer contained herein and, if given or made, such information or representations must not be relied upon as having been authorized by Precision Drilling Corporation. Neither the delivery of this prospectus nor any sales made hereunder shall under any circumstances create any implication that there has been no change in our affairs or that of our subsidiaries since the date hereof.

 

Precision Drilling Corporation is a corporation amalgamated under the laws of the Province of Alberta and is governed by the applicable provincial and federal laws of Canada. A majority of our directors and officers and some of the experts named in this prospectus and the documents incorporated by reference herein reside principally in Canada. Because most of these persons are located outside the United States, it may not be possible for you to effect service of process within the United States on these persons. Furthermore, it may not be possible for you to enforce against us or them, in the United States, judgments obtained in United States courts, because a portion of our assets and a substantial portion of the assets of these persons are located outside the United States.

 

There is doubt as to the enforceability, in original actions in Canadian courts, of liabilities based on the United States federal securities laws or “blue sky” laws of any state within the United States and as to the enforceability in Canadian courts of judgments of United States courts obtained in actions based on the civil liability provisions of the United States federal securities laws or any such state securities or blue sky laws. Therefore, it may not be possible to enforce those judgments against us, our directors and officers or some of the experts named in this prospectus or the documents incorporated by reference herein.

 

In this prospectus references to “C$” and “Canadian dollars” are to Canadian dollars and references to “US$” and “U.S. dollars” are to United States dollars. See “Currency Translation” below.

 

Rounding adjustments have been made in calculating some of the financial information included in this prospectus or incorporated by reference herein. As a result, numerical figures shown as totals in some tables may not be exact arithmetic aggregations of the figures that precede them.

 

The financial statements incorporated by reference in this prospectus have been prepared in accordance with Canadian generally accepted accounting principles, or “Canadian GAAP.” Canadian GAAP differs in some material respects from U.S. GAAP, and so these financial statements may not be comparable to the financial statements of U.S. companies.

 

Certain financial information incorporated by reference in this prospectus has been prepared in accordance with International Financial Reporting Standards (“IFRS”). IFRS differs in some material respects from U.S. GAAP, and so this financial information may not be comparable to the financial information of U.S. companies.

 

The audited financial statements of Precision incorporated by reference in this prospectus have been reconciled to U.S. GAAP. For an explanation of the differences between U.S. GAAP and Canadian GAAP as they relate to the audited financial statements, see Note 20 to our audited consolidated financial statements for the year ended December 31, 2010, incorporated by reference in this prospectus.

 

The following table sets forth certain exchange rates based on the noon exchange rate provided by the Bank of Canada (the “noon exchange rate”). These rates are set forth as U.S. dollars per C$1.00 and are the inverse of rates quoted by the Bank of Canada for Canadian dollars per US$1.00. On May 3, 2011, the noon exchange rate was C$1.00 per US$1.0537.

 

 

 

 

 

 

The following documents of Precision Drilling Corporation (“Precision” or the “Company”), filed with the SEC (available on EDGAR at www.sec.gov) include important business and financial information about the company and are specifically incorporated by reference into and form an integral part of this prospectus:

 

 

 

 

 

 

Any statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for the purposes of this prospectus to the extent that a statement contained herein modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.

 

Our SEC filings can be read and copied at the SEC’s public reference room at the following location:

 

Public Reference Room
100 F Street, N.E.
Room 1580
Washington, DC 20549

 

Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. These SEC filings are also available to the public from commercial document retrieval services and at the Internet web site maintained by the SEC at http://www.sec.gov. Reports and other information concerning us also may be inspected at the offices of the New York Stock Exchange, which is located at 20 Broad Street, New York, New York 10005.

 

This prospectus contains summaries of certain agreements that we have entered into, such as the indenture governing the exchange notes offered hereby, the registration rights agreement relating to the exchange notes and certain other material agreements described in this prospectus. The descriptions contained in this prospectus of these agreements do not purport to be complete and are subject to, or qualified in their entirety by reference to, the definitive agreements. Copies of the definitive agreements will be made available to you in response to a written request to us at our offices at 4200, 150 – 6th Avenue, S.W., Calgary, Alberta, Canada T2P 3Y7.

 

Market data and other statistical information used throughout this prospectus and the documents incorporated by reference herein are based on internal company research, independent industry publications, government publications, reports by market research firms or other published independent sources. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. Although we believe such information is accurate and reliable, we have not independently verified any of the data from third-party sources cited or used for our management’s industry estimates, nor have we ascertained the underlying economic assumptions relied upon therein. While we believe internal company estimates are reliable, such estimates have not been verified by any independent sources, and we make no representations as to the accuracy of such estimates. Statements as to our position relative to our competitors or as to market share refer to the most recent available data.

 

We own or have rights to use the trademarks, service marks and trade names that we use in connection with the operation of our business. Each trademark, service mark and trade name of any other company appearing in this prospectus or the documents incorporated by reference herein is, to our knowledge, owned by such other company. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus or the documents incorporated by reference herein are listed without the ^®, ^sm and ^tm symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names.

 

SUMMARY

	•	the exchange notes have been registered under the Securities Act;
	•	the exchange notes are not entitled to certain registration rights which are applicable to the outstanding notes under the registration rights agreement; and
	•	certain additional interest rate provisions are no longer applicable.

The Exchange Offer		We are offering to exchange up to US$650,000,000 aggregate principal amount of our 6.625% Senior Notes due 2020, which have been registered under the Securities Act, for up to US$650,000,000 aggregate principal amount of our existing 6.625% Senior Notes due 2020. Outstanding notes may be exchanged only in denominations of US$2,000 and integral multiples of US$1,000 in excess of US$2,000.
Resale		Based on an interpretation by the staff of the SEC set forth in no-action letters issued to third parties, we believe that the exchange notes issued pursuant to the exchange offer in exchange for the outstanding notes may be offered for resale, resold and otherwise transferred by you (unless you are our “affiliate” within the meaning of Rule 405 under the Securities Act) in the United States without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that:
		• you are acquiring the exchange notes in the ordinary course of your business; and
		• you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the exchange notes.
		If you are a broker-dealer and receive exchange notes for your own account in exchange for outstanding notes that you acquired as a result of market-making activities or other trading activities, you must acknowledge that you will deliver this prospectus in connection with any resale of the exchange notes. See “Plan of Distribution.”
		Any holder of outstanding notes who:
		• is our affiliate;
		• does not acquire exchange notes in the ordinary course of its business; or

		• tenders its outstanding notes in the exchange offer with the intention to participate, or for the purpose of participating, in a distribution of exchange notes;
		cannot rely on the position of the staff of the SEC enunciated in Morgan Stanley & Co. Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in Shearman & Sterling (available July 2, 1993), or similar no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the exchange notes in the United States.
Expiration Date; Withdrawal of Tender		The exchange offer will expire at 11:59 p.m., New York City time, on          , 2011, unless extended by us. We do not currently intend to extend the expiration date. You may withdraw the tender of your outstanding notes at any time prior to the expiration of the exchange offer. We will return to you any of your outstanding notes that are not accepted for any reason for exchange, without expense to you, promptly after the expiration or termination of the exchange offer.
Conditions to the Exchange Offer		The exchange offer is subject to customary conditions, which we may waive. See “The Exchange Offer — Conditions to the Exchange Offer” of this prospectus for more information.
Procedures for Tendering Outstanding Notes		If you wish to participate in the exchange offer, you must complete, sign and date the accompanying letter of transmittal according to the instructions contained in this prospectus and the letter of transmittal. You must then mail or otherwise deliver the letter of transmittal together with your outstanding notes and any other required documents, to the exchange agent at the address set forth on the cover page of the letter of transmittal.
		If you hold outstanding notes through The Depository Trust Company (“DTC”) and wish to participate in the exchange offer, you must comply with the Automated Tender Offer Program procedures of DTC by which you will agree to be bound by the letter of transmittal. By signing, or agreeing to be bound by, the letter of transmittal, you will represent to us that, among other things:
		• you are not our “affiliate” within the meaning of Rule 405 under the Securities Act;
		• you do not have an arrangement or understanding with any person or entity to participate in the distribution of the exchange notes;
		• you are acquiring the exchange notes in the ordinary course of your business; and
		• if you are a broker-dealer that will receive exchange notes for your own account in exchange for outstanding notes that were acquired as a result of market-making activities, you will deliver a prospectus, as required by law, in connection with any resale of such exchange notes in the United States.

Special Procedures for Beneficial Owners		If you are a beneficial owner of outstanding notes which are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender such outstanding notes in the exchange offer, you should contact such registered holder promptly and instruct such registered holder to tender on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date.
Guaranteed Delivery Procedures		If you wish to tender your outstanding notes and your outstanding notes are not immediately available or you cannot deliver your outstanding notes, the letter of transmittal or any other required documents, or you cannot comply with the procedures under DTC’s Automated Tender Offer Program for transfer of book-entry interests prior to the expiration date, you must tender your outstanding notes according to the guaranteed delivery procedures set forth in this prospectus under “The Exchange Offer — Guaranteed Delivery Procedures.”
Effect on Holders of Outstanding Notes		As a result of the making of, and upon acceptance for exchange of all validly tendered outstanding notes pursuant to the terms of the exchange offer, we and the guarantors will have fulfilled a covenant contained in the registration rights agreement and, accordingly, there will be no increase in the interest rate on the outstanding notes under the circumstances described in the registration rights agreement. If you are a holder of outstanding notes and you do not tender your outstanding notes in the exchange offer, you will continue to hold such outstanding notes and you will be entitled to all the rights and limitations applicable to the outstanding notes as set forth in the indenture, except we and the guarantors will not have any further obligations to you to provide for the exchange and registration of untendered outstanding notes under the registration rights agreement. To the extent that outstanding notes are tendered and accepted in the exchange offer, the trading market for outstanding notes that are not so tendered and accepted could be adversely affected.
Consequences of Failure to Exchange		All untendered outstanding notes will continue to be subject to the restrictions on transfer provided for in the outstanding notes and in the indenture. In general, the outstanding notes may not be offered or sold in the United States, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, we and the guarantors do not currently anticipate that we will register the outstanding notes under the Securities Act.
Certain Federal Income Tax Consequences		The exchange of outstanding notes in the exchange offer will not constitute a taxable event for United States federal or Canadian federal

		income tax purposes. See “Certain Federal Income Tax Considerations.”
Accounting Treatment		We will record the exchange notes in our accounting records at the same carrying value as the outstanding notes, which is the aggregate principal amount as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes upon the consummation of the exchange offer. We will record the expenses of the exchange offer as incurred.
Regulatory Approvals		Other than compliance with the Securities Act and other applicable securities laws and qualification of the indenture governing the notes under the Trust Indenture Act, there are no federal or state regulatory requirements that must be complied with or approvals that must be obtained in connection with the exchange offer.
Use of Proceeds		We will not receive any cash proceeds from the issuance of exchange notes pursuant to the exchange offer. See “Use of Proceeds.”
Exchange Agent		The Bank of New York Mellon is the exchange agent for the exchange offer. The contact information for the exchange agent is set forth in the section captioned “The Exchange Offer — Exchange Agent” of this prospectus.

Issuer		Precision Drilling Corporation
Securities Offered		US$650,000,000 aggregate principal amount of 6.625% Senior Notes due 2020.
Maturity		November 15, 2020.
Interest		The notes bear interest at a rate of 6.625% per year. We will make interest payments in U.S. dollars.
Interest Payment Dates		May 15 and November 15, beginning on May 15, 2011.
Guarantees		The notes are guaranteed, jointly and severally, by current and future U.S. and Canadian subsidiaries that also guarantee our revolving credit facility and certain other future indebtedness.
Mandatory Redemption		We are not required to make mandatory redemption or sinking fund payments with respect to the notes.
Optional Redemption		Prior to November 15, 2013, we may redeem up to 35% of the notes with the net proceeds of certain equity offerings. At any time prior to November 15, 2015, we may redeem the notes in whole or in part at their principal amount, plus the applicable premium and accrued interest. We may redeem the notes in whole or in part at any time on or after November 15, 2015, at the redemption prices described under the heading “Description of the Exchange Notes — Optional Redemption.”
Additional Amounts and Redemption for Changes in Canadian Withholding Taxes		Except as required by law, we will make payments on the notes free of withholding or deduction for Canadian taxes. If withholding or deduction is required, we will, subject to certain customary exceptions, be required to pay additional amounts so that the net amounts you receive will equal the amount you would have received if withholding or deduction had not been imposed. If, as a result of a change in law occurring on or after the date of the indenture, we are required to pay such additional amounts, we may redeem the notes in whole but not in part, at any time at 100% of their principal amount, plus accrued and unpaid interest, if any, to the redemption date. See “Description of the Exchange Notes — Payment of Additional Amounts” and “Description of the Exchange Notes — Optional Redemption — Redemption for Changes in Tax Law.”
Change of Control Repurchase		Upon specified change of control events, each holder of a note will have the right to sell to us all or a portion of its notes at a purchase price in cash equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to the date of purchase.
Ranking		The notes are:
		• our senior unsecured obligations;
		• equal in ranking (“pari passu”) with all of our existing and future senior unsecured indebtedness; and
		• senior in right of payment to our subordinated indebtedness.

		Our secured debt, including borrowings under our revolving credit facility, and all of our other secured obligations in effect from time to time are effectively senior to the notes to the extent of the value of the assets securing such debt or other obligations.
		The notes will be effectively subordinated to all existing and future obligations, including indebtedness and trade payables, of any of our subsidiaries that do not guarantee the notes. For the year ended December 31, 2010, our non-guarantor subsidiaries accounted for a de minimus amount of our revenue and EBITDA. As of December 31, 2010, our non-guarantor subsidiaries also accounted for a de minimus amount of our consolidated assets and liabilities.
		Each guarantee of the notes is:
		• a senior unsecured obligation of that guarantor;
		• pari passu with all existing and future senior indebtedness of that guarantor; and
		• senior in right of payment to subordinated indebtedness of that guarantor.
		Secured debt of that guarantor, including guarantees of borrowings under our revolving credit facility, and all other secured obligations of that guarantor in effect from time to time will be effectively senior to the guarantee to the extent of the value of the assets securing such debt or other obligations.
Certain Covenants		The indenture governing the notes limits our ability and the ability of certain of our subsidiaries to, among other things:
		• incur additional indebtedness and issue preferred stock;
		• create liens;
		• make restricted payments;
		• create or permit to exist restrictions on our ability or the ability of certain of our subsidiaries to make certain payments and distributions;
		• engage in amalgamations, mergers or consolidations;
		• make certain dispositions and transfers of assets; and
		• engage in transactions with affiliates.
		These covenants are subject to important exceptions and qualifications, which are described under “Description of the Exchange Notes — Certain Covenants” in this prospectus.
		If the notes receive an investment grade rating by Standard & Poor’s and Moody’s Investors Service and we and our subsidiaries are not in default under the indenture governing the notes, we and our subsidiaries will not be required to comply with particular covenants contained in the indenture. See “Description of the Exchange Notes — Certain Covenants.”
No Prior Market		The exchange notes will be new securities for which there is currently no market. Although the initial purchasers in the private offering of the

		outstanding notes have informed us that they intend to make a market in the outstanding notes and, if issued, in the exchange notes, they are not obligated to do so and they may discontinue any market making activities at any time without notice. Accordingly, we cannot assure you that a liquid market for the outstanding notes or exchange notes will develop or be maintained.
Use of Proceeds		There will be no cash proceeds to us from the exchange offer.

 

You should carefully consider the risk factors set forth below as well as the other information contained in this prospectus and the documents incorporated by reference herein before you decide to tender outstanding notes in the exchange offer, including, without limitation, the risk factors discussed under the heading “Risk Factors” in the annual information form of Precision dated March 25, 2011 for the year ended December 31, 2010 (filed on EDGAR on Form 40-F on March 30, 2011 and incorporated by reference herein). The risks described below are not the only risks that may affect us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition or results of operations. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. In such a case, you may lose all or a part of your investment.

 

Risks Related to the Exchange Offer

 

If you choose not to exchange your outstanding notes, the present transfer restrictions will remain in force and the market price of your outstanding notes could decline.

 

If you do not exchange your outstanding notes for exchange notes in the exchange offer, then you will continue to be subject to the transfer restrictions on the outstanding notes as set forth in the offering circular distributed in connection with the private offering of the outstanding notes. In general, the outstanding notes may not be offered or sold in the United States unless they are registered or exempt from registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the outstanding notes under the Securities Act. You should refer to “Summary — The Exchange Offer” and “The Exchange Offer” for information about how to tender your outstanding notes.

 

The tender of outstanding notes under the exchange offer will reduce the principal amount of the outstanding notes outstanding, which may have an adverse effect upon, and increase the volatility of, the market price of the outstanding notes due to reduction in liquidity.

 

Certain persons who participate in the exchange offer must deliver a prospectus in connection with resales of the exchange notes.

 

Based on interpretations of the staff of the SEC contained in Exxon Capital Holdings Corp., SEC no-action letter (May 13, 1988), Morgan Stanley & Co. Inc., SEC no-action letter (June 5, 1991) and Shearman & Sterling, SEC no-action letter (July 2, 1993), we believe that you may offer for resale, resell or otherwise transfer the exchange notes in the United States without compliance with the registration and prospectus delivery requirements of the Securities Act. However, in some instances described in this prospectus under “Plan of Distribution,” certain holders of exchange notes will remain obligated to comply with the registration and prospectus delivery requirements of the Securities Act to transfer the exchange notes in the United States. If such a holder transfers any exchange notes in the United States without delivering a prospectus meeting the requirements of the Securities Act or without an applicable exemption from registration under the Securities Act, such a holder may incur liability under the Securities Act. We do not and will not assume, or indemnify such a holder against, this liability.

 

Risks Related to the Notes

 

The following risks apply to the outstanding notes and will apply equally to the exchange notes.

 

Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under our revolving credit facility, our existing notes and the notes.

 

We have a significant amount of debt. As of December 31, 2010, our total outstanding long-term debt was C$804 million.

Our substantial debt could have a material adverse effect on our financial condition and results of operations as well as our ability to fulfill obligations under our revolving credit facility, our existing notes and the notes. In particular, it could:

 

 

We may incur substantial additional debt in the future, including additional secured debt. This could further exacerbate the risks associated with our substantial debt.

 

The notes and guarantees are unsecured and effectively subordinated to our and our subsidiaries’ existing and future secured indebtedness.

 

Our obligations under the notes are not secured and the guarantors’ obligations under the guarantees are not secured, while our obligations under our revolving credit facility and each guarantor’s obligations under their respective guarantees under our revolving credit facility are secured by substantially all of our tangible and intangible assets, including our shares of our U.S. and Canadian subsidiaries. Therefore, the lenders under our revolving credit facility and holders of any other secured debt that we may incur in the future will have claims with respect to these assets that have priority over the claims of holders of the notes.

 

In the event that we are declared bankrupt, become insolvent or are liquidated or reorganized, or if there is an event of default under our revolving credit facility, the lenders could declare all of the funds borrowed thereunder, together with accrued interest, to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay such indebtedness, the lenders could foreclose or otherwise realize on the pledged assets to the exclusion of holders of the notes, even if an event of default exists under the indenture under which the notes were issued. Furthermore, if the lenders foreclose or otherwise realize upon and sell the pledged equity interests in any guarantor under the notes, then that guarantor will be released from its guarantee of the notes automatically and immediately upon such sale. In any such events, because the notes are not be secured by any of our assets or the equity interests in guarantors, it is possible that there would be no assets remaining from which your claims could be satisfied or, if any assets remained, they might be insufficient to satisfy your claims fully.

As of December 31, 2010, we had C$23 million of secured indebtedness for borrowed money (consisting of C$23 million of outstanding letters of credit). We had approximately C$524 million of secured debt available for additional borrowing (including letters of credit) under our revolving credit facility as of December 31, 2010, as well as an incremental facility of up to C$99 million (subject to certain conditions), and up to C$40 million (US$40 million) (including outstanding letters of credit) of secured debt available for borrowing under operating facilities.

 

We need significant amounts of cash to service our indebtedness, including our obligations under the notes. If we are unable to generate a sufficient amount of cash to service our indebtedness, our financial condition and results of operations could be negatively impacted.

 

We need significant amounts of cash in order to service and repay our indebtedness. Our ability to generate cash in the future will be, to a certain extent, subject to general economic, financial, competitive and other factors that may be beyond our control. In addition, our ability to borrow funds in the future to service our debt, if necessary, will depend on covenants in the indenture governing the notes, the credit agreement governing our revolving credit facility, the indenture governing our existing notes and other debt agreements we enter into in the future. Future borrowings may not be available to us under our revolving credit facility or from the capital markets in amounts sufficient to enable us to pay our obligations as they mature or to fund other liquidity needs. If we are not able to obtain such borrowings or generate cash flow from operations in an amount sufficient to enable us to service and repay our indebtedness, we will need to refinance our indebtedness or be in default under the agreements governing our indebtedness and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets. Such refinancing or alternative measures may not be available on favorable terms or at all. The inability to service, repay and/or refinance our indebtedness could negatively impact our financial condition and results of operations.

 

In addition, we conduct a substantial portion of our operations through our subsidiaries, certain of which are not guarantors of the notes or our other indebtedness. Accordingly, repayment of our indebtedness, including the notes, is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Unless they are guarantors of the notes or our other indebtedness, our subsidiaries do not have any obligation to pay amounts due on the notes or our other indebtedness or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness, including the notes. Each subsidiary is a distinct legal entity, and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. While the indenture that governs the notes and the agreements governing certain of our other existing indebtedness limit the ability of our subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to us, these limitations are subject to qualifications and exceptions. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness, including the notes.

 

Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations under the notes.

 

If we cannot make scheduled payments on our debt, we will be in default and the holders of the notes could declare all outstanding principal and interest to be due and payable, the lenders under our revolving credit facility could terminate their commitments to lend money and foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation. All of these events could result in you losing your investment in the notes.

 

Despite our current level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks to our financial condition described above.

 

We and our subsidiaries may be able to incur significant additional indebtedness in the future. Although the indenture governing our existing notes, the indenture governing the notes and our revolving credit facility contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications

and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. If we incur any additional indebtedness that ranks equally with the notes, subject to collateral arrangements, the holders of that debt will be entitled to share ratably with you in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of our company. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness. In addition, as of December 31, 2010, our revolving credit facility provided for unused commitments of C$524 million, which could increase by C$99 million, subject to certain conditions. All of those borrowings would be secured indebtedness. If new debt is added to our current debt levels, the related risks that we and the guarantors now face could intensify. See “Description of the Exchange Notes.”

 

Our indebtedness contains restrictive covenants.

 

The indenture governing our existing notes, our revolving credit facility and the indenture governing the notes impose significant operating and financial restrictions on us. These restrictions limit our ability and that of our restricted subsidiaries to, among other things:

 

 

In addition, under our revolving credit facility, we are required to satisfy and maintain certain financial ratio tests. Our ability to meet such tests could be affected by events beyond our control, and we may not be able to meet such tests. These ratios may be changed by the lenders in certain circumstances.

 

A breach of any of these covenants could result in a default under our revolving credit facility, the indenture governing our existing notes or the indenture governing the notes. Upon the occurrence of an event of default under our revolving credit facility, the lenders could elect to declare all amounts outstanding under our revolving credit facility to be immediately due and payable and terminate all commitments to extend further credit. Upon the occurrence of an event of default under our existing notes, the noteholders could elect to declare all amounts outstanding under our existing notes to be immediately due and payable. If we are unable to repay those amounts, the lenders under our revolving credit facility could proceed to foreclose or otherwise realize upon the collateral granted to them to secure that indebtedness. If the lenders under our revolving credit facility or the noteholders of our existing notes accelerate the repayment of borrowings, we may not have sufficient assets to repay our revolving credit facility as well as our unsecured indebtedness, including our existing notes and the notes. The acceleration of our indebtedness under one agreement may permit acceleration of indebtedness under other agreements that contain cross-default or cross-acceleration provisions. If our indebtedness is accelerated, we may not be able to repay our indebtedness or borrow sufficient funds to refinance it. Even if we are able to obtain new financing, it may not be on commercially reasonable terms or on terms that are acceptable to us. The restrictions contained in our revolving credit facility, the indenture governing the notes or the indenture governing our existing notes may adversely affect our ability to finance our future operations and capital needs and to pursue available business opportunities. Moreover, any new indebtedness we incur may impose financial restrictions and other covenants on us that may be

more restrictive than our revolving credit facility, the indenture governing our existing notes or the indenture governing the notes.

 

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

 

Borrowings under our revolving credit facility are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. Assuming all revolving loans are fully drawn, each quarter point change in interest rates would result in a C$1 million change to annual interest expense of our indebtedness under our revolving credit facility. From time to time, we may enter into interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk.

 

Claims of noteholders will be structurally subordinated to claims of creditors of our subsidiaries that do not guarantee the notes.

 

The notes are not guaranteed by any of our non-U.S. and non-Canadian subsidiaries or certain other subsidiaries. Accordingly, claims of holders of the notes are structurally subordinated to the claims of creditors of these non-guarantor subsidiaries, including trade creditors. All obligations of these subsidiaries will have to be satisfied before any of the assets of such subsidiaries would be available for distribution, upon a liquidation or otherwise, to us or creditors of us, including the holders of the notes.

 

In addition, the indenture that governs the notes, subject to some limitations, permits these subsidiaries to incur additional indebtedness and does not contain any limitation on the amount of other liabilities, such as trade payables, that may be incurred by these subsidiaries.

 

For the year ended December 31, 2010, our non-guarantor subsidiaries accounted for a de minimus amount of our revenue and EBITDA. As of December 31, 2010, our non-guarantor subsidiaries also accounted for a de minimus amount of our consolidated assets and liabilities.

 

In addition, our subsidiaries that provide, or will provide, guarantees of the notes will be automatically released from those guarantees upon the occurrence of certain events, including the following:

 

 

If any guarantor is released, no holder of the notes will have a claim as a creditor against that subsidiary, and the indebtedness and other liabilities, including trade payables and preferred stock, if any, whether secured or unsecured, of that subsidiary will be effectively senior to the claim of any holders of the notes. See “Description of the Exchange Notes — Guarantees.”

 

U.S. federal and state statutes (and Canadian federal and provincial statutes) may allow courts, under specific circumstances, to void the guarantees and require noteholders to return payments received from guarantors.

 

Under U.S. federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee could be deemed a fraudulent transfer if the guarantor received less than a reasonably equivalent value in exchange for giving the guarantee and:

 

 

 

Similarly, under Canadian federal bankruptcy law and comparable provisions of provincial fraudulent preference and fraudulent conveyance laws, a guarantee or a payment under a guarantee could be deemed to be a fraudulent preference or fraudulent conveyance, or could be otherwise avoided if:

 

 

A payment under a guarantee could also be deemed a fraudulent preference or conveyance if it is found by a court to have been given with the purpose of hindering, delaying or defrauding any entity to which the guarantor was or became indebted, on or after the date the guarantee was given (and, in the case of fraudulent preferences, if the guarantor was insolvent or on the eve of insolvency at that time). The measures of insolvency for purposes of the foregoing considerations will vary depending upon the law applied in any proceeding with respect to the foregoing. Generally, however, a guarantor would be considered insolvent if:

 

 

The indenture governing the notes contains a provision intended to limit each guarantor’s liability under its guarantee to the maximum amount that it could incur under applicable laws without causing the guarantee or a payment thereunder to be a fraudulent transfer. This provision may not be effective to protect the guarantees or a payment thereunder from being voided under applicable fraudulent transfer law. If a guarantee is deemed to be a fraudulent transfer it could be voided altogether, or it could be subordinated to all other debts of the guarantor. In such case, any payment by the guarantor pursuant to its guarantee could be required to be returned to the guarantor or to a fund for the benefit of the creditors of the guarantor. If a guarantee is voided or held unenforceable for any other reason, holders of the notes would cease to have a claim against the guarantor based on the guarantee and would be creditors only of us and any guarantor whose guarantee was not similarly voided or otherwise held unenforceable.

 

Certain bankruptcy and insolvency laws may impair your ability to enforce your rights or remedies under the indenture governing the notes.

 

Your ability and the rights of the trustee, or any co-trustee, who represents the holders of the notes to enforce your rights or remedies under the indenture governing the notes may be significantly impaired by the provisions of applicable Canadian federal bankruptcy, insolvency and other restructuring legislation or by Canadian federal or provincial receivership laws. For example, the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) and the Winding-up and Restructuring Act (Canada) contain provisions enabling an insolvent debtor to obtain a stay of proceedings against its creditors and others and to prepare and file a proposal or a plan of arrangement and reorganization for consideration by all or some of its creditors, to be voted on by the various classes of creditors affected thereby. Such a restructuring proposal or arrangement and reorganization, if accepted by the requisite majority of each class of affected creditors and if approved by the relevant Canadian court, would be binding on all creditors of the

debtor within the affected classes, including those creditors who vote against such a proposal. Moreover, certain provisions of the relevant Canadian insolvency legislation permit an insolvent debtor to retain possession and administration of its property in certain circumstances, subject to court oversight, even though such debtor may be in default in respect of certain of its obligations during the period that the stay of proceedings remains in place.

 

The powers of the court under Canadian bankruptcy, insolvency and restructuring legislation and Canadian federal and provincial receivership laws, and particularly under the Companies’ Creditors Arrangement Act (Canada), are exercised broadly to protect a debtor and its estate from actions taken by creditors and others. We cannot predict whether payments under the notes would be made during any proceedings in bankruptcy, receivership, insolvency or other restructuring, whether or when you or the trustee, or any co- trustee, could exercise their rights under the indenture governing the notes or whether, and to what extent, the holders of the notes would be compensated for any delays in payment of principal, interest and costs, including fees and disbursements of the trustee, or any co-trustee. Accordingly, if we were to become subject to such proceedings, we may cease making payments on the notes and you and the trustee, or any co-trustee, may not be able to exercise your rights under the indenture governing the notes following commencement of or during such proceedings without leave of the court.

 

You might have difficulty enforcing your rights against us, certain of the guarantors and our directors and officers.

 

We and certain of the guarantors are incorporated or otherwise organized under the laws of the province of Alberta, Canada. The majority of our directors and officers and certain of the experts named in this prospectus and the documents incorporated by reference herein reside principally in Canada or otherwise outside the United States. Because we, certain of the guarantors and these persons are located outside the United States, it may not be possible for you to effect service of process within the United States on us or them. Furthermore, it may not be possible for you to enforce against us or them, in the United States, judgments obtained in United States courts, because a substantial portion of our and their assets are located outside the United States. There is doubt as to the enforceability, in original actions in Canadian courts, of liabilities based on the United States federal securities laws or the securities or “blue sky” laws of any state within the United States and as to the enforceability in Canadian courts of judgments of United States courts obtained in actions based on the civil liability provisions of the United States federal securities laws or any such state securities or blue sky laws. Therefore, it may not be possible to enforce those judgments against us, our directors and officers or some of the experts named in this prospectus or the documents incorporated by reference herein.

 

We may not have the ability to finance the change of control repurchase offer required by the indenture governing the notes.

 

Upon certain change of control events, as that term is defined in the indenture governing the notes, including a change of control caused by an unsolicited third party, we will be required to make an offer in cash to repurchase all or any part of each holder’s notes at a price equal to 101% of the aggregate principal amount thereof, plus accrued interest. The source of funds for any such repurchase would be our available cash or cash generated from operations or other sources, including borrowings, sales of equity or funds provided by a new controlling person or entity. We cannot assure you that sufficient funds will be available at the time of any change of control event to repurchase all tendered notes pursuant to this requirement. Our failure to offer to repurchase notes, or to repurchase notes tendered, following a change of control will result in a default under the indenture for the notes, which could lead to a cross-default under our revolving credit facility, the indenture governing our existing notes and under the terms of our other indebtedness. Additionally, we may be prohibited from repurchasing the notes by our revolving credit facility, the indenture governing our existing notes or by the terms of future indebtedness. Prior to repurchasing the notes upon a change of control event, as required under the indenture governing the notes, we may be required to either repay outstanding indebtedness under our revolving credit facility or obtain the consent of the lenders under that facility. If we do not obtain the required consents or repay our outstanding indebtedness under our revolving credit facility, we may be prohibited from offering to repurchase the notes. Our revolving credit facility also provides that a change of control, as defined therein, will be a default that permits the lenders to accelerate the maturity of borrowings thereunder and, if such debt is not repaid, to enforce the security interests in the collateral securing such debt. The indenture governing our existing notes also provides that upon certain change of control events, we will be required to

make an offer to repurchase those notes at a price equal to 101% of the aggregate principal amount thereof, plus a make whole premium and accrued interest. For further information, see “Description of the Exchange Notes.”

 

One of the events which would trigger a change of control is a sale of “all or substantially all” of our assets. The phrase “all or substantially all” as used in the definition of “change of control” has not been interpreted under New York law (which is the governing law of the indenture governing the notes) to represent a specific quantitative test. As a consequence, investors may not be able to determine when a change of control has occurred, giving rise to the repurchase obligations under the indenture governing the notes. It is possible, therefore, that there could be a disagreement between us and some or all of the holders of the notes over whether a specific asset sale or sales is a change of control triggering event and that holders of the notes might not receive a change in control offer in respect of that transaction. In addition, in the event the holders of the notes elected to exercise their rights under the indenture governing the notes and we elected to contest such election, there could be no assurance as to how a court interpreting New York law would interpret the phrase “all or substantially all.” In addition, certain important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, would not constitute a “change of control” under the indenture governing the notes.

 

Your ability to transfer the notes may be limited by the absence of an active trading market, and there is no assurance that any active trading market will develop for the notes.

 

We do not intend to apply for a listing of the exchange notes on a securities exchange or on any automated dealer quotation system. There is currently no established market for the exchange notes, and we cannot assure you as to the liquidity of markets that may develop for the exchange notes, your ability to sell the exchange notes or the price at which you would be able to sell the exchange notes. If such markets were to exist, the exchange notes could trade at prices that may be lower than their principal amount or purchase price depending on many factors, including prevailing interest rates, the market for similar notes, our financial and operating performance and other factors. The initial purchasers in the private offering of the outstanding notes have advised us that they intend to make a market with respect to the exchange notes as permitted by applicable laws and regulations. However, these initial purchasers are not obligated to do so, and any market making with respect to the exchange notes may be discontinued at any time without notice. In addition, such market making activity may be limited during the pendency of the exchange offer or the effectiveness of a shelf registration statement in lieu thereof. Therefore, we cannot assure you that an active market for the exchange notes will develop or, if developed, that it will continue. Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the exchange notes. The market, if any, for the exchange notes may experience similar disruptions and any such disruptions may adversely affect the prices at which you may sell your exchange notes.

 

Certain covenants contained in the indenture will no longer be applicable once the notes are rated investment grade by Moody’s and S&P.

 

The indenture provides that certain covenants will no longer be applicable once the notes are rated investment grade by both Moody’s and S&P. These covenants restrict, among other things, our ability to pay dividends, incur debt, incur liens, sell assets, enter into transactions with affiliates, enter into business combinations and enter into other transactions. There can be no assurance that the notes will ever be rated investment grade.

 

However, termination of these covenants would allow us to engage in certain transactions that would not be permitted while these covenants were in force, even if the notes are subsequently downgraded below investment grade. See “Description of the Exchange Notes — Certain Covenants — Covenant Termination.”

 

Credit ratings will not reflect all risks of an investment in the notes and may change.

 

Any credit ratings applied to notes are an assessment of our ability to pay our obligations, including obligations under the notes. Consequently, real or anticipated changes in the credit ratings will generally affect the market value of the notes. We cannot assure you that any credit rating assigned to the notes will remain in effect for any given period of time or that any rating will not be lowered or withdrawn entirely by the relevant rating agency. However, credit ratings will not reflect all risks associated with an investment in the notes. Credit ratings, for example, may not reflect the potential impact of risks related to structure, market or other factors discussed herein on the value of notes.

 

We will not receive any cash proceeds from the issuance of the exchange notes pursuant to the exchange offer. In consideration for issuing the exchange notes as contemplated in this prospectus, we will receive in exchange a like principal amount of outstanding notes, the terms of which are identical in all material respects to the exchange notes, except that the exchange notes are registered under the Securities Act, are not entitled to the registration rights which are applicable to the outstanding notes, and are not subject to certain additional interest rate provisions applicable to the outstanding notes. The outstanding notes surrendered in exchange for the exchange notes will be retired and canceled and cannot be reissued. Accordingly, issuance of the exchange notes will not result in any material change in our capitalization.

 

Our selected consolidated financial data as of December 31, 2010 and 2009 and for each of the years ended December 31, 2010, 2009 and 2008 have been derived from our audited consolidated financial statements incorporated by reference in this prospectus. The selected consolidated financial data as of December 31, 2008, 2007 and 2006 and for each of the years ended December 31, 2007 and December 31, 2006 have been derived from our audited consolidated financial statements which are not incorporated by reference in this prospectus. Our financial statements have been prepared in accordance with Canadian GAAP, which differs in certain material respects from U.S. GAAP. For a discussion of the principal differences between U.S. GAAP and Canadian GAAP as they relate to our financial statements, see Note 20 to our audited consolidated financial statements for the years ended December 31, 2010, 2009 and 2008, incorporated by reference in this prospectus. The selected consolidated financial data set forth below is qualified in its entirety by reference to, and should be read in conjunction with, our complete consolidated financial statements, including the notes thereto, and the related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” incorporated by reference in this prospectus.

 

 

 

 

 

 

Board of Directors

 

 

 

 

William T. Donovan of North Palm Beach, Florida, U.S.A. has been a director of Precision Drilling Corporation since December, 2008. Mr. Donovan has been the Chairman of the Board of Rockland Industrial Holdings, LLC, a Wisconsin entity engaged in manufacturing wood flooring products for the truck trailer and domestic container industries since April, 2006. He also serves as a director for several private companies in the United States, the United Kingdom and Russia. Mr. Donovan was a director of Grey Wolf, Inc. from June 1997 to December 2008, prior to its acquisition and was subsequently appointed as director of Precision Drilling Corporation on December 23, 2008. From 1997 to 2005, Mr. Donovan also served as President, Chief Executive Officer and director of Total Logistics, Inc., a Wisconsin corporation, which engaged in various operating and investment activities. Mr. Donovan previously served as President, Chief Financial Officer and was a director of Christiana Companies, Inc., prior to its merger with Weatherford International, Inc. in February 1999. From 1980 to 1998, Mr. Donovan was a Principal and Managing Director of Lubar & Co., a private investment and venture capital firm. Prior to joining Lubar & Co., Mr. Donovan was an officer with Manufacturers Hanover Trust Company from 1976 until 1980, where he specialized in merger and acquisition financing.

 

W.C. (Mickey) Dunn of Calgary, Alberta, Canada has been a director of Precision Drilling Corporation since September 1992. Mr. Dunn serves as the Chairman of Bellatrix Exploration Inc. and a founding shareholder of CashStore Financial Services Inc. From 1982 to 1999, Mr. Dunn was President and Chief Executive Officer of Cardium Service and Supply Limited, Cardium Tool Services Inc and Colorado Silica Sand Inc., an international manufacturer and service provider of specialty downhole equipment and services, in addition to developer, provider and marketer of high grade silica sand products.

 

Robert J.S. Gibson of Calgary, Alberta, Canada has been a director of Precision Drilling Corporation since June 1996. Mr. Gibson has served as President of a private investment firm, Stuart & Company Limited, since 1973 and is also the Managing Director of Alsten Holdings Ltd. since 1976. He serves on the Board of Cash Store Financial Services Inc. Mr. Gibson also serves as a director for a number of private companies which are active in real estate investment, oil and gas exploration, finance and investments. He is also Chairman and Director of the Canadian Defence and Foreign Affairs Institute.

 

Allen R. Hagerman, FCA of Calgary, Alberta, Canada has been a director of Precision Drilling Corporation since December 2006. Mr. Hagerman currently holds the position of Executive Vice President of Canadian Oil

Sands Limited, an oil sands mining and upgrading entity, and is currently responsible for overseeing crude oil marketing operations. Prior to 2007, Mr. Hagerman was Chief Financial Officer of Canadian Oil Sands Limited. Mr. Hagerman is lead director of Capital Power Income LP and a director of the Calgary Exhibition and Stampede. He is also a member of the Canadian Institute of Chartered Accountants, the Financial Executives Institute and is past President of Financial Executives Institute, Calgary Chapter, as well as past Chair of the Alberta Children’s Hospital Foundation. Previous board positions included Syncrude Canada Ltd. and University of Calgary. He is a fellow of the Institute of Chartered Accountants of Alberta and received their Distinguished Service Award.

 

Stephen J.J. Letwin of Toronto, Ontario, Canada has been a director of Precision Drilling Corporation since December 2006. Effective November 1, 2010, Mr. Letwin was appointed Director and President and Chief Executive Officer of IAMGOLD Corporation, a leading mid-tier gold mining company producing approximately one million ounces annually, from eight gold mines on three continents. Mr. Letwin has been a senior executive with Enbridge since March 1999. Most recently, since May 2006, he held the position of Executive Vice President of Gas Transportation & International with Enbridge, Inc., with responsibility for Enbridge’s natural gas operations, including certain natural gas pipelines, a gas distribution company and its international business unit. He also serves on the board of a private corporation. Mr. Letwin serves as Patron for Unicef Alberta, was a former director of YMCA Calgary, served on the Board of Governors at McMaster University, and is an Honorary Director of Westpark Hospital in Toronto. Mr. Letwin is a member of the Financial Executives Institute. He also previously served as a director of the Canadian and American Gas Association, as well as the Interstate Natural Gas Association of America.

 

Patrick M. Murray of Dallas, Texas, U.S.A. has been a director of Precision Drilling Corporation since July 2002. Mr. Murray served as Chairman and CEO of Dresser Inc. from 2001 until retiring in May 2007. Dresser Inc. is a leading manufacturer and marketer of highly engineered equipment for the energy industry. Prior to becoming Chairman of the Board of Dresser, Inc., Mr. Murray served as President and CEO. Previously, Mr. Murray was President of Halliburton Company’s Dresser Equipment Group from 1998 to 2000 and Senior Vice President, Strategic Initiatives of Dresser Industries, Inc. in 1997. Mr. Murray is on the Board of Directors of Harvest Natural Resources, Inc., the Maguire Energy Institute, the World Affairs Council of Dallas/Fort Worth, and the Board of Regents of Seton Hall University. Mr. Murray was also on the Board of Directors of Wellstream Holdings, Plc from 2007 until his resignation in February 2011. He is also a member of the American Petroleum Institute (API) and the Society of Petroleum Engineers (SPE).

 

Kevin A. Neveu of Calgary, Alberta, Canada was appointed Chief Executive Officer and a director of Precision Drilling Corporation in August 2007 and became President and Chief Executive Officer in January 2009. Mr. Neveu was previously President of the Rig Solutions Group of National Oilwell Varco in Houston from 2002 to 2007, where he was responsible for the company’s drilling equipment business. Over the past 25 years, Mr. Neveu has held senior management positions with National Oilwell Varco and its predecessor companies in London, Moscow, Houston, Edmonton and Calgary. Mr. Neveu holds a Bachelor of Science degree and is a graduate of the Faculty of Engineering at the University of Alberta. Mr. Neveu is a Professional Engineer, as designated by the Association of Professional Engineers, Geologists and Geophysicists of Alberta. In 2002, Mr. Neveu attended the Advanced Management Program at the Harvard Business School. Mr. Neveu serves on the boards of RigNet Inc., Houston, Texas (since 2004), the Heart and Stroke Foundation of Alberta (since 2009) and he was appointed a Member of the Board of Directors and a Member of the Executive Committee of the International Association of Drilling Contractors, Houston, Texas in January 2010.

 

Frederick W. Pheasey of Edmonton, Alberta, Canada has been a director of Precision Drilling Corporation since July 2002. Mr. Pheasey founded Dreco Energy Services Ltd., a company which designs and manufactures drilling rigs and components and downhole tools. In 1997, Dreco and its subsidiaries were merged into National Oilwell, Inc. (now National Oilwell Varco, Inc.), a company that designs and manufactures systems and components used in oil and gas drilling and production. Mr. Pheasey became Executive Vice President of National Oilwell, Inc. following the merger and continued in that position until 2004. He was a director of National Oilwell, Inc. from 1997 to 2005 and continues to be a director and employee of Dreco Energy Services Ltd. In 1999, Mr. Pheasey was made a honourary member of the Canadian Association of Oilwell Drilling Contractors. In 2002, he was inducted into the Canadian Petroleum Hall of Fame. Mr. Pheasey served on the leadership committee of the City of Edmonton’s Committee to End Homelessness and on the Housing Subcommittee in 2008.

Robert L. Phillips of Vancouver, British Columbia, Canada has been a director of Precision Drilling Corporation since May 2004 and was appointed as Chairman of the Board of Directors in August 2007. Mr. Phillips is an experienced senior corporate executive having most recently been the President and Chief Executive Officer of BCR Group of Companies from 2001 to 2004. Within the oil and gas exploration and production and oilfield service sectors, he has served as Vice President of Husky Oil Limited and as President and Chief Executive Officer of PTI Group Inc. and Dreco Energy Services Ltd. Mr. Phillips has served on the boards of publicly-traded and private corporations for more than twenty years, including several oil and gas exploration and production and oilfield service companies. In addition to Precision Drilling Corporation, he currently serves on the boards of several major Canadian corporations. Mr. Phillips is an active private investor. He also practiced corporate and securities law for over fifteen years.

 

Trevor M. Turbidy of Houston, Texas, U.S.A. has been a director of Precision Drilling Corporation since December 2008. Mr. Turbidy has served as an Energy Industry Advisor with Avista Capital Partners since December 2007. From August 2005 until July 2007, Mr. Turbidy served as President and Chief Executive Officer of Trico Marine Services, Inc., an international marine support and transportation company. From August 2003 until August 2005, he served as Vice President and Chief Financial Officer of Trico. From November 2000 until May 2002, Mr. Turbidy served as a director in the Investment Banking Department of Credit Suisse First Boston. From 1991 until November 2000, he held various positions in investment banking covering the U.S. energy industry with a focus on oilfield services and equipment, exploration and production and refining. Mr. Turbidy was a Director of Grey Wolf, Inc. from December 2005 to December 2008, prior to its acquisition by Precision Drilling Trust and his subsequent appointment as a director of Precision Drilling Corporation in December 2008. Mr. Turbidy serves as a director of a number of private energy companies, including a European exploration and production company concentrating on the Southern North Sea; a U.S. based jackup rig operator; a European based exploration and production company focused on onshore Europe; a natural gas company focused on the Marcellus; and a U.S. based exploration and production company with assets in the Niobrara and the Eagle Ford.

 

Executive Officers

 

Our executive officers serve at the pleasure of our board of directors. Our executive officers are as follows:

 

 

 

 

Kevin A. Neveu is our President and Chief Executive Officer. See information regarding directors of Precision set forth above.

 

Joanne L. Alexander of Calgary, Alberta, Canada is Vice President and General Counsel since 2008 and Corporate Secretary since 2009. From 2007 to 2008, Ms. Alexander was General Counsel of Marathon Oil Canada Corporation and in 2007, she was General Counsel of Western Oil Sands Inc. Ms. Alexander was General Manager of Stakeholder Engagement & Regulatory Affairs at ConocoPhillips Canada Ltd. in 2006 and Vice President of Legal and Regulatory Affairs at Burlington Resources Canada Ltd. from 2000 to 2006.

 

Kenneth J. Haddad of Houston, Texas, U.S.A. is Vice President of Business Development since 2008. Prior to that, he was a Director of Merger & Acquisitions at Halliburton Company from 2002 to 2008.

Robert J. McNally of Calgary, Alberta, Canada is Executive Vice President and Chief Financial Officer and was appointed to that position in 2010. Prior to that appointment, Mr. McNally served as investment Principal at Kenda Capital from 2007 to 2010, except for a period during 2008 when he served as Chief Executive Officer of Dalbo Holdings. He also served as Executive Vice President of Finance and Operations and a member of the board of directors of Warrior Energy Services Corporation in 2006. From 2000 to 2005, Mr. McNally was an Investment Banker at Simmons and Company.

 

Darren J. Ruhr of Calgary, Alberta, Canada is Vice President of Corporate Services and has held that position since 2009. Prior to that, Mr. Ruhr was Vice President of Corporate Services & Corporate Secretary from 2005 to 2009, Director, Information Technology, Real Estate & Travel, from 2003 to 2005 and Director, Information Technology, from 2000 to 2003.

 

Gene C. Stahl of Houston, Texas, U.S.A. is President of Drilling Operations since 2008. Prior to that, he was President and Chief Operating Officer since 2005, Vice President, of Precision Rentals from 2003 to 2005 and General Manager of Ducharme Rentals/Big D Rentals from 2002 to 2003.

 

Douglas J. Strong of Calgary, Alberta, Canada was appointed President of Completion and Production Services in 2010. Previously, Mr. Strong was Chief Financial Officer from 2005 to 2010, Chief Financial Officer of Precision Diversified Services Ltd. from 2001 to 2005 and Group Controller from 2001 to 2005.

 

Executive Summary

 

This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation program for 2010 and certain revisions to our 2011 program. Our compensation programs are designed to attract, motivate and retain executives who lead our business in delivering High Performance, High Value services to our customers and ultimately deliver value to our shareholders over the long-term. This CD&A reviews how the Compensation Committee determined the compensation for the following named executive officers (“NEOs”):

 

 

The conversion of Precision from an income trust structure to a corporate structure was approved on May 10, 2010 at our Annual & Special Meeting and became effective June 1, 2010. The Compensation Committee of our Board of Directors (the “Compensation Committee”), in consultation with its advisors, confirmed that the conversion would not trigger the change of control provisions under any employment agreements or long-term incentive plans. All outstanding grants under our long-term incentive plans were rolled over into economically equivalent grants under the new corporate structure and the associated plan documents were revised to account for the new corporate structure.

 

Our strong performance in 2010 exceeded most of the financial and operational targets set at the beginning of the year, demonstrating an exceptional recovery from the severe global economic down-turn and financial challenges of 2009. In addition, during 2010 we were successful with several strategic initiatives including: continued focus on our High Performance, High Value organic growth initiatives by securing contracts for nine new build rigs and 12 rig upgrades, strategic market repositioning to capture emerging oil activity opportunities shifting operations and rigs to oil and liquids-rich gas plays, refinancing and significantly improving our capital structure while lowering interest expense, implementing strategic employee Talent and Performance Management processes, implementing the CEO, NEOs and Senior Manager Succession Plan, and recruiting and appointing key executives for finance and operations. We also implemented a comprehensive enterprise-wide legal, ethics, Health, Safety and Environmental Policy (“HSE policy”) compliance and certification process, which reinforces risk accountability and compliance throughout all levels of our organization on a quarterly basis.

 

Based on recommendations provided by the Compensation Committee in consultation with Mercer, the Compensation Committee’s compensation consultant, our Board of Directors (the “Board”) approved the following executive compensation decisions in 2010:

 

 

 

 

The following table provides information on the total compensation received by our NEOs for the past three years along with information about our 2011 compensation known to date such as long-term incentives that were granted on February 9, 2011. Please see the Summary Compensation Table below for additional information about the compensation of our NEOs.

 

 

 

Notes:

 

 

 

At the end of 2010, we had approximately 6,584 employees, including 685 in salaried non-field positions. Approximately 647 salaried employees participated in the STIP and 365 salaried employees participated in the LTIP in 2010.

 

Executive Compensation Program

 

Philosophy

 

Our compensation philosophy is to attract and retain high performing executives by ensuring that:

 

 

Our strategy is to increase net earnings and create shareholder value through excellence in customer service, organic growth in high performance capabilities, and growth through acquisition and business line diversification. We pride ourselves on having a strong pay-for-performance culture that starts with our senior management and NEOs but is strongly embraced by our entire organization. Our programs create a clear and direct linkage between compensation and the achievement of business objectives, in the short, medium and long-term, by providing an appropriate mix of fixed versus at-risk compensation, and immediate income versus future income linked to our share price performance.

 

Our executives participate in the same compensation programs provided to our salaried employees, which consists of base salary, short-term cash incentives, longer-term share-based incentives, pension and other benefits.

We target base salaries at or slightly below the median against a comparator group of public companies. Our short-term incentive plan is designed to reward the annual achievement of performance relative to company-wide financial and operational metrics, as well as individual performance. Our long-term incentive plans are designed to align the interests of executives with shareholders by rewarding for growth in shareholder value, and to retain executives in a competitive and highly cyclical environment. Total compensation, including annual and long-term incentives, is targeted at the median for typical/median performance and at or above the 75th percentile for exceptional corporate and individual performance. Actual pay positioning for each executive is based on demonstrated performance, leadership and management skills, experience, education, succession planning considerations, competitive pressures and internal equity.

 

The table below shows the key components of our compensation programs and their respective form and performance period:

 

 

We consider our short-term incentive plan and long-term incentive plans, consisting of RSUs, PSUs and Options, as “at-risk” compensation.

 

Executive Share Ownership Guidelines

 

We have guidelines for our senior executives to own Precision shares. These guidelines reflect our belief that equity ownership by executives further aligns the interests of management with those of our shareholders.

 

The Compensation Committee, with the assistance of Mercer, reviewed our ownership guidelines relative to comparable Canadian companies. In February 2010, the Compensation Committee recommended, and the Board approved, an increase to the ownership guidelines. Under the revised guidelines, the CEO is expected to own Precision shares with a value equal to at least three times his annual base salary. The CFO and other officers are expected to own Precision shares with a value equal to at least two times their annual base salary. Vice Presidents who are not corporate officers are expected to own Precision shares with a value equal to at least the amount of their annual base salary. Executives have five years from February 2010 or their appointment to an executive position, whichever is later, to accumulate the Precision shares in accordance with these guidelines.

 

In calculating the value of Precision shares held by an executive for purposes of evaluating adherence to the guidelines, we use the higher of the actual purchase cost, or the current market value of the Precision shares to determine the executive’s ownership position. In determining Precision share ownership, we only consider actual Precision shares held and therefore do not include RSUs, PSUs or Options.

 

Under the previous guidelines, the CEO was expected to own Precision shares with a value equal to at least two times his annual base salary. The CFO and other officers were expected to own Precision shares with a value equal to at least one time their annual base salary.

The following table summarizes the targets and actual ownership in Precision shares as a multiple of base salary for the NEOs (as at December 31, 2010):

 

 

 

Notes:

 

 

Compensation Consultant

 

The Compensation Committee has retained the services of Mercer, an external executive compensation consultant, to assist and advise the Compensation Committee in its review of executive compensation, including the competitiveness of pay levels, executive compensation design issues, market trends and technical considerations. In 2010, the support provided by Mercer consisted of:

 

 

The Compensation Committee pre-approves the provision of all services provided by Mercer to ensure they do not compromise Mercer’s objectivity. The total fees paid to Mercer for the past three years are as outlined below:

 

 

The higher fees paid to Mercer in 2008 and 2009 were associated with the redesign of our short and long-term incentive plans.

Competitive Positioning

 

We review our compensation for NEOs and other executives against a group of comparator companies. In 2009, with the assistance of Mercer, the Compensation Committee established the comparator group of companies with whom we compete with for executive talent and includes contract drilling or well servicing companies, offshore drilling companies and companies from the broader oilfield services industry. The Compensation Committee took the following factors into consideration when selecting the comparator group:

 

 

The Compensation Committee, with the assistance of Mercer, reviewed the comparator group in 2010 and determined that it was still appropriate to use for 2010 compensation planning purposes. The comparator group of companies and their associated data points as at December 31, 2010 are shown below:

 

 

 

Notes:

 

 

In circumstances where equivalent executive positions are not disclosed in the proxy data, we use third party compensation surveys and extract relevant data from other similarly-sized energy sector companies, generally measured in terms of revenue.

 

Role of Management in Determining Compensation

 

The CEO participates in the compensation design process by providing recommendations to the Compensation Committee with respect to the other executives and recommends to the Compensation Committee the specific performance targets to be used for the various incentive plans. The Vice President, Corporate Services assists the CEO in developing and presenting management’s recommendations and supporting material to the Compensation Committee regarding the compensation of the executives.

 

Each year, the CEO completes a formal evaluation of the performance of the NEOs. These evaluations are based on the achievement of specific goals established at the beginning of the year for each NEO as well as an assessment of his performance against a matrix used to evaluate all of our salaried employees. The CEO also evaluates NEO performance relative to the achievement of our annual objectives and assesses the leadership of the NEOs in advancing our long-term strategic objectives. The results of these evaluations are shared with the Compensation Committee.

 

Base Salary

 

Base salary provides a fixed amount of cash compensation for performing day-to-day responsibilities and reflects the individual’s experience, potential, performance and market competitiveness against our comparator group.

 

For 2009, in response to the economic uncertainty and the expected decline in demand for drilling services in the short term, we maintained salaries at their 2008 levels for the CEO and all other senior executives, notwithstanding the fact salaries for most of the NEOs were below our target pay positioning. Mr. Stahl received a salary increase effective December 1, 2009 in recognition of his relocation to the United States and his expanded scope and responsibilities as President, Drilling Operations.

 

In February 2010, the Compensation Committee, with the assistance of Mercer, reviewed the 2010 compensation for the CEO and the other NEOs.

 

After consideration of Mercer’s analysis, the Compensation Committee recommended and the Board approved base salary increases for the NEOs. For more details of the compensation of the CEO, see “— Compensation of the Chief Executive Officer”. Effective March 1, 2010, the Compensation Committee approved base salary increases for the other NEOs and reduced their 2010 STIP targets to restructure total NEO compensation to be closer to the median of the comparator group. Please see the “— 2010 NEO STIP Targets” section.

 

For 2011, upon consultation with Mercer, salary increases of 2 percent were approved for each of our NEOs.

 

The following table compares the year-end salaries for 2008 through 2010, as well as the new base salary effective March 1, 2011 for each of our NEOs:

 

 

Notes:

 

 

Short Term Incentive Plan (“STIP”)

 

The STIP is designed to recognize and reward individuals for the annual achievement of performance relative to company-wide financial and operational metrics, as well as their individual performance. Each participant has the opportunity to earn annual cash bonuses that are tied to specified target awards defined as a percentage of their base salary (“STIP Target”). The individual performance component can result in awards ranging from 0% to 50% of STIP Target, while the corporate performance component can range from 0% to 150% of STIP Target, for a total bonus award of up to 200% of STIP Target. The Compensation Committee believes this weighting reinforces our pay-for-performance philosophy by rewarding individual performance while maintaining the emphasis of the program on company-wide performance which promotes our collaborative culture.

 

The overall STIP bonus pool is capped at 2.5% of EBIT. In the case of the STIP bonus pool funding being insufficient to pay out at target, the individual component is first paid out, and the corporate component reduced. The Compensation Committee may use its discretion to increase or decrease the size of the bonus pool if the Compensation Committee determines that the calculated size of the bonus pool resulted in a significant overpayment or underpayment based on actual performance achieved in the year.

 

Individual Component

 

We fully implemented and executed a performance management system in 2010, with all STIP-eligible employees establishing annual performance objectives. These objectives are monitored by managers throughout the year and bonus awards are linked to achievement of the objectives and overall employee performance, with awards for individual performance ranging from 0% to 50% of STIP Target. Managers make recommendations on the awards which are then approved by senior Management. The CEO makes recommendations to the Compensation Committee for each of the other NEO’s awards. The Compensation Committee recommends the CEO’s award and the other NEOs’ awards for final approval by the Board.

 

Corporate Component

 

The corporate component is awarded based on our performance relative to company-wide financial and operational metrics and targets which are approved by the Compensation Committee at the beginning of each year. Each metric is weighted and has threshold, plan and stretch objectives. The operational and financial metrics in aggregate will result in awards ranging from 0% to 150% of STIP Target. The operational metrics used are highly descriptive and directly measure our safety, operational and employee retention performance, all of which we consider critical components of our High Performance, High Value competitive strategy. The objectives for each operational metric are established to encourage our NEOs to strive towards achieving high performance results with stretch objectives that are set at a level that requires exceptional performance. These metrics were first introduced in 2009 and we exceeded the plan objectives set for that year. These metrics represent 15% of the CEO’s target cash compensation (base salary plus STIP Target) and 13% of the other NEOs’ target cash compensation. The threshold, plan and stretch objectives for the operational metrics are not disclosed for competitive reasons.

2010 NEO STIP Targets

 

In 2010, after a review of the compensation for our NEOs, the Compensation Committee realigned the total compensation for each NEO to be closer to the median level of the comparator group. As a result, in conjunction with adjustments to base salaries, the Compensation Committee reduced each NEO’s STIP Target to 75% of base salary from 100%. The CEO’s STIP Target remains at 100% of base salary.

 

2010 Corporate Performance

 

The metrics are as outlined in the table below:

 

 

Following the 2010 year-end, the Compensation Committee reviewed our achievements against the metrics and confirmed that the corporate component uncapped payout was 78% of STIP Target. Consistent with the plan design, the Compensation Committee calculated the STIP bonus pool by applying the 2.5% EBIT cap, resulting in a reduction to the corporate component payout from 78% down to 15% after providing for funding of the individual component. The Compensation Committee determined that this level of funding was inappropriate given our strong performance against the metrics and achievement of strategic objectives and used its discretion to increase the STIP bonus pool to 3.1% of EBIT or approximately $1.6 million, resulting in a corporate component payout of 27% of STIP Target.

 

Each participant’s award consisted of 27% of STIP Target for the corporate component and 0% to 50% of STIP Target for the individual component based on individual performance.

 

2010 STIP Awards

 

The following table shows the actual 2010 and 2009 STIP awards for each NEO: