10-K/A 1 a14-11406_110ka.htm 10-K/A

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

 

FORM 10-K/A

 

Amendment No. 1

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

 

For the fiscal year ended December 31, 2013

 

Commission file number: 001-32920

 

 

GRAPHIC

(Exact name of registrant as specified in its charter)

 

Yukon Territory

 

N/A

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

1625 Broadway, Suite 250

 

 

Denver, Colorado 80202

 

(303) 592-8075

(Address of principal executive offices)

 

(Registrant’s telephone number, including area code)

 

Securities pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Name of Exchange on Which Registered

Common Stock

 

New York Stock Exchange

 

Securities registered pursuant to Section 12(g) of the Act:

 

None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference on Part III of this Form 10-K or any amendment to this Form10-K. o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, accelerated filer, and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o
 (Do not check if a smaller reporting company)

 

Smaller reporting company o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

At June 28, 2013, the aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant was approximately $1,884,404,592. The number of shares of the registrant’s Common Stock outstanding as of February 26, 2014, was 266,255,765.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

 



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EXPLANATORY NOTE

 

This Amendment No. 1 to the Annual Report on Form 10-K of Kodiak Oil & Gas Corp. (“Kodiak”, “we”, “our”, “us”, or the “Company”) for the year ended December 31, 2013, which was originally filed with the U.S. Securities and Exchange Commission (“SEC”) on February 27, 2014, is being filed to include the responses to the items required by Part III that we previously intended to incorporate by reference to the proxy statement for our 2014 annual meeting of shareholders. Additionally, pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company has filed the certifications required by Rule 13a-14(a) or 15d-14(a) of the Exchange Act. Except as specifically provided otherwise herein, this Amendment No. 1 does not reflect events occurring after February 27, 2014, the date of the filing of our original Form 10-K, or modify or update those disclosures that may have been affected by subsequent events.  Accordingly, this Amendment No. 1 should be read in conjunction with the Form 10-K originally filed on February 27, 2014.

 

PART III

 

ITEM 10.                                         DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

The following table sets forth certain information with respect to our current directors and executive officers. The term for each director expires at our next annual meeting or at such time as his or her successor is appointed and qualified, upon ceasing to meet the qualifications for election as a director, upon death, upon removal by the shareholders or upon delivery or submission to the Company of the director’s written resignation, unless the resignation specifies a later time of resignation. Each executive officer shall hold office until the earlier of the date his resignation becomes effective, the date his successor is appointed or he shall cease to be qualified for that office, or the date he is terminated by the Board. The ages of the directors and executive officers are shown as of December 31, 2013.

 

Name and Municipality
of Residence

 

Position and Office Held

 

Director/Officer
Since

 

Age

 

 

 

 

 

 

 

Executive Officers

 

 

 

 

 

 

Lynn A. Peterson—Denver, Colorado

 

Director, Chairman of the Board, President & CEO

 

November 2001

 

60

 

 

 

 

 

 

 

James P. Henderson—Denver, Colorado(1)

 

CFO, Secretary & Treasurer

 

April 2010

 

48

 

 

 

 

 

 

 

James E. Catlin—Denver, Colorado

 

Director, Executive V.P. of Business Development

 

February 2001

 

66

Russell A. Branting—Denver, Colorado

 

Executive V.P. of Operations

 

June 2011

 

51

 

 

 

 

 

 

 

Russ D. Cunningham— Denver, Colorado

 

Executive V.P. of Exploration

 

June 2011

 

59

 

 

 

 

 

 

 

Directors

 

 

 

 

 

 

Rodney D. Knutson(2)(3)(4)—Aspen, Colorado

 

Director

 

March 2001

 

72

 

 

 

 

 

 

 

Herrick K. Lidstone, Jr.(2)(3)(4)—Centennial, Colorado

 

Director

 

March 2006

 

64

 

 

 

 

 

 

 

William J. Krysiak (2)(3)(4)—Denver, Colorado

 

Director

 

September 2010

 

53

 

(1)                                 Mr. Henderson rejoined the Company in April 2010 after having formerly served as the Company’s Chief Financial Officer from May 2007 to May 2008.

 

(2)                                 Member of the Compensation Committee of the Board.

 

(3)                                 Member of the Audit Committee of the Board.

 

(4)                                 Member of the Nominating and Corporate Governance Committee of the Board.

 

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The following is a brief description of the employment background of the Company’s current directors/director nominees and executive officers:

 

Lynn A. Peterson, co-founder of the Company, has served as a director of the Company since November 2001, President and Chief Executive Officer since July 2002 and Chairman of the Board since June 2011. Mr. Peterson has over 30 years of industry experience. Mr. Peterson was an owner of CP Resources, LLC, an independent oil and natural gas company from 1986 to 2001. Mr. Peterson served as Treasurer of Deca Energy from 1981 to 1986. Mr. Peterson was employed by Ernst and Whinney as a certified public accountant prior to this time. He received a Bachelor of Science in Accounting from the University of Northern Colorado in 1975. Mr. Peterson’s business address is 1625 Broadway, Suite 250, Denver, Colorado 80202. The determination was made that Mr. Peterson should serve on our Board of Directors due to his extensive executive level experience working with oil and natural gas companies. In addition, we believe that it is important that the Board of Directors have the benefit of management’s perspective, and in particular, that of the Chief Executive Officer.

 

James P. Henderson previously served as the Company’s Chief Financial Officer from May 24, 2007 to May 10, 2008. He rejoined the Company as Chief Financial Officer on April 1, 2010 after two years as director of finance of Aspect Energy LLC, a Denver-based privately held energy company. Prior to May 2007, Mr. Henderson spent 17 years at Western Gas Resources and its successor, Anadarko Petroleum Corp., in its Denver office. During that time, he served as director, accounting services at Anadarko Petroleum Corp. and in various financial roles including director, financial planning and analysis at Western Gas Resources. Mr. Henderson holds a Bachelors degree in Accounting from Texas Tech University and a Master of Business Administration degree from Regis University in Denver. Mr. Henderson’s business address is 1625 Broadway, Suite 250, Denver, Colorado 80202.

 

James E. Catlin, co-founder of the Company, has served as a director of the Company since February 2001, Chairman of the Board from July 2002 until June 2011, Secretary from July 2002 to May 2008, Chief Operating Officer from June 2006 until June 2011 and Executive Vice President of Business Development since June 2011.  Mr. Catlin has nearly 40 years of geologic experience, primarily in the Rocky Mountain Region. Mr. Catlin was an owner of CP Resources LLC, an independent oil and natural gas company from 1986 to 2001. Mr. Catlin was a founder and Vice-President of Deca Energy from 1980 to 1986 and worked as a district geologist for Petroleum Inc. and Fuelco prior to this time. He received a Bachelor of Arts and a Masters degree in Geology from the University of Northern Illinois in 1973. Mr. Catlin’s business address is 1625 Broadway, Suite 250, Denver, Colorado 80202. The determination was made that Mr. Catlin should serve on our Board of Directors due to his extensive training and experience with respect to geology and executive level experience working with oil and natural gas companies.

 

Dr. Russell A. Branting previously served as the Company’s Operations Manager from June of 2007 to May of 2009 and Vice-President of Operations from May of 2009 until June of 2011.  Dr. Branting currently serves as Executive Vice-President of Operations and has served in that capacity since June of 2011.  He has more than 20 years of experience focused throughout the Rocky Mountain region, with extensive experience in the Green River Basin in Wyoming. He has served in various positions in petroleum engineering and operations with Western Gas Resources, Inc., Petropro Engineering, Inc., Tesco Underbalanced Drilling Services, Chevron USA, Inc., and Snyder Oil Corporation. He was most recently the Drilling Engineering Manager at Anadarko, where he was responsible for managing all drilling engineering operations ongoing in the Rocky Mountain Region. Dr. Branting earned his Ph. D. in Petroleum Engineering from the University of Wyoming in 1993.  Dr. Branting’s business address is 1625 Broadway, Suite 250, Denver, Colorado 80202.

 

Russ D. Cunningham previously served as the Company’s Northern Rockies Exploration Manager from September of 2004 to December of 2007, Exploration Manager from December of 2007 to May of 2009, and Vice-President of Exploration from May of 2009 to June of 2011.  Mr. Cunningham currently serves as Executive Vice-President of Exploration and has served in that capacity since June of 2011.  He has over 30 years experience in oil and gas exploration, primarily in the Rocky Mountain Region and the Mid-Continent Region, as well as international experience in Colombia, South America and Russia. Mr. Cunningham was most recently with Cabot Oil and Gas Corporation exploring in Wyoming’s Wind River Basin, the Paradox Basin of Colorado and Utah, and the Williston Basin of Montana and North Dakota. Prior to Cabot, Mr. Cunningham served as Vice-President Exploration for GHK Colombia Company, a subsidiary of Seven Seas Exploration. Mr. Cunningham has a Masters Degree in Geology from the University of Tulsa, Tulsa, Oklahoma and is a member of the American Association of Petroleum Geologists, Society of Economic Paleontologists and Mineralogists and the Geologic Society of America.  Mr. Cunningham’s business address is 1625 Broadway, Suite 250, Denver, Colorado 80202.

 

Rodney D. Knutson has served as a director of the Company since March 2001. Currently, he is a self-employed attorney in Aspen, Colorado. Prior to this, he had over thirty years of private law practice in Denver, Colorado working with oil, gas and mining companies. Mr. Knutson has a Bachelor of Electrical Engineering (1965) from the University of Minnesota and a Juris Doctor (1972) from the University of Denver. Mr. Knutson is a former president of the Rocky Mountain Mineral Law Foundation. Mr. Knutson’s business address is 1625 Broadway, Suite 250, Denver, Colorado 80202. Mr. Knutson is also currently serves as a director of Midway Gold Corp.  The determination was made that Mr. Knutson should serve on our Board of Directors due to his extensive experience working with oil, gas and mining companies.

 

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Herrick K. Lidstone, Jr. has served as a director of the Company since March 2006. Mr. Lidstone is an attorney at law in Greenwood Village, Colorado, and is currently with Burns, Figa & Will, P.C., where he is managing director and practices in corporate and securities law, dealing frequently with mergers and acquisitions, finance transactions, and private and public securities offerings. Mr. Lidstone served on the Securities Board for the Department of Regulatory Agencies in Colorado from 1999 through 2011. He has been Adjunct Professor of Law at the University of Colorado and the University of Denver and has taught continuing education courses for the National Business Institute, CLE in Colorado, Inc., Denver Association of Oil and Gas Title Lawyers, and other CLE providers. He has numerous legal publications and presentations in the fields of securities law, corporate governance, financial accounting, corporations, limited liability companies, ethics, taxation, and other areas to his credit. Mr. Lidstone received a Bachelor of Arts from Cornell University in 1971 and a Juris Doctor from the University of Colorado School of Law in 1978. Mr. Lidstone’s business address is Suite 1000, 6400 South Fiddler’s Green Circle, Greenwood Village, Colorado 80111. The determination was made that Mr. Lidstone should serve on our Board of Directors due to his extensive business and securities law experience and his experience in representing companies involved in natural resource exploration, development and production.

 

Mr. Krysiak has served as a director of the Company since September 2010. He is currently the CFO of Southwest Generation Operating Company, LLC, an independent power producer. Prior to his current position, from September 2007 to July 2009, he was the CFO of Aspect Holdings LLC, a Denver-based energy company. Prior to Aspect, he served in various financial-oriented management and officer positions at Western Gas Resources, Inc. from 1985 to 2006, including Chief Financial Officer. Subsequent to the sale of Western Gas Resources to Anadarko, Mr. Krysiak assisted Anadarko in a transition period from August 2006 through June 2007 as the Director of Financial Projects. He earned his BS in business administration with a major in accounting from Colorado State University in 1982 and is a Certified Public Accountant. Mr. Krysiak’s business address is 1625 Broadway, Suite 250, Denver, Colorado 80202. The determination was made that Mr. Krysiak should serve on our Board of Directors due to his substantial financial reporting, compliance, capital markets and oil and gas transactional experience gained by way of his 18 years of experience as a corporate officer responsible for accounting and financial matters and his strong public company experience in the oil and gas industry.

 

Legal Proceedings

 

During the past ten years, none of our directors or executive officers has been involved in any legal proceedings that are material to an evaluation of the ability or integrity of such person.

 

Family Relationships

 

There are no family relationships among the members of the Board or the members of senior management of the Company.

 

Audit Committee and Audit Committee Financial Expert

 

The Audit Committee was established by the Board in accordance with Section 3(a)(58)(A) of the Exchange Act, to oversee the Company’s corporate accounting and financial reporting processes and audits of its financial statements. The members of our Audit Committee are Messrs. Krysiak, Lidstone and Knutson. Mr. Krysiak is chairman of the Audit Committee. All committee members qualify as independent directors under the applicable New York Stock Exchange standards, SEC rules and Multilateral Instrument 52-110 (“MI 52-110”). The Board has determined that all current members of the Audit Committee are “financially literate” as interpreted by the Board in its business judgment. Mr. Krysiak further qualifies as an audit committee financial expert, as defined in the applicable rules of the SEC. The Audit Committee held five meetings during fiscal year 2013.

 

The Audit Committee meets periodically with our independent accountants and management to review the scope and results of the annual audit and to review our financial statements and related reporting matters prior to the submission of the financial statements to the Board. In addition, the committee meets with the independent auditors at least on a quarterly basis to review and discuss the annual audit or quarterly review of our financial statements.

 

We have established an Audit Committee Charter that deals with the establishment of the Audit Committee and sets out its duties and responsibilities. The Audit Committee reviews and reassesses the adequacy of the Audit Committee Charter on an annual basis. The Audit Committee Charter is available on our Company website at http://www.kodiakog.com.

 

Code of Business Conduct and Ethics

 

The Board has adopted a Code of Business Conduct and Ethics, applicable to all directors, officers and employees, the full text of which can be found on our website at http://www.kodiakog.com.  Any shareholder may request a hard copy, free of charge, of the Company’s Code of Business Conduct and Ethics by making such request in writing to the Company.

 

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NYSE Corporate Governance

 

In 2013, our Chief Executive Officer certified to the NYSE that he was not aware of any violation by the Company of any NYSE corporate governance listing standard.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires the Company’s officers and directors and persons who own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. Officers, directors and such 10% shareholders are required to furnish the Company with copies of all Forms 3, 4 and 5 they file.

 

Based solely on a review of the reports received by the SEC, furnished to the Company, or written representations from reporting persons that all reportable transactions were reported, the Company believes that, during the fiscal year ended December 31, 2013, the Company’s officers, directors and greater than ten percent owners timely filed all reports they were required to file under Section 16(a), except that Mr. Cunningham filed one late report relating to a stock option exercise and sale, filed on April 15, 2014.

 

ITEM 11.                                         EXECUTIVE COMPENSATION

 

COMPENSATION DISCUSSION AND ANALYSIS

 

The following contains a description of our 2013 compensation programs and objectives with respect to our Named Executive Officers identified in the Summary Compensation table (the “NEOs”).

 

Executive Summary

 

The year ended December 31, 2013 (referred to herein as “fiscal 2013”) was another outstanding year for us, with the Company again achieving record financial results. The table below summarizes the key Company financial and operational results for fiscal 2013 compared to fiscal 2012.

 

 

 

Fiscal 2013
($ in thousands)

 

Fiscal 2012
($ in thousands)

 

Percent
Increase

 

Proved Reserves (MMBOE)

 

167.3

 

94.8

 

76.5

%

Adjusted EBITDA(1)

 

$

669,372

 

$

317,054

 

111.1

%

Sales Volume (BOE)

 

10,646,000

 

5,254,000

 

102.6

%

 

(1)                                 “Adjusted EBITDA” is a non-GAAP financial measure. For further information regarding this measure, please see our earnings release furnished on a Form 8-K filed on February 27, 2014.

 

Consistent with our executive compensation program’s emphasis on pay-for-performance, compensation awarded to the NEOs for fiscal 2013 reflected the Company’s record financial and operational results and significant milestones achieved. Taking into account the foregoing factors, including that the Company exceeded all of the pre-established 2013 performance objectives as of September 30, 2013, the following determinations were made with respect to the at-risk portion of the NEOs’ 2013 compensation:

 

·                  Annual Bonus Incentive Program: The CEO received a payout under our annual bonus incentive program equal to 200% of target, and the other NEOs received a payment equal to 150% of target.

 

·                  Equity-Based Awards: Each NEO earned the maximum number of restricted stock units that were subject to the 2013 performance criteria.

 

This Compensation Discussion and Analysis includes an analysis of the following:

 

·                  2013 NEO Pay Mix

·                  How Executive Compensation is Determined

·                  Objectives of our Executive Compensation Program

·                  Base Pay

·                  Performance-Based Annual Bonus Incentives

·                  Performance-Based Long-Term Equity Pay

·                  Post-2013 Changes in Compensation

 

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2013 NEO Pay Mix and Emphasis on Variable Pay

 

The compensation package for our NEOs is composed of the following elements:

 

Component

 

Short or
Long Term

 

At Risk
or Not

 

Summary

Base Pay

 

Short term

 

Not at risk

 

Fixed pay that is not subject to financial performance risk.

 

 

 

 

 

 

 

Annual Bonus Incentive Program

 

Short term

 

At risk

 

Annual award that is based on corporate performance.

 

 

 

 

 

 

 

Performance Equity-Based Awards

 

Long term

 

At risk

 

For 2013, the NEOs were awarded a grant of restricted stock units (“RSUs”), the vesting of which was tied to corporate performance objectives and subject to additional time-based vesting requirements. For 2014, the NEOs were awarded RSUs, the vesting of which was again tied to corporate performance objectives and subject to additional time-based vesting requirements.

 

The Company’s executive compensation program is designed to align the interests of the NEOs with shareholders by tying a significant portion of the NEOs’ compensation to the Company’s performance, as measured by a variety of objective factors during the applicable fiscal year. Under the program, the portion of compensation guaranteed to the NEOs for any fiscal year represents only a fraction of the total potential compensation. For the CEO, 9% of the value of the CEO’s aggregate 2013 compensation was in the form of base salary, whereas 91% was contingent on the Company’s performance in the form of annual bonus incentives as well as performance equity-based awards.  For the other NEOs, on average, 15% of the value of the NEOs’ aggregate 2013 compensation was in the form of base salary, whereas 85% was contingent on the Company’s performance in the form of annual bonus incentives as well as performance equity-based awards. The following illustrates these pay mixes:

 

2013 Pay Opportunity

 

 

How Executive Compensation is Determined and the Role of the Compensation Committee, Management and Consultants; Benchmarking

 

The compensation review process for determining NEO compensation for the 2013 fiscal year occurred during the fourth quarter of 2012 with a presentation by the Chief Executive Officer to the Compensation Committee of the Company’s current compensation philosophies and programs. The role of the Chief Executive Officer is to provide the Compensation Committee with perspectives on the business context to assist the Compensation Committee in making its decisions. The Chief Executive Officer also discusses with the Compensation Committee the compensation of the other NEOs. After such discussions, the Chief Executive Officer generally does not participate further in Compensation Committee deliberations or determinations regarding NEO compensation. The Compensation Committee makes all final decisions concerning NEO compensation. As discussed in greater detail below, compensation decisions are generally based upon an analysis of competitive benchmarking data and the performance of the Company overall and, at the sole discretion of the Compensation Committee, may also be based upon other considerations, such as the individual’s performance and the individual’s influence on the performance of the Company.

 

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As part of its evaluation of NEO compensation, the Compensation Committee utilizes outside consulting services. For the analysis of fiscal 2013 executive compensation, the Compensation Committee retained Denver Compensation & Benefits, LLC (“Denver CAB”). The Compensation Committee obtained a report prepared by Denver CAB in connection with the Committee’s determination of the appropriate salary, and the appropriate potential for bonus incentives and equity awards. The Compensation Committee had instructed Denver CAB to conduct a review utilizing peer group data and to make recommendations with respect to compensation levels as part of Denver CAB’s report.

 

The peer group utilized by Denver CAB, based on input from the Compensation Committee, consisted of oil and gas exploration and production companies with a total asset size of between approximately $267.8 million and $10.4 billion, revenue between approximately $107.9 million and $3.7 billion, market capitalization between approximately $906.8 million and $5.3 billion, and one year stock appreciation between approximately -74.1% and 438.9%,.  The peer group was composed of the following companies:

 

Bill Barrett Corporation

Carrizo Oil & Gas, Inc.

EXCO Resources, Inc.

Forest Oil Corporation

Gulfport Energy Corporation

Halcon Resources Corp

Laredo Petroleum Holdings Inc.

Legacy Reserves LP

McMoRan Exploration Co.

Newfield Exploration Co.

Oasis Petroleum Inc.

Rosetta Resources Inc.

SM Energy Co.

Ultra Petroleum Corp.

Vanguard Natural Resources, LLC

Whiting Petroleum

WPX Energy

 

The foregoing peer group was used to set the compensation levels for 2013. At the time of the Denver CAB report, the Company ranked 12th among the 18 peer group companies (including Kodiak) for total assets, 13th among the 18 peer group companies for revenue and ranked 9th among the 18 peer group companies for market capitalization. The Company’s success was further evidenced by the fact that the Company ranked 2nd for one year stock price appreciation and 2nd for three year stock appreciation among the 18 peer group companies. Given the Company’s significant growth over the last several years, the Company felt it was important to include companies in the peer group that are reflective of the Company’s strategic goals and long-term outlook for Company performance.

 

During the fourth quarter of 2013, the Compensation Committee evaluated the Company’s performance in 2012 for total assets, 2012 revenue, and net income, and compared it to the peer group’s corresponding performance and 2012 compensation in order to evaluate the effectiveness of the peer group for setting compensation and the correlation between realized compensation and relative peer group performance.

 

The Company’s performance relative to and position among the peer group were considered by the Compensation Committee in setting compensation to ensure the NEOs were compensated on a level commensurate with the success of the Company, as discussed in more detail below.

 

The Application of Internal Equity Considerations

 

In addition to benchmarking against an industry peer group, the Compensation Committee believes it is appropriate to consider other principles of compensation, and not accept “benchmarking” data as the sole basis for setting compensation levels. Thus, while the Compensation Committee has considered peer group data as described herein, it has also applied other compensation principles, including internal equity, when determining executive compensation.

 

The CEO’s 2013 total potential compensation ranged from 2.6 to 4.5 times that of the total potential compensation of the other NEOs. The spread between the CEO’s compensation and that of the other NEOs represents the Compensation Committee’s conclusion that Mr. Peterson’s leadership was a significant contribution to the Company’s performance in recent years. In addition, the Compensation Committee determined to treat the CFO, the EVP of Exploration and the EVP of Operations equally with respect to 2013 compensation, due to their relatively equivalent tenure in the oil and gas industry and their relatively equivalent tenures and contribution as executive officers of the Company. The application of internal equity considerations to the various components of compensation is discussed in more detail in the applicable sections below.

 

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Objectives of our Executive Compensation Program

 

The compensation package for our NEOs is specifically designed to achieve three compensation objectives:

 

·                  Attracting and retaining key talent;

 

·                  Aligning the interests of our executive officers with the interests of our shareholders; and

 

·                  Providing our executives with reasonable security to motivate them to continue employment with the Company.

 

The compensation package achieves the goal of attracting and retaining key talent in a highly competitive oil and gas environment through a total compensation package that pays at or above market levels, as described in more detail below. The compensation package achieves the goal of aligning the interests of management and our shareholders by linking the size of NEO bonus incentive awards and the equity-based long-term incentive awards to the successful performance of the Company, and in turn, to the creation of shareholder value. The compensation package achieves the goal of providing our executives with reasonable security through the provision of moderate termination and change of control benefits, thereby promoting the NEO’s focus on enhancing shareholder value without undue concern about job security, while avoiding excessively liberal provisions that might motivate unnecessary risk taking.

 

2013 Compensation: The Year in Review

 

Following is a discussion of the 2013 compensation decisions with respect to Mr. Peterson, our CEO, Mr. Henderson, our CFO, Mr. Catlin, our EVP of Business Development, Dr. Branting, our EVP of Operations, and Mr. Cunningham, our EVP of Exploration.

 

Base Salary

 

The Compensation Committee believes that Kodiak’s 2012 success could not have been achieved without the significant contributions and effort put forth by the executive team, and in particular, by the CEO. Further, despite the Company’s relatively low rank among its peers with regard to total assets, revenue, and net income as measured at the time of the establishment of the peer group, the Company ultimately ranked in the top quartile for performance for the 2013 performance period, based on revenue growth and shareholder return, indicating that the Company significantly outperformed the peer companies. Based on the foregoing factors, the Compensation Committee set the annual base salary for Mr. Peterson slightly above the median of the peer group, with a salary increase of approximately 23% (from $437,500 in 2012 to $540,000 for 2013, effective January 1, 2013). In addition, the Compensation Committee believes that Kodiak’s 2012 success could not have been achieved without the significant contributions and effort put forth by the other members of executive team. Therefore, the annual base salaries for Messrs. Henderson, Branting and Cunningham were increased by 20%, from $275,000 in 2012 to $330,000 for 2013, effective January 1, 2013. This increase places each of these NEOs base salary at approximately the peer group median for base salary, based on the compensation data from 2011 and 2012. The Compensation Committee believed this to be appropriate due to the extensive experience of the NEOs in the oil and gas industry and their significant and substantially equal contribution to the success of the Company. In prior years, Mr. Catlin stated his desire to somewhat reduce the amount of his time devoted to the Company. Accordingly, in recent years, the Compensation Committee had reduced the base salary for Mr. Catlin to accommodate his reduced hours. For 2013, Mr. Catlin did not intend to further reduce his hours, and as such, no further reduction in base salary was deemed to be warranted. Ultimately, the Compensation Committee determined to increase Mr. Catlin’s base salary in order to reflect the superior performance of the Company and Mr. Catlin’s role in fostering such success, although the amount of the increase was lower than that of the other NEOs due to Mr. Catlin’s reduced role with Company. Accordingly, Mr. Catlin’s annual base salary was only increased by 15%, from $200,000 for 2012 to $230,000 for 2013, effective January 1, 2013.

 

Annual Incentive Bonuses

 

The target bonus potential for 2013 remained at 100% of base salary; however, the maximum bonus potential for the CEO was set at 200% of base pay, and the maximum bonus potential for the other NEOs was reduced from the 200% of base pay that was used in 2012 to 150% of base pay for 2013, in order to better align the incentive potential with market compensation levels. Differentiating maximum award levels between the CEO and the other NEOs was common among the Company’s peer group and generally in-line with industry best practices. Of the peer group companies that set short-term incentive award levels as a percentage of base salary (11 of the 17 selected peer companies), all 11 differentiated award levels between the CEO and other NEOs. The differentiation between maximum awards is intended to reflect the increased responsibility of the CEO in impacting the success of the Company compared to the other NEOs. The objective is to correlate the potential bonus amounts to peer performance, with a 100% bonus payout approximately equivalent with the peer group median, and a 150%/200% bonus payout equaling an amount significantly above the median to correlate with superior performance. Additionally, for all NEOs, performance at the threshold level will result in an incentive payout equal to approximately 50% of base salary.

 

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The 2013 NEO bonuses were subject to the attainment of corporate performance goals, which are described below. The Compensation Committee believes that pre-established goals serve to (1) provide visibility and clarity with respect to the compensation system, including to both the NEOs and shareholders, (2) incentivize the executives throughout the year and (3) focus the NEOs’ attention on the objectives that are critical to the success of the Company and the growth of shareholder value. The Compensation Committee further believes that the objective metrics used to determine the bonus payouts are designed to correlate superior performance with increased shareholder value. If superior performance is achieved, the Compensation Committee is of the view that bonus payments above the peer group median are warranted. Performance levels achieved between the threshold, target and maximum levels result in proportional bonus payouts. A discussion of the specific objectives to which the 2013 bonus payout was subject is set forth below under the heading “2013 Corporate Objectives”.

 

2013 Long-Term Equity-Based Incentive Awards

 

In prior years, the Company had used stock options as its primary long-term incentive compensation vehicle for NEOs.  In 2011, the Company began awarding full-value equity awards rather than appreciation awards (e.g.,  stock options). The Compensation Committee believes that the value of RSUs to executives is more direct and visible than that of stock options, and that RSUs generally require fewer shares than stock options to deliver comparable value to executives. RSUs are also considered more effective as a retention tool given that they have a more identifiable value. With RSUs, if the performance goals are met, then the executive is assured of receiving some economic value even if the stock price declines or stays constant (as value is realized upon vesting). This is important where the stock price can be impacted by factors beyond the executives’ control or influence, such as declining market conditions or the cyclical nature of commodity prices.

 

For the 2013 compensation period, the Compensation Committee granted RSUs as the form of annual equity-based incentive awards granted to NEOs. The vesting schedule established in 2011 was continued with respect to the equity-based awards granted for 2013, in that the vesting of the equity-based awards is not solely tied to performance-based conditions. Rather, to the extent that the 2013 corporate objectives are satisfied, only a portion will vest upon the completion of that performance period and the remainder will vest ratably over the following three year period, provided the NEO continues to provide the requisite services to the Company on the scheduled vesting dates.

 

The Compensation Committee made the following determinations with regard to the value of the 2013 RSUs to be awarded to each NEO:

 

·                  The target award for the CEO would approximate the peer group median.

 

·                  With respect to the EVP of Business Development, a downward adjustment to the median was made due to his reduced time commitment to the Company.

 

·                  With respect to the CFO, the Compensation Committee determined to target his 2013 RSUs at approximately the median for CFOs in the peer group.

 

·                  As the EVP of Operations and EVP of Exploration had substantial longevity with the Company, the Compensation Committee determined that such NEOs should receive awards slightly above the median for their respective positions.

 

·                  Ultimately, the Compensation Committee determined to treat the CFO, EVP of Operations and EVP of Exploration equally for purposes of the 2013 restricted share grant.

 

The Compensation Committee set the target long-term incentive (“LTI”) award levels as a dollar value based on market levels of LTI compensation. For each NEO, the Compensation Committee set the threshold levels as 50% of the NEO’s target award, and the maximum level as 150% of the NEO’s target award. The maximum level was reduced to 150% of the NEO’s target award (from 200% in 2012) in order to align the maximum potential award with the peer group 75th percentile for LTI compensation. The actual number of RSUs underlying the 2013 LTI award earned by each NEO will be determined by dividing the dollar amount earned by each NEO by the five trading day average closing price of one share of the Company’s common stock, as reported by the NYSE, for the period ending December 14, 2012 ($8.98). Consistent with the foregoing considerations, the Compensation Committee determined that the following number of RSUs will be earned in the event actual performance achieves the maximum, target or threshold performance levels, respectively:

 

Name

 

Number of RSUs to be
Earned at
Threshold
Performance

 

Number of RSUs to be
Earned at
Target
Performance

 

Number of RSUs to be
Earned at
Maximum
Performance

 

Lynn A. Peterson

 

164,327

 

328,654

 

492,981

 

James P. Henderson

 

55,704

 

111,408

 

167,112

 

James E. Catlin

 

27,852

 

55,704

 

83,556

 

Russell A. Branting

 

55,704

 

111,408

 

167,112

 

Russ D. Cunningham

 

55,704

 

111,408

 

167,112

 

 

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Performance levels achieved in between the threshold, target and maximum levels will result in a proportionate number of RSUs being earned.

 

To the extent the RSUs are earned based upon the Company’s actual performance, the resulting RSUs will then vest in accordance with the following time-based vesting schedule, provided the NEO continues to provide the requisite services to the Company on the scheduled vesting dates:

 

·                  25% of the earned RSUs will vest on the date that the Compensation Committee determines the amount of earned RSUs (and in no event later than December 31, 2013); and

 

·                  an additional 25% of the earned RSUs will vest thereafter on each of November 1, 2014, November 1, 2015 and November 1, 2016.

 

As discussed under the next heading, due to the Company’s attainment of all of the pre-established 2013 corporate objectives, as well as the overall outstanding 2013 performance of the Company, 150% of the 2013 target awards were determined earned, with only 25% vested at the time of such determination and the remaining 75% subject to ratable vesting over a three year period. Effectively, therefore, the one year performance period plus the following three year time-based vesting period results in a four year vesting cycle. The Compensation Committee believes that a four year vesting schedule is appropriate to secure a long-term commitment from each NEO.

 

2013 Corporate Objectives

 

As discussed above, the 2013 NEO bonuses and RSU awards were subject to the satisfaction of predetermined corporate objectives. Consistent with prior practice, the Compensation Committee determined to set the performance period as the twelve month period ending September 30 (as opposed to December 31) for the 2013 compensation period. This is done so that the Compensation Committee can make timely decisions on annual NEO compensation prior to the end of the fiscal year, while retaining the benefit of having a full twelve month performance period to review.

 

Beginning with the 2012 compensation period, the Compensation Committee reduced the number of objective performance metrics used to determine the payout of the at-risk compensation (i.e., annual incentive bonus and performance equity-based awards) from five to three. The three performance categories for 2013 were Adjusted EBITDA, Oil & Gas Sales Volumes and Proved Reserves.  For the 2013 compensation period, the Compensation Committee continued to use the same three objective performance metrics to determine the payout of the at-risk compensation.

 

As part of the compensation benchmarking findings, Denver CAB recommended, and the Compensation Committee agreed, that threshold, target and maximum payouts should be established for the bonuses and equity-based awards relative to the market, with the expectation that target awards will be consistent with market performance. The Compensation Committee further believes that the objective metrics used to determine the bonus payouts are designed to correlate superior performance with increased shareholder value, and therefore if superior performance is achieved, bonus payments above the peer group median are warranted. Performance levels achieved between the threshold, target and maximum levels will result in proportional payouts.

 

The 2013 corporate objectives to which the payout of the NEO bonuses and RSU awards were subject, as well as the actual results of corporate performance with respect to such objectives are as follows:

 

Performance Category For the 12 Months Ended
September 30, 2013

 

Threshold

 

Target

 

Maximum

 

Actual

 

Adjusted EBITDA(1)(4)

 

$

245,483,339

 

$

294,580,007

 

$

331,402,508

 

$

576,182,564

 

Oil & Gas Sales Volume (BOE)(2)

 

4,238,552

 

5,086,262

 

5,722,045

 

8,999,732

 

Proved Reserves (BOE)(3)

 

76,843,526

 

92,212,231

 

103,738,760

 

154,371,647

 

 

(1)                                 Adjusted EBITDA will have a relative weighting of 25% of the total.

 

(2)                                 Oil and Gas Sales Volume will have a relative weighting of 37.5% of the total.

 

(3)                                 Proved Reserves will have a relative weighting of 37.5% of the total.

 

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(4)                                 “Adjusted EBITDA” is a non-GAAP financial measure. For further information regarding this measure, please see our earnings release furnished on a Form 8-K filed on February 27, 2014.

 

The Compensation Committee selected the foregoing particular measures because they are key indicators of Company performance, are easy to track and are communicated to shareholders on a quarterly basis through the Company’s earnings press release and conference call.

 

Post-2013 Changes in Compensation

 

Compensation Consultant

 

As part of its evaluation of fiscal 2014 NEO compensation, the Compensation Committee retained Denver CAB in the fourth quarter of 2013. The Compensation Committee obtained a report prepared by Denver CAB to evaluate the NEOs’ base salaries, bonus and equity award potential (including the performance criteria to which they are subject).. The Compensation Committee had instructed Denver CAB to conduct a review utilizing peer group data and to make recommendations with respect to compensation levels. The peer group utilized by Denver CAB, based on input from the Compensation Committee, consisted of oil and gas exploration and production companies with a total asset size of between $119.8 million and $11.4 billion, revenue between approximately $129.88 million and $2.95 billion, market capitalization between approximately $886 million and $15.27 billion, and one year stock appreciation between approximately -39.52% and 186.5%, and was composed of the following companies:

 

Approach Resources Inc.

Bonanza Creek Energy

Cabot Oil & Gas, Corp

Carrizo Oil & Gas, Inc.

Cimarex Energy Co.

Concho Resources, Inc.

Energen Corporation

EQT Corp.

Gulfport Energy Corporation

Halcon Resources Corp

Laredo Petroleum Holdings Inc.

Linn Energy

Newfield Exploration Co.

Oasis Petroleum Inc.

PDC Energy Inc.

Range Resources Corporation

Rosetta Resources Inc.

SM Energy Co.

Triangle Petroleum Corp.

Ultra Petroleum Corp.

Unit Corp

Whiting Petroleum

WPX Energy

 

The Company ranked 14th out of the 24 peer group companies (including Kodiak) for total assets and 13th out of the 24 peer group companies for revenue. In addition, the Company ranked 16th for market capitalization, 15th for one year stock price appreciation, and 4th for three year stock appreciation out of the 24 peer group companies. Given the Company’s significant growth over the last several years, the Company felt it was important to include companies in the peer group that are reflective of the Company’s strategic goals and long-term outlook for Company performance.

 

Changes to Base Salary

 

The Compensation Committee believes that the Company would not have achieved the growth and success that it has to date had it not been for the performance and contributions of the CEO. Given the Company’s extraordinary performance and growth over the last few years, the appropriate peer group grew significantly as well, which has resulted in increases to the corresponding levels of market compensation.  Further, while compensation increases to account for the growth of the Company’s peer group are responsible for a portion of the base salary increases, the Compensation Committee believes the Company’s continued growth and expected performance at the top levels of the peer group warrant total compensation that is in line with the top quartile of the Peer Group.  As such, in order to align total direct compensation with the market (as STI and LTI awards are linked to base salary), the Compensation Committee set the annual base salary for Mr. Peterson at approximately the 75th percentile of the peer group, with a salary increase of

 

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approximately 46% (from $540,000 in 2013 to $790,000 for 2014, effective January 1, 2014). In addition, the Compensation Committee believes that Kodiak’s 2013 success could not have been achieved without the significant contributions and effort put forth by the other members of executive team. Therefore, the annual base salaries for Messrs. Henderson, Branting and Cunningham were increased by approximately 27%, from $330,000 in 2013 to $420,000 for 2014, effective January 1, 2014. This increase places each of these NEOs base salary at approximately the peer group 75th percentile for base salary, based on the compensation data from 2012 and 2013. The Compensation Committee believed this to be appropriate due to the extensive experience of the NEOs in the oil and gas industry and their significant and substantially equal contribution to the success of the Company. In prior years Mr. Catlin stated his desire to somewhat reduce the amount of his time devoted to the Company. Accordingly, in recent years, the Compensation Committee had reduced the base salary for Mr. Catlin to accommodate his reduced hours. For 2014, Mr. Catlin did not intend to further reduce his hours, and as such, no further reduction in base salary was warranted. Ultimately, the Compensation Committee determined to increase Mr. Catlin’s base salary in order to reflect the superior performance of the Company and Mr. Catlin’s role in fostering such success, although the amount of the increase was lower than that of the other NEOs due to Mr. Catlin’s reduced role with Company. Accordingly, Mr. Catlin’s annual base salary for was only increased by approximately 8.7%, from $230,000 for 2013 to $250,000 for 2014, effective January 1, 2014.

 

2014 Corporate Objectives

 

For the 2014 compensation period, the Compensation Committee continued to use three objective performance metrics to determine the payout of the annual bonus portion of at-risk compensation and two objective performance metrics to determine the payout of the equity award portion of at-risk compensation, with the specific objectives set forth in the table below.  For determining the amount of the annual bonus earned, all three metrics will be used, with relative weighting discussed below.  Upon review of the prevalent industry metrics, as well as general trends for equity award metrics, Denver CAB recommended, and the Compensation Committee agreed, that EBITDA should not be used for determining the annual equity awards,, and as such Oil & Gas Sales Volume and Proved Reserves will be the two metrics used to determine the annual equity awards earned (with each having an equal weighting, as discussed below).

 

As part of the compensation benchmarking findings, Denver CAB recommended, and the Compensation Committee agreed, that threshold, target and maximum payouts should be established for the bonuses and equity-based awards relative to the market, with the expectation that target awards will be consistent with market performance. The Compensation Committee further believes that the objective metrics used to determine the bonus payouts are designed to correlate superior performance with increased shareholder value, and therefore if superior performance is achieved, bonus payments above the peer group median are warranted. Performance levels achieved between the threshold, target and maximum levels will result in proportional payouts.

 

The 2014 corporate objectives to which the payout of the NEO bonuses are subject, and to which the size of the restricted stock units are tied, are as follows:

 

Performance Category For the 12 Months Ended

 

 

 

 

 

 

 

September 30, 2014

 

Threshold 

 

Target

 

Maximum

 

Adjusted EBITDA(1)(4)

 

$

576,182,564

 

$

691,419,077

 

$

777,846,461

 

Oil & Gas Sales Volume (BOE)(2)

 

8,999,732

 

10,799,678

 

12,149,638

 

Proved Reserves (BOE)(3)

 

154,371,647

 

185,245,976

 

208,401,723

 

 

(1)                                 Adjusted EBITDA will have a relative weighting of 25% of the total STI award, but will not be used to determine the 2014 LTI award

 

(2)                                 Oil and Gas Sales Volume will have a relative weighting of 37.5% of the total STI award and 50% of the total LTI award.

 

(3)                                 Proved Reserves will have a relative weighting of 37.5% of the total STI award and 50% of the total LTI award.

 

(4)                                 “Adjusted EBITDA” is a non-GAAP financial measure. For further information regarding this measure, please see our earnings release furnished on a Form 8-K filed on February 27, 2014.

 

The Compensation Committee selected the foregoing particular measures because they are key indicators of Company performance, are easy to track and are communicated to shareholders on a quarterly basis through the Company’s earnings press release and conference call.

 

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Annual Incentive Bonuses

 

The target bonus potential for 2014 remained at 100% of base salary. Additionally, the maximum bonus potential for the CEO continues to be set at 200% of base pay, and the maximum bonus potential for the other NEOs remains at 150% of base pay for 2014. Differentiating maximum award levels between the CEO and the other NEOs is common among the Company’s peer group and generally in-line with industry best practices. Of the peer group companies that set short-term incentive award levels as a percentage of base salary (18 of the 23 selected peer companies), 17 of the 18 companies differentiated award levels between the CEO and other NEOs. The differentiation between maximum awards is intended to reflect the increased responsibility of the CEO in impacting the success of Company compared to the other NEOs. The objective is to correlate the potential bonus amounts to peer performance, with a 100% bonus payout approximately equivalent with the peer group median, and a 150%/200% bonus payout equaling an amount significantly above the median to correlate with superior performance. Additionally, for all NEOs, performance at the threshold level will result in an incentive payout equal to approximately 50% of base salary. Performance levels achieved between the threshold, target and maximum levels will result in proportional bonus payouts. A discussion of the specific objectives to which the 2014 bonus payout is subject is set forth above under the heading “2014 Corporate Objectives”.

 

Structure of Long-Term Equity-Based Incentive Awards

 

For the 2014 compensation period, the Compensation Committee granted RSUs as the form of annual equity-based incentive awards granted to NEOs. The vesting schedule established in 2011 was continued with respect to the equity-based awards granted for 2014, in that the vesting of the equity-based awards is not solely tied to performance-based conditions. Rather, to the extent that the 2014 corporate objectives are satisfied, only a portion will vest upon the completion of that performance period and the remainder will vest ratably over the following three year period, provided the NEO continues to provide the requisite services to the Company on the scheduled vesting dates.

 

The Compensation Committee made the following determinations with regard to the value of the 2014 RSUs to be awarded to each NEO:

 

·                  The target award for the CEO would approximate the peer group median.

 

·                  With respect to the EVP of Business Development, an upward adjustment to the median was made in order to account for a below median base salary (and corresponding below market annual bonus) in order to provide maximum potential compensation that is consistent with the market median.

 

·                  With respect to the CFO, the Compensation Committee determined to target his 2014 RSUs in between the median and 75th percentile for CFOs in the peer group.

 

·                  As the EVP of Operations and EVP of Exploration had substantial longevity with the Company, the Compensation Committee determined that such NEOs should receive awards in between the median and 75th percentile for their respective positions.

 

·                  Ultimately, the Compensation Committee determined to treat the CFO, EVP of Operations and EVP of Exploration equally for purposes of the 2014 RSUs.

 

The Compensation Committee set the target LTI award levels as a dollar value based on market levels of LTI compensation. For each NEO, the Compensation Committee set the threshold levels as 50% of the NEO’s target award, and the maximum level as 150% of the NEO’s target award (200% for the CEO). The actual number of RSUs underlying the 2014 LTI awards earned by each NEO will be determined by dividing the dollar amount earned by each NEO by the five trading day average closing price of one share of the Company’s common stock, as reported by the NYSE, for the period ending December 3, 2013 ($11.416). Consistent with the foregoing considerations, the Compensation Committee determined that the following number of RSUs will be earned in the event actual performance achieves the maximum, target or threshold performance levels, respectively:

 

Name

 

Number of RSUs to be
Earned at
Threshold
Performance

 

Number of RSUs to be
Earned at
Target
Performance

 

Number of RSUs to be
Earned at
Maximum
Performance

 

Lynn A. Peterson

 

131,394

 

262,789

 

525,578

 

James P. Henderson

 

65,697

 

131,394

 

197,091

 

James E. Catlin

 

35,038

 

70,077

 

105,115

 

Russell A. Branting

 

65,697

 

131,394

 

197,091

 

Russ D. Cunningham

 

65,697

 

131,394

 

197,091

 

 

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Performance levels achieved in between the threshold, target and maximum levels will result in a proportionate number of RSUs being earned.

 

To the extent the RSUs are earned based upon the Company’s actual performance, the resulting RSUs will then vest in accordance with the following time-based vesting schedule, provided the NEO continues to provide the requisite services to the Company on the scheduled vesting dates:

 

·                  25% of the earned RSUs will vest on the date that the Compensation Committee determines the amount of earned RSUs (and in no event later than December 31, 2014); and

 

·                  an additional 25% of the earned RSUs will vest thereafter on each of November 1, 2015, November 1, 2016 and November 1, 2017.

 

Termination/Change of Control Benefits under Amended Employment Agreements

 

The Company has entered into employment agreements with each of the NEOs. We provide severance arrangements to the NEOs primarily to motivate the NEO to operate in the best interest of the Company, rather than in a manner potentially self-serving to secure employment. The Company has entered into change-in-control agreements with the NEOs because it believes that the occurrence, or potential occurrence, of a change-in-control transaction would create uncertainty and disruption during a critical time for the Company.

 

In setting the benefits payable under the amended employment agreements in connection with a change of control or in the event an NEO were to be terminated without cause or resigned for good reason, the Compensation Committee noted that the peer group companies varied widely on these benefits, ranging from 1 times base salary to 3 times the sum of base salary plus bonus. Based on the review of the pay practices of peer companies, the views informally expressed to the Company by institutional advisory firms, and the general desire to avoid a windfall to executives in these events, the Compensation Committee determined that it was reasonable and appropriate to set the termination benefits for the CEO and EVP of Business Development at the levels set forth under the heading “Potential Payments Upon Termination/Change of Control”. With respect to Messrs. Henderson, Branting, and Cunningham, the Compensation Committee determined to establish their respective termination/change of control values at lower levels than that of the other two NEOs, due to the fact that Messrs. Henderson, Branting, and Cunningham have a shorter tenure with the Company than do Mr. Peterson and Mr. Catlin.

 

Consideration of Say-on-Pay Advisory Vote

 

At the June 2013 Annual Meeting, approximately 97.7% of votes cast indicated approval of the advisory Say-on-Pay proposal in connection with 2012 NEO compensation. The Compensation Committee believes that the vote outcome is an indication that shareholders generally approve of the structure of executive compensation at the Company and, therefore, the Compensation Committee structured executive compensation for 2013 in a way that is generally consistent with 2012. Unless the Board modifies its policy on the frequency of future “say-on-pay” advisory votes, shareholders will have an opportunity annually to cast an advisory vote in connection with executive compensation.

 

Perquisites and Other Personal Benefits

 

The Company provides retirement benefits to all employees, including the NEOs, under the terms of a qualified defined-contribution 401(k) retirement plan. Eligible employees may make voluntary contributions not exceeding statutory limitations to the plan. The Company matches 100% of employee contributions up to 3% of the employee’s salary and 50% of an additional 2% of employee contributions. Employees are vested 100% for all contributions upon participation. Potential retirement benefits do not factor into the Compensation Committee’s annual compensation decision process with respect to the NEOs.

 

Hedging Prohibitions, Claw-Back Provisions and Stock Ownership Requirements

 

The Company’s current policy regarding hedging and monetization transactions is embodied in the Company’s insider trading policy, which provides that the Company strongly discourages insiders from engaging in certain forms of hedging or monetization transactions, such as zero-cost collars and forward sale contracts. Any insider wishing to enter into such an arrangement must first pre-clear the proposed transaction with the Company’s compliance officer under its insider trading policy. Any request for pre-clearance of a hedging or similar arrangement must be submitted to the compliance officer at least two weeks prior to the proposed execution of documents evidencing the proposed transaction and must set forth a justification for the proposed transaction

 

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Each of the NEO’s employment agreements provide that, if the Company is required to prepare an accounting restatement due to noncompliance with any financial reporting requirement under United States securities laws, then the Company will have the right to require the NEO to reimburse the Company for (a) any bonus or other incentive-based or equity-based compensation received by the NEO from the Company during the 12-month period following the first public issuance or filing with the SEC (whichever first occurs) of the financial documents embodying such financial reporting requirement, (b) any profits realized from the sale of securities of the Company during such 12-month period and (c) such other incentive-based compensation as may be specified by applicable law, regulation or listing standard.

 

The Company does not currently have a stock ownership requirement with respect to its directors and officers or any other service providers.

 

Compensation Committee Report

 

The Compensation Committee has reviewed and discussed with management the Company’s Compensation Discussion and Analysis included herein. Based on such review and discussions, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and the Company’s 2014 Proxy Statement.

 

Submitted by the following members of the Compensation Committee of the Board of Directors:

 

 

Herrick K. Lidstone, Jr., Chairman

 

 

 

Rodney Knutson

 

 

William Krysiak

 

Summary Compensation Table

 

A summary of the compensation paid to our NEOs for each of the 2011, 2012 and 2013 fiscal years is set forth below. Additional information on the components of the total compensation package, including a discussion of the proportion of each element to total compensation, is discussed in the Compensation Discussion and Analysis.

 

Name and
Principal
Position(1)

 

Year

 

Salary
($)

 

Bonus
($)

 

Stock
Awards
($)(2)

 

Option
Awards
($)(2)

 

Non-Equity
Incentive Plan
Compensation

 

All Other
Compensation
($)(3)

 

Total $

 

Lynn A. Peterson(4)

 

2013

 

540,000

 

—

 

4,515,706

 

—

 

1,080,000

 

10,200

 

6,145,906

 

President & CEO

 

2012

 

437,500

 

—

 

2,401,440

 

—

 

875,000

 

10,000

 

3,723,940

 

 

 

2011

 

350,000

 

105,000

(5)

742,500

 

—

 

245,000

 

9,800

 

1,452,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James P. Henderson(6)

 

2013

 

330,000

 

—

 

1,530,746

 

 

 

495,000

 

10,200

 

2,365,946

 

Chief Financial Officer

 

2012

 

275,000

 

—

 

1,047,745

 

—

 

550,000

 

10,000

 

1,882,745

 

 

 

2011

 

250,000

 

75,000

(5)(7)

495,000

 

—

 

175,000

(7)

7,313

 

1,002,313

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James E. Catlin(4)

 

2013

 

230,000

 

—

 

765,373

 

 

 

345,000

 

8,450

 

1,348,823

 

Executive Vice President — Business Development

 

2012

 

200,000

 

—

 

1,466,848

 

—

 

400,000

 

8,000

 

2,074,848

 

 

 

2011

 

250,000

 

75,000

(5)

495,000

 

—

 

175,000

 

9,800

 

1,004,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Russ A. Branting(8)

 

2013

 

330,000

 

—

 

1,530,746

 

 

 

495,000

 

10,200

 

2,365,946

 

Executive Vice President of Operations

 

2012

 

275,000

 

—

 

1,047,745

 

—

 

550,000

 

10,000

 

1,882,745

 

 

 

2011

 

250,000

 

75,000

(5)(7)

336,525

 

—

 

175,000

(7)

9,800

 

846,325

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Russ D. Cunningham(8)

 

2013

 

330,000

 

—

 

1,530,746

 

—

 

495,000

 

10,200

 

2,365,946

 

Executive Vice President of Exploration

 

2012

 

275,000

 

—

 

1,047,745

 

—

 

550,000

 

10,000

 

1,882,745

 

 

 

2011

 

250,000

 

75,000

(5)

336,525

 

—

 

175,000

 

9,795

 

846,320

 

 

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(1)          See “Potential Payments Upon Termination/Change of Control” for a discussion of the material terms of the NEO’s employment agreement.

 

(2)          These amounts represent the aggregate grant date fair value for stock awards (i.e., RSUs) and option awards under our 2007 Stock Incentive Plan, as amended, calculated according to ASC 718 based on the closing price of our common stock on the NYSE on the grant date. The amounts are consistent with the estimate of aggregate compensation cost to be recognized over the service period for accounting purposes for the awards, excluding the effect of estimated forfeitures, and do not necessarily correspond to the actual value that will be recognized by the NEOs. Assumptions used in the calculation of these amounts for fiscal years ended December 31, 2011, 2012 and 2013 are included in footnote 11 to the Company’s audited financial statements for the fiscal year ended December 31, 2013, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2014. See “Compensation Discussion and Analysis” for additional information regarding these awards.

 

(3)          The amounts shown in this column represent the 401(k) matching contributions made by the Company to the NEOs.

 

(4)          All compensation reflected in this table for Lynn Peterson and James Catlin was paid in connection with their respective services as officers and not in connection with their services as directors of the Company. The Company does not pay director compensation to directors who are also employees of the Company.

 

(5)          These amounts represent the portion of the 2011 cash incentive award (i.e., 30% of such award) that was subject to the discretion of the Compensation Committee.

 

(6)          Mr. Henderson re-joined the Company as its Chief Financial Officer on April 1, 2010, after having served previously in such role from May 2007 and until May 2008.

 

(7)          Upon the determination of the Compensation Committee of the amount of the cash bonus awards earned by the NEOs, the each of Messrs. Henderson and Branting elected to receive 50% of his respective 2011 award in the form of shares of the Company common stock.  Accordingly, Messrs. Henderson and Branting each received 14,487 shares of common stock in settlement of 50% of their cash incentive award.

 

(8)          On June 15, 2011, Messrs. Branting and Cunningham were promoted to officer level positions in the Company.

 

2013 Grants of Plan-Based Awards

 

The following table provides information related to grants of plan-based awards to our NEOs during the 2013 fiscal year.

 

 

 

 

 

Estimated Future
Payouts Under
Non-Equity
Incentive Plan
Awards(1)(2)

 

Estimated Future
Payouts Under
Non-Equity
Incentive Plan
Awards(1)(2)

 

Estimated Future
Payouts Under
Equity Incentive
Plan
Awards(3)(4)

 

Estimated Future
Payouts Under
Equity Incentive
Plan
Awards(3)(4)

 

Grant Date Fair
Value of Stock
Award and
Option

 

Name

 

Grant
Date

 

Target
($)

 

Maximum
($)

 

Target
(#)

 

Maximum
(#)

 

Awards(5)
($)

 

Lynn A. Peterson

 

12/3/2013

 

540,000

 

1,080,000

 

328,654

 

492,981

 

4,515,706

 

James P. Henderson

 

12/3/2013

 

330,000

 

495,000

 

111,408

 

167,112

 

1,530,746

 

James E. Catlin

 

12/3/2013

 

230,000

 

345,000

 

55,704

 

83,556

 

765,373

 

Russell A. Branting

 

12/3/2013

 

330,000

 

495,000

 

111,408

 

167,112

 

1,530,746

 

Russ D. Cunningham

 

12/3/2013

 

330,000

 

495,000

 

111,408

 

167,112

 

1,530,746

 

 

(1)          Amounts reflect total 2013 cash incentive award potential that is subject to pre-established performance objectives.

 

(2)          These awards were subject to the 2013 performance-based measures.  In December 2013, the Compensation Committee determined that all of the applicable performance measures were satisfied.  Accordingly, 100% of the awards were determined to be earned.  For more information concerning the foregoing vesting criteria, as well as a description of the specific performance measures to which the awards are subject, see “Compensation Discussion and Analysis.”

 

(3)          These awards relate to NEO compensation for the 2013 fiscal year, which awards were granted in advance of the fiscal year in December 2012 but earned in 2013.

 

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(4)   This column represents RSUs granted, pursuant to the Company’s 2007 Stock Incentive Plan, as amended. These awards were subject to the 2013 performance-based and time-based vesting criteria.  In December 2013, the Compensation Committee determined that all of the applicable performance measures were satisfied.  Accordingly, 25% of the awards were determined to be vested in December 2013, and the remaining 75% are subject to time-based vesting over the subsequent three year period.  For more information concerning the foregoing vesting criteria, as well as a description of the specific performance measures to which the awards are subject, see “Compensation Discussion and Analysis”.

 

(5)   These amounts represent the aggregate grant date fair value for stock awards (i.e., RSUs) granted in respect of the 2013 fiscal year, calculated according to FASB ASC 718 based on the closing price of our common stock on the NYSE on the grant date. The amounts are consistent with the estimate of aggregate compensation cost to be recognized over the service period for accounting purposes for the awards, excluding the effect of estimated forfeitures.

 

Outstanding Equity Awards at 2013 Fiscal Year-End

 

The following table provides information related to the outstanding stock option awards and stock awards held by each of our NEOs at December 31, 2013.

 

Name

 

Number of
Securities
Underlying
Unexercised
Options
(Exercisable)

 

Number of
Securities
Underlying
Unexercised
Options
(Unexercisable)

 

Option
Exercise
Price ($)

 

Option
Expiration
Date

 

Number
of Shares
or Units
of Stock
Held
That
Have
Not
Vested
(#)

 

Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested
($)(1)

 

Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested (#)

 

Equity
Incentive
Plan
Awards:
Market of
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)(1)

 

(a)

 

(b)

 

(c)

 

(e)

 

(f)

 

(g)

 

(h)

 

(i)

 

(j)

 

Lynn A. Peterson

 

 

 

 

 

 

 

 

 

18,750

(2)

210,188

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,375

(3)

105,094

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

132,822

(4)

1,488,935

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

369,735

(5)

4,144,729

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

262,789

(6)

2,945,865

 

 

 

497,448

 

—

 

1.18

 

5/10/2014

 

 

 

 

 

 

 

 

 

 

 

197,946

 

—

 

3.50

 

4/1/2015

 

 

 

 

 

 

 

 

 

 

 

251,931

 

—

 

3.48

 

6/3/2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James P. Henderson

 

 

 

 

 

 

 

 

 

12,500

(2)

140,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,250

(3)

70,063

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57,951

(4)

649,631

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

125,334

(5)

1,404,994

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

131,394

(6)

1,472,927

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James E. Catlin

 

 

 

 

 

 

 

 

 

12,500

(2)

140,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,250

(3)

70,063

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

81,130

(4)

909,467

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

62,667

(5)

702,497

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

70,077

(6)

785,559

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Russ A. Branting

 

 

 

 

 

 

 

 

 

8,750

(2)

98,088

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,375

(3)

49,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57,951

(4)

649,631

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

125,334

(5)

1,404,994

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

131,394

(6)

1,472,927

 

 

 

100,000

 

—

 

0.36

 

12/29/2018

 

 

 

 

 

 

 

 

 

 

 

125,000

 

—

 

2.20

 

3/13/2018

 

 

 

 

 

 

 

 

 

 

 

60,830

 

—

 

2.30

 

1/4/2020

 

 

 

 

 

 

 

 

 

 

 

80,000

 

—

 

6.26

 

5/24/2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Russ D. Cunningham

 

 

 

 

 

 

 

 

 

8,750

(2)

98,088

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,375

(3)

49,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57,951

(4)

649,631

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

125,334

(5)

1,404,994

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

131,394

(6)

1,472,927

 

 

 

56,000

 

—

 

2.30

 

1/4/2020

 

 

 

 

 

 

 

 

 

 

 

21,000

 

—

 

3.04

 

10/15/2017

 

 

 

 

 

 

 

 

 

 

 

60,000

 

—

 

3.16

 

5/1/2018

 

 

 

 

 

 

 

 

 

 

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(1)         The dollar amounts shown in this column are determined by multiplying the number of RSUs and PAs, as applicable, by $11.21 (the closing price of our common stock on the last trading day of fiscal 2013).

 

(2)         These awards, consisting of the unvested portion of the 2011 performance-based RSUs, are scheduled to vest pursuant to the 2011 time-based vesting criteria vest on November 15, 2014. See “Compensation Discussion and Analysis” for a further discussion of these awards.

 

(3)         These awards, consisting of the unvested portion of the 2011 performance-based PAs, are scheduled to vest pursuant to the 2011 time-based vesting criteria, and vest on November 15, 2014. See “Compensation Discussion and Analysis” for a further discussion of these awards.

 

(4)         These awards, consisting of the unvested portion of the 2012 performance-based restricted stock, are scheduled to vest pursuant to the 2012 time-based vesting criteria, with one-half to vest on each of November 15, 2014 and November 15, 2015. See “Compensation Discussion and Analysis” for a further discussion of these awards.

 

(5)         These awards, consisting of the unvested portion of the 2013 performance-based restricted stock, are scheduled to vest pursuant to the 2013 time-based vesting criteria, with one-third to vest on each of November 15, 2014, November 15, 2015 and November 15, 2016. See “Compensation Discussion and Analysis” for a further discussion of these awards.

 

(6)         These awards, consisting of the 2014 RSUs, are subject to the 2014 performance-based and time-based vesting criteria, with up to 25% of the earned RSUs vesting on the date that the Compensation Committee determines the amount of the award that is earned based upon the results of the performance criteria, which shall in no event be later than December 31, 2014, and up to an additional 25% of the earned RSUs to vest thereafter on each of November 1, 2015, November 1, 2016 and November 1, 2017.  The amounts assume the target level of performance is achieved.  See “Compensation Discussion and Analysis” for a further discussion of these awards, including the specific performance criteria to which they are subject and the possible range of potential awards (including the maximum and threshold levels not reflected in the table).

 

2013 Option Exercises And Stock Vested

 

The following table provides information regarding stock that vested and stock options that were exercised by our NEOs during 2013. Option award value realized is calculated by subtracting the aggregate exercise price of the options exercised from the aggregate market value of the shares of common stock acquired on the date of exercise. Stock award value is calculated by multiplying the number of shares of restricted stock units vested by the market value of the underlying shares on the vesting date.

 

 

 

Option Awards

 

Stock Awards (1)

 

Name

 

Number of
Shares
Acquired on
Exercise (#)

 

Value
Realized ($)

 

Number of
Shares
Acquired on
Vesting (#)

 

Value
Realized on
Vesting ($)

 

Lynn A. Peterson

 

—

 

—

 

208,408

 

2,462,205

 

James P. Henderson

 

—

 

—

 

83,253

 

989,236

 

James E. Catlin (2)

 

269,926

 

1,390,443

 

73,955

 

893,345

 

Russell A. Branting

 

—

 

—

 

79,503

 

943,711

 

Russ D. Cunningham

 

—

 

—

 

79,503

 

943,711

 

 

(1)         The amounts reflected in the table are not the actual amounts received. A portion of the shares acquired on vesting were withheld by the Company to pay for the taxes. Therefore, upon vesting, each recipient actually received the following:

 

Name

 

Shares

 

Value

 

Lynn A. Peterson

 

167,293

 

1,970,494

 

James P. Henderson

 

71,342

 

845,270

 

James E. Catlin

 

59,553

 

726,676

 

Russell A. Branting

 

68,577

 

810,786

 

Russ D. Cunningham

 

68,595

 

810,988

 

 

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(2)         The amounts reflected in the table are not the actual amounts received by Mr Catlin. A portion of the options were exercised pursuant to a net exercise, by which a portion of those shares acquired on exercise were withheld by the Company to pay for the taxes and exercise price associated with such exercise. Upon exercise, Mr. Catlin received 89,359 shares having a value of $460,306.

 

Potential Payments Upon Termination/Change of Control

 

Effective January 1, 2012, we entered into new employment agreements with each of our NEOs, and effective January 1, 2013, the Compensation Committee, in connection with its annual review of NEO compensation, approved amendments to the change of control provisions of these agreements, as discussed below. A summary of the termination and change of control benefits under these agreements follows.

 

A.                                    Termination for Cause/Good Reason

 

In the event of a termination without “cause,” or in the event an NEO resigns for “good reason,” the Company must pay severance compensation to Messrs. Peterson, Catlin and Henderson in an amount equal to 18 months of his then-current respective base salary, and must pay Messrs. Branting and Cunningham an amount equal to 6 months of his then-current respective base salary. In such event, all unvested incentive compensation previously granted to the NEO will immediately terminate, subject only to the provisions of any applicable award agreement relating to post-termination exercise of stock options.

 

“Cause” will be determined in the sole discretion of the Company, or in certain cases, the Compensation Committee, and means that the NEO: (i) has materially failed or refused to satisfactorily perform his assigned duties and job responsibilities, (ii) has willfully engaged in conduct that he knew or should have known would be materially injurious to the Company, (iii) has committed an act of fraud, embezzlement or a willful and material breach of a fiduciary duty to the Company, (iv) has breached certain provisions of his employment agreement, (v) has been convicted of (or pleaded no contest to) any crime that (A) is a felony, (B) involves fraud or dishonesty or (C) impugns the character or reputation of the NEO or the Company, or (vi) has violated or caused the Company to violate any law that is harmful to the business reputation of the Company.

 

The following conditions will constitute “good reason”: (i) the Company’s material breach of the employment agreement or any other material written agreement between the NEO and the Company; (ii) the assignment to the NEO (without the NEO’s consent) of any duties that are substantially inconsistent with or materially diminish the NEO’s position, (iii) a requirement that the NEO (without the NEO’s consent) be based at any office or location more than 50 miles from the NEO’s primary work location immediately prior to a “change of control”, not including reasonable travel by the NEO consistent with the travel obligations of similar executives holding similar positions with similar responsibilities; or (iv) the NEO’s refusal to renew his employment agreement at the time it would otherwise expire, provided that at such time the NEO was willing to renew the employment agreement and was able to continue providing services.

 

B.                                    Termination on Account of Death or Disability

 

Upon any termination of the NEO’s employment on account of death or “disability” (as defined in the employment agreements), the Company must pay Messrs. Peterson, Catlin and Henderson an amount equal to 18 months of his then-current respective base salary, and must pay Messrs. Branting and Cunningham an amount equal to 6 months of his then-current respective base salary. Further, each NEO’s outstanding stock options and restricted stock will immediately become fully vested and no longer subject to any restrictions on ownership or exercise.  With respect to other forms of incentive compensation, including, but not limited to, restricted stock units and performance awards, the terms of the applicable award agreement will govern vesting. With respect to unvested incentive compensation not granted under an equity-based plan, the Company, or in certain cases, the Compensation Committee, shall, subject to certain limitations, determine whether to vest or provide any payment or compensation on account thereof.

 

C.                                    Change of Control Benefits

 

The agreements that were effective through December 31, 2012 provided that, if, within 12 months following a “change of control”, any of Messrs. Peterson, Catlin or Henderson is terminated or if he resigns for “good reason,” the Company would be obligated to pay the respective NEO a lump sum payment equal to his then-current base salary for a period of 24 months plus an amount equal to the greater of his most recent annual cash bonus or the average cash bonus paid to him under his current employment agreement and prior employment agreements. Effective January 1, 2013, Mr. Peterson’s and Mr. Catlin’s agreements were amended to increase the base salary portion of such payment to an amount equal to his then-current base salary for a period of 30 months.

 

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With respect to Messrs. Branting and Cunningham, their agreements that were effective through December 31, 2012 provided that, if, within 12 months following a “change of control”, either were to be terminated or if he were to resign for “good reason,” the Company would be obligated to pay the respective NEO a lump sum payment equal to his then-current base salary for a period of 6 months plus an amount equal to the greater of his most recent annual cash bonus or the average cash bonus paid to him under his current employment agreement and prior employment agreements.  Effective January 1, 2013, Mr. Branting’s and Mr. Cunningham’s agreements were amended to increase the base salary portion of such payment to an amount equal to his then-current base salary for a period of 24 months.

 

Immediately upon the occurrence of a “change of control,” all of the NEOs’ equity-based incentive compensation will immediately vest irrespective of whether his employment continues or is terminated, subject to limitations, if any, arising from Section 409A of the Code.

 

In addition, effective January 1, 2013, each NEO’s employment agreement was amended to provide limited health insurance benefits in connection with a termination upon a “change of control”.  Specifically, in the event the NEO elects continuance of applicable group health insurance within the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), and state law on a timely basis, and makes the premium payments therefore, the Company (or the applicable successor or surviving entity in the “change of control”) must reimburse the NEO for such premiums for the NEO and his immediate family and/or eligible dependents for a period of 24 months after such termination date.

 

A “change of control” means any of the following:

 

(i)  Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act”) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Company representing more than 50% of the total voting power represented by Company’s then outstanding voting securities;

 

(ii)  A merger or consolidation of Company whether or not approved by the Board, other than a merger or consolidation that would result in the voting securities of Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted or into voting securities of the surviving entity) at least 50% of the total voting power represented by the voting securities of Company or such surviving entity (or the parent of any such surviving entity) outstanding immediately after such merger or consolidation, or a change in the ownership of all or substantially all of Company’s assets to a person not related (within the meaning of income tax Regulations Section 1.409A-3(i)(5)(vii)(b)) to the Company; or

 

(iii)  The replacement during any 12-month period of a majority of the members of the Board with directors whose appointment or election was not endorsed by a majority of the members before the date of the appointment or election.

 

All such termination benefits (except in the case of death of NEO) are subject to the timely execution and delivery of a release agreement in favor of employer, the Company and their respective affiliates. The Compensation Committee evaluated these termination/change of control benefits relative to its 2013 peer group and determined them to be consistent with market practices.

 

Potential Cost of Termination Payments in the Event of Termination

 

Name

 

Termination without
cause or by NEO for
good reason

 

Termination for death or
disability

 

No termination after
change of control

 

Termination after
change of control

 

 

 

($)

 

($)

 

($)

 

($)

 

 

 

 

 

 

 

 

 

 

 

Lynn Peterson

 

 

 

 

 

 

 

 

 

Salary

 

810,000

 

810,000

 

—

 

1,350,000

 

Bonus payout

 

—

 

—

 

—

 

1,080,000

 

Medical benefit continuation

 

—

 

—

 

—

 

14,153

 

Equity acceleration

 

—

 

8,894,810

 

11,840,675

 

11,840,675

 

Life insurance

 

—

 

—

 

—

 

—

 

Total

 

810,000

 

9,704,810

 

11,840,675

 

14,284,827

 

 

 

 

 

 

 

 

 

 

 

James Catlin

 

 

 

 

 

 

 

 

 

Salary

 

345,000

 

345,000

 

—

 

575,000

 

Bonus payout

 

—

 

—

 

—

 

345,000

 

Medical benefit continuation

 

—

 

—

 

—

 

16,771

 

Equity acceleration

 

—

 

2,411,321

 

3,000,491

 

3,000,491

 

Life insurance

 

—

 

—

 

—

 

—

 

Total

 

345,000

 

2,756,321

 

3,000,491

 

3,937,262

 

 

 

 

 

 

 

 

 

 

 

James Henderson

 

 

 

 

 

 

 

 

 

Salary

 

495,000

 

495,000

 

—

 

660,000

 

Bonus payout

 

—

 

—

 

—

 

495,000

 

Medical benefit continuation

 

—

 

—

 

—

 

14,153

 

Equity acceleration

 

—

 

3,369,507

 

4,474,202

 

4,474,202

 

Life insurance

 

—

 

—

 

—

 

—

 

Total

 

495,000

 

3,864,507

 

4,474,202

 

5,643,355

 

 

 

 

 

 

 

 

 

 

 

Russell Branting

 

 

 

 

 

 

 

 

 

Salary

 

165,000

 

165,000

 

—

 

660,000

 

Bonus payout

 

—

 

—

 

—

 

495,000

 

Medical benefit continuation

 

—

 

—

 

—

 

24,347

 

Equity acceleration

 

—

 

3,306,451

 

4,411,146

 

4,411,146

 

Life insurance

 

—

 

—

 

—

 

—

 

Total

 

165,000

 

3,471,451

 

4,411,146

 

5,590,493

 

 

 

 

 

 

 

 

 

 

 

Russ Cunningham

 

 

 

 

 

 

 

 

 

Salary

 

165,000

 

165,000

 

—

 

660,000

 

Bonus payout

 

—

 

—

 

—

 

495,000

 

Medical benefit continuation

 

—

 

—

 

—

 

23,353

 

Equity acceleration

 

—

 

3,306,451

 

4,411,146

 

4,411,146

 

Life insurance

 

—

 

—

 

—

 

—

 

Total

 

165,000

 

3,471,451

 

4,411,146

 

5,589,499

 

 

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Risk Assessment Regarding Compensation Policies and Practices

 

The Compensation Committee has reviewed its compensation programs for executives and for non-executives and believes that compensation is structured in a way that does not create risks that would be reasonably likely to have a material, adverse effect on the Company. The Compensation Committee believes it has designed the overall compensation program in such a way as to deter excessive risk taking, to encourage executives to focus on the long-term success of the Company and to align the interests of executives with those of shareholders by:

 

·                 encompassing several different financial and operational goals;

·                 incorporating short-term and long-term performance periods of varying lengths;

·                 capping short-term bonus incentives;

·                 scaling compensation to industry; and

·                 considering internal equity among Company executives.

 

Report On Repricing Of Options

 

The Company did not reprice any stock options during the fiscal years ended December 31, 2012 or 2013.

 

Compensation Committee Interlocks and Insider Participation

 

There were no compensation committee or board interlocks among the members of our Board during 2013.

 

DIRECTOR COMPENSATION

 

Our Compensation Committee charter provides that the Compensation Committee is to recommend to the Board of Directors matters related to director compensation. The 2013 director compensation package for non-employee directors consisted of annual cash compensation and equity-based awards in the form of shares of restricted stock, each under the 2007 Stock Incentive Plan, as amended. The value of the cash awards was based on the closing price of one share of the Company’s common stock on the grant date.  Twenty-five percent of the restricted stock shares granted as compensation for 2013 vested on January 1, 2014, with the remaining shares vesting ratably on each of January 1, 2015, January 1, 2016 and January 1, 2017.

 

Directors who also chair a committee receive additional cash compensation for their service as a chairperson. For the 2013 fiscal year, each of Herrick K. Lidstone, Jr., William Krysiak and Rodney Knutson received additional cash compensation for his role as chairperson of the Compensation Committee, chairperson of the Audit Committee and chairperson of the Nominating and Corporate Governance Committee, respectively. No additional compensation was paid to any director for attending meetings. No employee of the Company is entitled to compensation for service as a director.

 

The following table provides information related to the compensation of our non-employee directors during fiscal year 2013.

 

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Name

 

Fees Earned or
Paid in Cash(1)
($)

 

Stock
Awards (2)
($)

 

Total
$

 

Rodney D. Knutson

 

70,000

 

226,530

 

296,530

 

William J. Krysiak

 

75,000

 

226,530

 

301,530

 

Herrick K. Lidstone, Jr.

 

75,000

 

226,530

 

301,530

 

 

(1)         Each director received an aggregate of $60,000 in cash compensation, and the chairman of each committee received an additional aggregate amount of $15,000 except Mr. Knutson, the chairman of the Nominating and Corporate Governance Committee, who received $10,000.

 

(2)         The amounts shown in this column represent shares of restricted stock and cash awards subject to our 2007 Stock Incentive Plan, as amended, and reflect the aggregate grant date fair value of equity awards granted within the fiscal year in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 718 for stock-based compensation.  For each director, these awards are comprised of 12,000 shares of restricted stock that were granted on January 1, 2013 (that vest 25% annually beginning January 1, 2014), and 10,500 shares granted on December 3, 2013 (that vest 25% annually beginning January 1, 2015).  These amounts do not necessarily correspond to the actual cash value that will be recognized by the directors when received. Assumptions used in the calculation of this amount for fiscal years ended December 31, 2011, 2012 and 2013 are included in footnote 11 to the Company’s audited financial statements for the fiscal year ended December 31, 2013, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2014.

 

(3)         As of December 31, 2013, the directors had (i) the following number of stock options outstanding: Mr. Lidstone: 75,000; and Mr. Krysiak: 100,000; and (ii) the following number of shares of restricted stock outstanding: Mr. Knutson: 30,000; Mr. Lidstone 30,000; and Mr. Krysiak: 30,000.  The foregoing outstanding restricted stock awards contain a “change of control” provision, which generally provides that, in the event of a qualified “change of control” (as defined in the applicable agreement), any unvested shares will vest irrespective of whether the director’s service to the Company continues or is terminated.

 

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth certain information regarding the beneficial ownership of shares of our common stock as of April 22, 2014 by:

 

·                 our NEOs;

 

·                 our directors and nominees;

 

·                 all of our executive officers and directors as a group; and

 

·                 each person who is known by us to beneficially own more than 5% of our issued and outstanding shares of common stock.

 

Unless otherwise indicated, the shareholders listed possess sole voting and investment power with respect to the shares shown. Our directors and executive officers do not have different voting rights from other shareholders.

 

Name

 

Business Address

 

Amount And
Nature of 
Beneficial 
Ownership

 

Percent of
Class(1)

 

Lynn A. Peterson

 

1625 Broadway, Suite 250,
Denver, Colorado 80202

 

3,801,235

(2)

1.4

%

James E. Catlin

 

1625 Broadway, Suite 250,
Denver, Colorado 80202

 

1,349,628

(3)

*

 

James P. Henderson

 

1625 Broadway, Suite 250,
Denver, Colorado 80202

 

168,995

 

*

 

Russell A. Branting

 

1625 Broadway, Suite 250,
Denver, Colorado 80202

 

553,199

(4)

*

 

Russ D. Cunningham

 

1625 Broadway, Suite 250,
Denver, Colorado 80202

 

245,595

(5)

*

 

Rodney D. Knutson

 

1625 Broadway, Suite 250,
Denver, Colorado 80202

 

213,280

(6)

*

 

William J. Krysiak

 

1625 Broadway, Suite 220,
Denver, Colorado 80202

 

135,000

(7)

*

 

 

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Name

 

Business Address

 

Amount And
Nature of 
Beneficial 
Ownership

 

Percent of
Class(1)

 

Herrick K. Lidstone, Jr.

 

6400 South Fiddler’s Green Circle, Suite 1000, Greenwood Village, Colorado 80111

 

110,000

(8)

*

 

All directors and executive officers as a group (eight individuals)

 

 

 

6,576,932

 

2.5

%

BlackRock Inc.

 

40 East 52nd Street New York, New York 10022

 

17,147,913

 

6.4

%(9)

The Vanguard Group

 

100 Vanguard Boulevard
Malvern, Pennsylvania 19355

 

15,873,145

 

6.0

%(10)

Paulson & Co. Inc.

 

1251 Avenue of the Americas New York, New York 10020

 

26,000,001

 

9.8

%(11)

 

* Less than 1%.

 

(1)         Based on 266,517,464 shares outstanding as of April 22, 2014, plus any shares of common stock deemed to be beneficially owned pursuant to options and warrants that are exercisable within 60 days from the above date.

 

(2)        Includes 2,453,910 shares held directly by the individual (of which 2,319,733 have been pledged to secure a line of credit), 400,000 shares held by individual’s spouse and 947,325 options exercisable within 60 days of April 22, 2014.

 

(3)         Includes 1,049,628 shares held by the individual and 300,000 shares held by the individual’s spouse.

 

(4)         Includes 365,830 options exercisable within 60 days of April 22, 2014.

 

(5)         Includes 137,000 options exercisable within 60 days of April 22, 2014.

 

(6)         Includes 19,500 shares of restricted stock which are not yet fully vested.

 

(7)         Includes 100,000 options exercisable within 60 days of April 22, 2014 and 19,500 shares of restricted stock which are not yet fully vested.

 

(8)         Includes 75,000 options exercisable within 60 days of April 22, 2014 and 19,500 shares of restricted stock which are not yet fully vested.

 

(9)         This information is based solely on a Schedule 13G filed with the SEC on February 3, 2014.

 

(10)  This information is based solely on a Schedule 13G filed with the SEC on February 11, 2014.

 

(11) This information is based solely on a Schedule 13G filed with the SEC on February 14, 2014.

 

We have no knowledge of any other arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change of control of our company.

 

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Equity Compensation Plan Information as of December 31, 2013

 

 

 

 

 

 

 

(c)

 

Plan Category

 

(a)
Number of securities to
be issued upon exercise
of outstanding 
options, warrants
and rights

 

(b)
Weighted-average
exercise price of
outstanding options,
warrants and rights

 

Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities reflected
in column (a))

 

Equity compensation plans approved by security holders

 

8,713,330

(1)

$

6.12

(2)

22,562,004

(3)

Equity compensation plans not approved by security holders

 

N/A

 

N/A

 

N/A

 

Total

 

8,713,330

 

$

6.12

 

22,562,004

 

 

(1)         This number reflects 6,100,155 shares issuable upon the exercise of outstanding stock options, 2,578,175 shares issuable upon the vesting of restricted stock units (RSUs) or restricted stock awards and 35,000 shares issuable upon the vesting of performance awards (PAs). The PAs are payable in cash or, in the Nominating and Corporate Governance Committee’s discretion, shares of the Company’s common stock.

 

(2)         The restricted stock, RSUs and PAs do not have an exercise price; accordingly, the weighted average exercise price in this column reflects the exercise price of the stock options.

 

(3)         This number is based on an aggregate of 37,138,264 shares of the Company’s common stock authorized for issuance under the 2007 Stock Incentive Plan as of December 31, 2013, as amended. Pursuant to Amendment No. 1 to the 2007 Stock Incentive Plan, adopted by the Company’s shareholders of June 3, 2010, beginning on January 1, 2011, the aggregate number of shares authorized for issuance under the 2007 Stock Incentive Plan, as amended, shall be adjusted to equal 14% of the Company’s issued and outstanding shares of common stock, calculated as of January 1 of the respective year. Such shares included within the 2007 Stock Incentive Plan may be either authorized but unissued shares or shares re-acquired and held in treasury.

 

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Certain Relationships and Related Transactions

 

In accordance with our Audit Committee Charter, our Audit Committee is responsible for reviewing, approving and overseeing all related party transactions. Our Code of Business Conduct and Ethics sets forth our written policy regarding related party transactions. Specifically, our Code of Business Conduct and Ethics provides that our directors, officers and employees should not be involved in any activity that creates or gives the appearance of a conflict of interest between their personal interests and the interests of the Company. In particular, our Code of Business Conduct states that, without the specific permission of our Board of Directors (including contracts approved by our Board of Directors), no director, officer or employee, or a member of his or her family shall:

 

·                 be a consultant to, or a director, officer or employee of, or otherwise operate an outside business that:

 

·                 is in competition with our current or potential business goals and objectives;

 

·                 supplies products or services to the Company; or

 

·                 has any financial interest, including significant stock ownership, in any entity with which we do business that might create or give the appearance of a conflict of interest;

 

·                 seek or accept any personal loan or services from any entity with which we do business, except from financial institutions or service providers offering similar loans or services to third parties under similar terms in the ordinary course of their respective businesses;

 

·                 be a consultant to, or a director, officer or employee of, or otherwise operate, an outside business if the demands of the outside business would interfere with the director’s, officer’s or employee’s responsibilities to us;

 

·                 accept any personal loan or guarantee of obligations from the Company, except to the extent such arrangements are legally permissible; or

 

·                 conduct business on behalf of the Company with immediate family members, which include spouses, children, parents, siblings and persons sharing the same home whether or not legal relatives.

 

Directors, officers, and employees must immediately notify the Chair of our Audit Committee of the existence of any actual or potential conflict of interest. The circumstances will be reviewed for a decision on whether a conflict of interest is present, and if so, what course of action is to be taken. The Company had no reportable related party transactions during 2013.  Further, during 2013, the

 

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Company had no transactions where the policies and procedures summarized above did not require review, approval, or ratification, or where such policies and procedures were not followed.

 

Independence of Directors

 

The Board of Directors has determined that the following directors qualify as independent under the applicable standards of the New York Stock Exchange, SEC rules and the NI 52-110: Rodney D. Knutson, Herrick K. Lidstone, Jr. and William J. Krysiak.  The other two members of the Board are Lynn A. Peterson and James E. Catlin, who are not independent directors because they are currently serving as officers of the Company. The Board has also determined that Messrs. Knutson, Lidstone and Krysiak, as members of the Audit and Compensation Committees, qualify as independent under the New York Stock Exchange and SEC rules applicable to audit and compensation committee members.

 

ITEM 14.                 PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Fees Billed by Independent Auditors

 

We paid the following fees to Ernst & Young LLP for the audit of the consolidated financial statements and for other services provided in the years ended December 31, 2013, and 2012. All services and fees, including tax service fees, were pre-approved by the Audit Committee.

 

Financial Year Ending

 

Audit Fees $

 

Audit
Related
Fees $

 

Tax Fees $(1)

 

All Other
Fees $

 

Total $

 

December 31, 2013

 

648,000

 

—

 

227,907

 

—

 

875,907

 

December 31, 2012

 

581,983

 

—

 

71,013

 

—

 

652,996

 

 

(1)         The tax fees related to tax advisory services.

 

Pre-Approval Policies and Procedures

 

The Audit Committee Charter provides that the Audit Committee is responsible for the appointment, compensation, retention and oversight of the independent public accountants, and pre-approves all audit services and permissible non-audit services to be provided to the Company by the independent public accountants. The Audit Committee may, in its discretion, delegate the authority to pre-approve all audit services and permissible non-audit services to the Chairman of the Audit Committee provided the Chairman reports any delegated pre-approvals to the Audit Committee at the next meeting thereof. The Audit Committee has not, however, adopted any specific policies and procedures for the engagement of non-audit services. For 2012 and 2013, all of the services related to amounts billed by the Company’s external accountants were pre-approved by the Audit Committee.

 

Report on Audited Financial Statements

 

The Audit Committee reviewed and discussed with management and the Company’s independent auditors the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. The Audit Committee has discussed with the independent registered public accountants matters required to be discussed by Auditing Standard No. 16 (Communications with Audit Committees), as adopted by the Public Company Accounting Oversight Board. As part of that review, the Committee received the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and the Committee has discussed the independent registered public accounting firm’s independence from the Company and its management, including any matters in those written disclosures. Additionally, the Audit Committee considered whether the provision of non-audit services was compatible with maintaining such accountants’ independence. Based on the review and discussions, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2013, for filing with the SEC.

 

 

Audit Committee of the Board
William J. Krysiak, Chairman
Rodney D. Knutson
Herrick K. Lidstone, Jr.

 

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PART IV

 

ITEM 15.                 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

(b)  Exhibits

 

Exhibit 
Number

 

Description

2.1

 

Purchase and Sale Agreement between Kodiak Oil & Gas (USA) Inc., Kodiak Oil & Gas Corp. and Liberty Resources LLC dated June 2, 2013 (filed as Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed on June 3, 2013 and incorporated herein by reference)

3.1

 

Certificate of Continuance of Kodiak Oil & Gas Corp., dated September 20, 2001 (filed as Exhibit 1.1 to the registrant’s Registration Statement on Form 20-F filed on November 23, 2005 and incorporated herein by reference)

3.2

 

Articles of Continuation of Kodiak Oil & Gas Corp. (filed as Exhibit 1.2 to the registrant’s Registration Statement on Form 20-F filed on November 23, 2005 and incorporated herein by reference)

3.3

 

Amended and Restated By-Law No. 1 of the Company (filed as Exhibit 3.3 to the registrant’s Quarterly Report on Form 10-Q filed on May 9, 2008 and incorporated herein by reference)

3.4

 

Articles of Incorporation of Kodiak Oil and Gas (USA) Inc. (filed as Exhibit 3.3 to the registrant’s Registration Statement on Form S-3 (Registration No. 333-169517) filed on September 22, 2010 and incorporated herein by reference)

4.1

 

Form of common stock certificate (filed as Exhibit 4.6 to the registrant’s Registration Statement on Form S-3ASR (Registration No. 333-173520) filed on April 15, 2011 and incorporated herein by reference)

4.2

 

Form of senior indenture between Kodiak Oil & Gas Corp. and one or more trustees to be named (filed as Exhibit 4.7 to the registrant’s Registration Statement on Form S-3ASR (Registration No. 333-173520) filed on April 15, 2011 and incorporated herein by reference)

4.3

 

Form of subordinated indenture between Kodiak Oil & Gas Corp. and one or more trustees to be named (filed as Exhibit 4.8 to the registrant’s Registration Statement on Form S-3ASR (Registration No. 333-173520) filed on April 15, 2011 and incorporated herein by reference)

4.4

 

Indenture, dated November 23, 2011, among Kodiak Oil & Gas Corp., Kodiak Oil & Gas (USA) Inc., U.S. Bank National Association and Computershare Trust Company of Canada (filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed on November 23, 2011 and incorporated herein by reference)

4.5

 

Indenture, dated January 15, 2013, among Kodiak Oil & Gas Corp., Kodiak Oil & Gas (USA) Inc., U.S. Bank, National Association, as trustee, and Computershare Trust Company of Canada, as the Canadian trustee (filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed on January 15, 2013 and incorporated herein by reference)

4.6

 

Indenture, dated July 26, 2013, among Kodiak Oil & Gas Corp., Kodiak Oil & Gas (USA) Inc., Kodiak Williston, LLC, KOG Finance, LLC, U.S. Bank National Association, as trustee, and Computershare Trust Company of Canada, as Canadian trustee (filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed on July 26, 2013 and incorporated herein by reference)

4.7

 

Supplemental Indenture, dated as of July 30, 2013, among Kodiak Oil & Gas Corp., Kodiak Williston, LLC, KOG Finance, LLC, U.S. Bank National Association and Computershare Trust Company of Canada, to the Indenture, dated as of November 23, 2011, among Kodiak Oil & Gas Corp., Kodiak Oil & Gas (USA) Inc., U.S. Bank National Association and Computershare Trust Company of Canada (filed as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q on August 1, 2013 and incorporated herein by reference)

4.8

 

Supplemental Indenture, dated as of July 30, 2013, among Kodiak Oil & Gas Corp., Kodiak Williston, LLC, KOG Finance, LLC, U.S. Bank National Association and Computershare Trust Company of Canada, to the Indenture, dated as of January 15, 2013, among Kodiak Oil & Gas Corp., Kodiak Oil & Gas (USA) Inc., U.S. Bank National Association and Computershare Trust Company of Canada (filed as Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q on August 1, 2013 and incorporated herein by reference)

4.9

 

Registration Rights Agreement, dated May 17, 2012, among Kodiak Oil & Gas Corp., Kodiak Oil & Gas (USA) Inc., RBC Capital Markets, LLC, Wells Fargo Securities, LLC, and Credit Suisse Securities (USA) LLC (filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on May 17, 2012 and incorporated herein by reference)

4.10

 

Registration Rights Agreement, dated January 15, 2013, among Kodiak Oil & Gas Corp., Kodiak Oil & Gas (USA) Inc., Wells Fargo Securities, LLC, RBC Capital Markets, LLC and Credit Suisse Securities (USA) LLC (filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on January 15, 2013 and incorporated herein by reference)

4.11

 

Registration Rights Agreement, dated July 26, 2013, among Kodiak Oil & Gas Corp., Kodiak Oil & Gas (USA) Inc., Kodiak Williston, LLC, KOG Finance, LLC and Credit Suisse Securities (USA) LLC (filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on July 26, 2013 and incorporated herein by reference)

4.12

 

Officers’ Certificate of the Company dated as of May 17, 2012 (filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed on May 17, 2012 and incorporated herein by reference)

 

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10.1

 

Kodiak Oil & Gas Corp. Incentive Share Option Plan (filed as Exhibit 4.5 to the registrant’s Registration Statement on Form 20-F filed on November 23, 2005 and incorporated herein by reference)

10.2

 

Kodiak Oil & Gas Corp. 2007 Stock Incentive Plan (filed as Appendix A to the registrant’s Definitive Proxy Statement filed on April 27, 2007 and incorporated herein by reference)

10.3

 

Amendment No. 1 to Kodiak Oil & Gas Corp. 2007 Stock Incentive Plan (filed as Appendix A to the registrant’s Definitive Proxy Statement filed on April 30, 2010 and incorporated herein by reference)

10.4

 

Amendment No. 2 to Kodiak Oil & Gas Corp. 2007 Stock Incentive Plan (filed as Appendix A to the registrant’s Definitive Proxy Statement filed on April 28, 2011 and incorporated herein by reference)

10.5

 

Form of Incentive Stock Option Agreement for 2007 Stock Incentive Plan (filed as Exhibit 4.2 to the registrant’s Registration Statement on Form S-8 (Registration No. 333-138704) filed on July 26, 2007 and incorporated herein by reference)

10.6

 

Form of Employee Non-incentive Stock Option Agreement for 2007 Stock Incentive Plan (filed as Exhibit 4.3 to the registrant’s Registration Statement on Form S-8 (Registration No. 333-138704) filed on July 26, 2007 and incorporated herein by reference)

10.7

 

Form of Directors’ Non-incentive Stock Option Agreement for 2007 Stock Incentive Plan (filed as Exhibit 4.4 to the registrant’s Registration Statement on Form S-8 (Registration No. 333-138704) filed on July 26, 2007 and incorporated herein by reference)

10.8

 

Form of Non-Incentive Performance-Based Stock Option Agreement for 2007 Stock Incentive Plan (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on March 19, 2008 and incorporated herein by reference)

10.9

 

Form of Stock Award Agreement for 2007 Stock Incentive Plan (filed as Exhibit 10.8 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2010 filed on March 3, 2011 and incorporated herein by reference)

10.10

 

Form of Restricted Stock Unit and Performance Award Agreement for 2007 Stock Incentive Plan (filed as Exhibit 10.9 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2010 filed on March 3, 2011 and incorporated herein by reference)

10.11

 

Form of Restricted Stock and Cash Award Agreement for 2007 Stock Incentive Plan (filed as Exhibit 10.10 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2010 filed on March 3, 2011 and incorporated herein by reference)

10.12

 

Form of Restricted Stock Unit Award Agreement for 2007 Stock Incentive Plan (filed as Exhibit 10.12 to the registrant’s Annual Report on Form 10-K filed on February 28, 2012 and incorporated herein by reference)

10.13

 

Form of Restricted Stock Agreement for 2007 Stock Incentive Plan (filed as Exhibit 10.13 to the registrant’s Annual Report on Form 10-K filed on February 28, 2012 and incorporated herein by reference)

10.14

 

Form of Restricted Stock Agreement for 2007 Stock Incentive Plan (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on May 3, 2013 and incorporated herein by reference)

10.15

 

Form of Stock Option Termination Agreement (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on January 6, 2010 and incorporated herein by reference)

10.16

 

Fourth Amendment to Lease, dated February 14, 2007, between Transwestern Broadreach WTC, LLC and Kodiak Oil & Gas (USA) Inc. (filed as Exhibit 10.14 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006 filed on March 27, 2007 and incorporated herein by reference)

10.17

 

Fifth Amendment to Lease, dated May 31, 2007 between Transwestern Broadreach WTC, LLC and Kodiak Oil & Gas (USA) Inc. (filed as Exhibit 10.3 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 filed on March 14, 2008 and incorporated herein by reference)

10.18

 

Executive Employment Agreement, effective January 1, 2011, by and among Lynn A. Peterson, Kodiak Oil & Gas (USA) Inc. and Kodiak Oil & Gas Corp. (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on January 6, 2011 and incorporated herein by reference)

10.19

 

Amendment No. 1 to Employment Agreement of Lynn A. Peterson effective January 1, 2013 (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on January 28, 2013 and incorporated herein by reference)

10.20

 

Executive Employment Agreement, effective January 1, 2011, by and among James E. Catlin, Kodiak Oil & Gas (USA) Inc. and Kodiak Oil & Gas Corp. (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on January 6, 2011 and incorporated herein by reference)

10.21

 

Amendment No. 1 to Employment Agreement of James E. Catlin effective January 1, 2013 (filed as Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed on January 28, 2013 and incorporated herein by reference)

10.22

 

Executive Employment Agreement, effective January 1, 2011, by and among James P. Henderson, Kodiak Oil & Gas (USA) Inc. and Kodiak Oil & Gas Corp. (filed as Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed on January 6, 2011 and incorporated herein by reference)

10.23

 

Amendment No. 1 to Employment Agreement of James P. Henderson effective January 1, 2013 (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on January 28, 2013 and incorporated herein by reference)

10.24

 

Employment Agreement between Kodiak Oil and Gas Corp. and Russell A. Branting dated January 1, 2011 (filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q filed on August 4, 2011 and incorporated herein by reference)

 

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10.25

 

Amendment No. 1 to Employment Agreement of Russell A. Branting (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on June 22, 2012 and incorporated herein by reference)

10.26

 

Amendment No. 2 to Employment Agreement of Russell A. Branting effective January 1, 2013 (filed as Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed on January 28, 2013 and incorporated herein by reference)

10.27

 

Employment Agreement between Kodiak Oil and Gas Corp. and Russ D. Cunningham dated January 1, 2011 (filed as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q filed on August 4, 2011 and incorporated herein by reference)

10.28

 

Amendment No. 1 to Employment Agreement of Russ D. Cunningham (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on June 22, 2012 and incorporated herein by reference)

10.29

 

Amendment No. 2 to Employment Agreement of Russ D. Cunningham effective January 1, 2013 (filed as Exhibit 10.5 to the registrant’s Current Report on Form 8-K filed on January 28, 2013 and incorporated herein by reference))

10.30

 

Credit Agreement dated as of May 24, 2010 among Kodiak Oil & Gas (USA) Inc., Wells Fargo Bank, N.A. and The Lenders Signatory Thereto (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on May 27, 2010 and incorporated herein by reference)

10.31

 

First Amendment to Credit Agreement among Kodiak Oil & Gas (USA) Inc., Wells Fargo Bank, N.A. and The Lenders Signatory Thereto, effective as of November 30, 2010 (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on December 2, 2010 and incorporated herein by reference)

10.32

 

Second Amendment to Credit Agreement among Kodiak Oil & Gas (USA) Inc., Wells Fargo Bank, N.A., and the Lenders Signatory Thereto, effective as of April 13, 2011 (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on April 19, 2011 and incorporated herein by reference)

10.33

 

Amended and Restated Credit Agreement, dated as of October 28, 2011, among Kodiak Oil & Gas (USA) Inc., Wells Fargo Bank, N.A. and The Lenders Party Thereto (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on November 3, 2011 and incorporated herein by reference)

10.34

 

First Amendment and Limited Waiver to Amended and Restated Credit Agreement among Kodiak Oil & Gas (USA) Inc., as Borrower, Wells Fargo Bank, N.A., as Administrative Agent, and The Lenders Signatory Thereto, dated as of November 14, 2011 (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on November 14, 2011 and incorporated herein by reference)

10.35

 

Second Amendment to Amended and Restated Credit Agreement among Kodiak Oil & Gas (USA) Inc., as Borrower, Wells Fargo Bank, N.A., as Administrative Agent, and The Lenders Signatory Thereto, executed as of November 14, 2011 (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on November 14, 2011 and incorporated herein by reference)

10.36

 

Third Amendment to Amended and Restated Credit Agreement among Kodiak Oil & Gas (USA) Inc., as Borrower, Wells Fargo Bank, N.A., as Administrative Agent, and The Lenders Signatory Thereto, dated as of January 10, 2012 (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on January 17, 2012 and incorporated herein by reference)

10.37

 

Fifth Amendment to Amended and Restated Credit Agreement among Kodiak Oil & Gas (USA) Inc., as Borrower, Wells Fargo Bank, N.A., as Administrative Agent, and The Lenders Signatory Thereto, dated as of May 11, 2012 (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on May 17, 2012 and incorporated herein by reference)

10.38

 

Sixth Amendment to Amended and Restated Credit Agreement among Kodiak Oil & Gas (USA) Inc.; as Borrower, Wells Fargo Bank, N.A., as Administrative Agent, and The Lenders Signatory Thereto, dated as of October 15, 2012 (filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q filed on November 1, 2012 and incorporated herein by reference)

10.39

 

Seventh Amendment to Amended and Restated Credit Agreement, dated as of January 15, 2013, among Kodiak Oil & Gas (USA) Inc., as Borrower, Wells Fargo Bank, N.A., as Administrative Agent, and the Lenders signatory thereto (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on January 15, 2013 and incorporated herein by reference)

10.40

 

Tenth Amendment and Limited Waiver to Amended and Restated Credit Agreement among Kodiak Oil & Gas (USA) Inc., as Borrower, Wells Fargo Bank, N.A., as Administrative Agent, and The Lenders Signatory Thereto, dated as of July 12, 2013 (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on July 15, 2013 and incorporated herein by reference)

10.41

 

Guarantee and Collateral Agreement dated as of May 24, 2010 by Kodiak Oil & Gas (USA) Inc. in favor of Wells Fargo Bank, N.A. as administrative agent (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on May 27, 2010 and incorporated herein by reference)

10.42

 

Amended and Restated Guarantee and Collateral Agreement made by each of the Grantors (as defined therein) in favor of Wells Fargo Bank, N.A., dated as of October 28, 2011 (filed as Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed on November 3, 2011 and incorporated herein by reference)

10.43

 

Guarantee and Pledge Agreement dated as of May 24, 2010 by Kodiak Oil & Gas Corp. in favor of Wells Fargo Bank, N.A. as administrative agent (filed as Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed on May 27, 2010

 

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and incorporated herein by reference)

10.44

 

Amended and Restated Guarantee and Pledge Agreement made by Kodiak Oil & Gas Corp. in favor of Wells Fargo Bank, N.A., dated as of October 28, 2011 (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on November 3, 2011 and incorporated herein by reference)

10.45

 

Second Lien Credit Agreement, dated as of November 30, 2010, among Kodiak Oil & Gas (USA) Inc., Wells Fargo Energy Capital, Inc. and The Lenders Party Thereto (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on December 2, 2010 and incorporated herein by reference)

10.46

 

Agreement and Amendment No. 1 to Second Lien Credit Agreement, dated as of July 15, 2011, among Kodiak Oil & Gas (USA) Inc., Kodiak Oil & Gas Corp., as guarantor, the lender parties and Wells Fargo Energy Capital, Inc. (filed as exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on July 18, 2011 and incorporated herein by reference)

10.47

 

Amended and Restated Second Lien Credit Agreement, dated as of October 28, 2011, among Kodiak Oil & Gas (USA) Inc., Wells Fargo Energy Capital, Inc. and The Lenders Party Thereto (filed as Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed on November 3, 2011 and incorporated herein by reference)

10.48

 

First Amendment and Limited Waiver to Amended and Restated Second Lien Credit Agreement among Kodiak Oil & Gas (USA) Inc., as Borrower, Wells Fargo Energy Capital, Inc., as Administrative Agent, and The Lenders Signatory Thereto, dated as of November 14, 2011 (filed as Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed on November 14, 2011 and incorporated herein by reference)

10.49

 

Second Lien Guarantee and Pledge Agreement made by Kodiak Oil & Gas Corp. in favor of Wells Fargo Energy Capital, Inc., dated as of November 30, 2010 (filed as Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed on December 2, 2010 and incorporated herein by reference)

10.50

 

Amended and Restated Second Lien Guarantee and Pledge Agreement made by Kodiak Oil & Gas Corp. in favor of Wells Fargo Energy Capital, Inc., dated as of October 28, 2011 (filed as Exhibit 10.5 to the registrant’s Current Report on Form 8-K filed on November 3, 2011 and incorporated herein by reference)

10.51

 

Second Lien Guarantee and Collateral Agreement made by each of the Grantors (as defined therein) in favor of Wells Fargo Energy Capital, Inc., dated as of November 30, 2010 (filed as Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed on December 2, 2010 and incorporated herein by reference)

10.52

 

Amended and Restated Second Lien Guarantee and Collateral Agreement made by each of the Grantors (as defined therein) in favor of Wells Fargo Energy Capital, Inc., dated as of October 28, 2011. (filed as Exhibit 10.6 to the registrant’s Current Report on Form 8-K filed on November 3, 2011 and incorporated herein by reference)

10.53

 

Purchase Agreement, dated May 14, 2012, among Kodiak Oil & Gas Corp., Kodiak Oil & Gas (USA) Inc., and RBC Capital Markets, LLC, Wells Fargo Securities, LLC, and Credit Suisse Securities (USA) LLC, as representatives of the several purchasers identified therein (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on May 17, 2012 and incorporated herein by reference)

10.54

 

Purchase Agreement, dated January 10, 2013, among Kodiak Oil & Gas Corp., Kodiak Oil & Gas (USA) Inc., and Wells Fargo Securities, LLC, RBC Capital Markets, LLC and Credit Suisse Securities (USA) LLC, as representatives of the several purchasers identified therein (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on January 15, 2013 and incorporated herein by reference)

10.55

 

Purchase Agreement, dated July 23, 2013, among Kodiak Oil & Gas Corp., Kodiak Oil & Gas (USA) Inc., Kodiak Williston, LLC, KOG Finance, LLC and Credit Suisse Securities (USA) LLC, as representative of the several purchasers identified therein (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on July 26, 2013 and incorporated herein by reference)

12.1+

 

Computation of Ratio of Earnings to Fixed Charges

21.1+

 

Subsidiaries of the Registrant

23.1+

 

Consent of Ernst & Young LLP

23.2+

 

Consent of Netherland, Sewell & Associates, Inc.

31.1+

 

Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)

31.2+

 

Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)

31.3

 

Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)

31.4

 

Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)

32.1+

 

Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2+

 

Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350

32.3

 

Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.4

 

Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350

99.1+

 

Reserve Estimate Report of Netherland Sewell & Associates, Inc.

101+

 

The following materials are filed herewith: (i) XBRL Instance, (ii) XBRL Taxonomy Extension Schema, (iii) XBRL Taxonomy Extension Calculation, (iv) XBRL Taxonomy Extension Labels, (v) XBRL Taxonomy Extension

 

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Presentation, and (vi) XBRL Taxonomy Extension Definition. In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Exchange Act of 1934, and otherwise is not subject to liability under these sections and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by the specific reference in such filing.

 

+ Previously filed on the Registrant’s original Form 10-K for the fiscal year ended December 31, 2013 filed on February 27, 2014.

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

KODIAK OIL & GAS CORP.

 

(Registrant)

 

 

 

Date: April 30, 2014

By:

/s/ LYNN A. PETERSON

 

 

Lynn A. Peterson

 

 

President and Chief Executive Officer

 

 

(principal executive officer)

 

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