DEF 14A 1 mcf-20170331xdef14a.htm DEF 14A mcf_Current_Folio_Proxy

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12

 

 

CONTANGO OIL & GAS COMPANY

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

(1)

Title of each class of securities to which transaction applies:

(2)

Aggregate number of securities to which transaction applies:

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

(4)

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Total fee paid:

 

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 240.0-11 and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)

Amount Previously Paid:

(2)

Form, Schedule or Registration Statement No.:

(3)

Filing Party:

(4)

Date Filed:

 

 

 

 


 

CONTANGO OIL & GAS COMPANY
717 TEXAS AVENUE, SUITE 2900
HOUSTON, TEXAS 77002
(713) 236-7400

ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 11, 2017


Dear Contango

Stockholder:

March 31, 2017

We are pleased to invite you to attend the 2017 Annual Meeting of Stockholders of Contango Oil & Gas Company. The Annual Meeting will be held on May 11, 2017, at 9:30 a.m., local time, at the Chase Center Auditorium, located at 601 Travis St., Houston, Texas 77002.

The enclosed Notice of Annual Meeting and the accompanying proxy statement describe the various matters to be acted upon during the Annual Meeting. In addition, there will be a report on the state of our business and an opportunity for you to ask questions of our management.

You may vote your shares by submitting a proxy by Internet, by telephone, by completing, signing, dating and returning the enclosed proxy card or by voting your shares in person at the Annual Meeting. The enclosed proxy card describes your voting options in more detail. Our report to the stockholders, including our Annual Report on Form 10-K for the year ended December 31, 2016, also accompanies the enclosed proxy statement.

The Annual Meeting gives us an opportunity to review our business results and discuss the steps we have taken to position our company for the future. We appreciate your ownership of Contango’s common stock, and I hope you will be able to join us at the Annual Meeting.

 

 

 

Sincerely,

 

 

 

Picture 1

 

 

 

Allan D. Keel

 

President and Chief Executive Officer

 

 

 

 


 

CONTANGO OIL & GAS COMPANY
717 TEXAS AVENUE, SUITE 2900
HOUSTON, TEXAS 77002
(713) 236-7400

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 11, 2017

The 2017 Annual Meeting of Stockholders (the “Annual Meeting”) of Contango Oil & Gas Company, a Delaware corporation, will be held on May 11, 2017, at 9:30 a.m., local time, at the Chase Center Auditorium, located at 601 Travis St., Houston, Texas 77002 for the following purposes:

(1) the election of six directors to our Board until the 2018 Annual Meeting of Stockholders;

(2) the ratifying of the appointment of Grant Thornton LLP as our independent registered public accounting firm;

(3) the holding of an advisory vote on named executive officer compensation;

(4) the approval of the amendment and restatement of the Amended and Restated 2009 Incentive Compensation Plan to, among other items, increase the number of shares authorized for issuance thereunder and to extend the term thereof;  

(5) the re-approval of the material terms of the Amended and Restated  2009 Incentive Compensation Plan, as amended, in accordance with the stockholder approval requirements of Section 162(m) of the Internal Revenue Code; and

(6) the transacting of such other business as may arise that can properly be conducted at the Annual Meeting or any adjournment or postponement thereof.

Our Board has fixed the close of business on March 17, 2017 as the record date (the “Record Date”) for the determination of stockholders entitled to notice of and to vote at the Annual Meeting or any adjournment(s) or postponement(s) thereof. Only stockholders of record at the close of business on the Record Date are entitled to notice of and to vote at the Annual Meeting. A list of stockholders entitled to vote at the Annual Meeting will be available for examination at our offices for 10 calendar days prior to the Annual Meeting. The list will also be available during the Annual Meeting for inspection by stockholders.

EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ACCOMPANYING ENVELOPE OR USE THE TELEPHONE OR INTERNET VOTING.

 

 

 

By Order of the Board of Directors,

 

 

 

Picture 4

 

 

Houston, Texas

John A. Thomas

March 31, 2017

Vice President, General Counsel and Corporate Secretary

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 11, 2017

The Notice of Annual Meeting of Stockholders, the Proxy Statement for the 2017 Annual Meeting of Stockholders and the
Annual Report to Stockholders for the year ended
December 31, 2016 are available at
www.proxyvote.com

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CONTANGO OIL & GAS COMPANY
PROXY STATEMENT


TABLE OF CONTENTS

 

 

 

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING 

 

CORPORATE GOVERNANCE AND OUR BOARD 

 

EXECUTIVE OFFICERS 

 

11 

COMPENSATION DISCUSSION AND ANALYSIS 

 

13 

EXECUTIVE COMPENSATION 

 

25 

DIRECTOR COMPENSATION 

 

33 

TRANSACTIONS WITH RELATED PERSONS 

 

34 

PROPOSAL 1ELECTION OF DIRECTORS

 

36 

PROPOSAL 2RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP

 

39 

PROPOSAL 3ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION

 

40 

PROPOSAL 4THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE AMENDED AND RESTATED 2009 INCENTIVE COMPENSATION PLAN

 

41 

PROPOSAL 5THE RE-APPROVAL OF THE AMENDED AND RESTATED 2009 INCENTIVE COMPENSATION PLAN FOR PURPOSES OF SECTION 162(M) OF THE INTERNAL REVENUE CODE

 

52 

AUDIT COMMITTEE REPORT 

 

55 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 

 

56 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE 

 

58 

STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR THE 2017 ANNUAL MEETING 

 

58 

OTHER BUSINESS 

 

59 

ANNUAL REPORT 

 

59 

 

 

 

 

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CONTANGO OIL & GAS COMPANY

717 TEXAS AVENUE, SUITE 2900

HOUSTON, TEXAS 77002

(713) 236-7400


PROXY STATEMENT

FOR

THE 2017 ANNUAL MEETING OF STOCKHOLDERS


Unless the context requires otherwise, references in this proxy statement to “Contango,” “we,” “us” and “our” are to Contango Oil & Gas Company, a Delaware corporation, and its consolidated subsidiaries. Unless the context otherwise requires, references to the “stockholders” are to the holders of shares of our common stock, par value $0.04 per share (“Common Stock”).

The accompanying proxy is solicited by the Board of Directors of Contango (our “Board”) to be voted at our 2017 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on May 11, 2017, at the time and place and for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders (the “Notice”) and at any adjournment(s) or postponement(s) thereof.

This proxy statement and accompanying form of proxy are being mailed to our stockholders on or about March 31, 2017. Our Annual Report on Form 10-K (the “Annual Report”) covering the year ended December 31, 2016 is enclosed, but does not form any part of the materials for solicitation of proxies.

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

What is the purpose of the Annual Meeting?

At the Annual Meeting, our stockholders will act upon the matters outlined in the Notice, including (1) the election of six directors to our Board, each for a term ending on the date of the 2018 Annual Meeting of Stockholders (this proposal is referred to as the “Election of Directors”), (2) the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm (this proposal is referred to as the “Ratification of Grant Thornton”), (3) holding an advisory vote on named executive officer compensation (this proposal is referred to as the “Compensation Advisory Vote”), (4) the approval of the amendment and restatement to the Amended and Restated 2009 Incentive Compensation Plan; (5) re-approval of the material terms of the Amended and Restated 2009 Incentive Compensation Plan pursuant to Section 162(m) of the Internal Revenue Code, and (6) the transaction of such other business as may arise that can properly be conducted at the Annual Meeting or any adjournment or postponement thereof. Also, management will report on our performance during the last fiscal year and respond to questions from our stockholders.

What is a proxy?

A proxy is another person that you legally designate to vote your stock. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card.

What is a proxy statement?

It is a document that regulations of the Securities and Exchange Commission (the “SEC”) require that we give to you when we ask you to sign a proxy card to vote your stock at the Annual Meeting.


 

What is “householding” and how does it affect me?

One copy of the Notice, this proxy statement and the Annual Report (collectively, the “Proxy Materials”) will be sent to stockholders who share an address, unless they have notified us that they want to continue receiving multiple packages. This practice, known as “householding,” is designed to reduce duplicate mailings and save significant printing and postage costs. If you received a householded mailing this year and you would like to have additional copies of the Proxy Materials mailed to you or you would like to opt out of this practice for future mailings, we will promptly deliver such additional copies to you if you submit your request in writing to our Investor Relations Department, at 717 Texas Avenue, Suite 2900, Houston, Texas 77002, or call at (713) 236-7400. You may also contact us in the same manner if you received multiple copies of the Annual Meeting materials and would prefer to receive a single copy in the future. The Proxy Materials are also available at www.proxyvote.com.

What should I do if I receive more than one set of voting materials?

Despite our efforts related to householding, you may receive more than one set of voting materials, including multiple copies of the proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. Similarly, if you are a stockholder of record and hold shares in a brokerage account, you will receive a proxy card and a voting instruction card. Please complete, sign, date and return each proxy card and voting instruction card that you receive to ensure that all your shares are voted at the Annual Meeting.

What is the record date and what does it mean?

The record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting is the close of business on March 17, 2017 (the “Record Date”). The Record Date is established by our Board as required by Delaware law. On the Record Date, we had 25,232,989 shares of Common Stock issued and outstanding.

What is a quorum?

A quorum is the presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the shares of our Common Stock outstanding and entitled to vote as of the Record Date. There must be a quorum for the Annual Meeting to be held. If a quorum is not present, the Annual Meeting may be adjourned from time to time until a quorum is reached. Proxies received but marked as abstentions or broker non-votes will be included in the calculation of votes considered to be present at the Annual Meeting.

Who is entitled to vote at the Annual Meeting?

Subject to the limitations set forth below, stockholders at the close of business on the Record Date may vote at the Annual Meeting.

What are the voting rights of the stockholders?

Each holder of Common Stock is entitled to one vote per common share on all matters to be acted upon at the Annual Meeting. Neither our Certificate of Incorporation, as amended, nor our bylaws allow for cumulative voting rights.

What is the difference between a stockholder of record and a “street name” holder?

Most stockholders hold their shares through a broker, bank or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned in street name.

·

Stockholder of Record. If your shares are registered directly in your name with Continental Stock Transfer & Trust Company, our transfer agent, you are considered, with respect to those shares, the stockholder of record. As the stockholder of record, you have the right to grant your voting proxy directly or to vote in person at the Annual Meeting.

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·

Street Name Stockholder. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name.” As the beneficial owner, you have the right to direct your broker or nominee how to vote and are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote these shares in person at the Annual Meeting unless you obtain a signed proxy from the record holder giving you the right to vote the shares.

How do I vote my shares?

Stockholders of Record: Stockholders of record may vote their shares or submit a proxy to have their shares voted by one of the following methods:

·

By Internet. You may submit a proxy electronically on the Internet by following the instructions provided on the enclosed proxy card. Please have the proxy card in hand when you log onto the website. Internet voting facilities will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time, on May 10, 2017.

·

By Telephone. If you request paper copies of the proxy materials by mail, you may submit a proxy by telephone (from U.S. and Canada only) using the toll-free number listed on the proxy card. Please have your proxy card in hand when you call. Telephone voting facilities will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time, on May 10, 2017.

·

By Mail. You may indicate your vote by completing, signing and dating your proxy card and returning it in the enclosed reply envelope.

·

In Person. You may vote in person at the Annual Meeting by completing a ballot; however, attending the Annual Meeting without completing a ballot will not count as a vote.

Street Name Stockholders: Street name stockholders may generally vote their shares or submit a proxy to have their shares voted by one of the following methods:

·

By Mail. You may indicate your vote by completing, signing and dating your proxy card or other information forwarded by your bank, broker or other holder of record and returning it in the enclosed reply envelope.

·

By Methods Listed on Proxy Card. Please refer to your proxy card or other information forwarded by your bank, broker or other holder of record to determine whether you may submit a proxy by telephone or electronically on the Internet, following the instructions on the proxy card or other information provided by the record holder.

·

In Person with a Proxy from the Record Holder. You may vote in person at the Annual Meeting if you obtain a legal proxy from your bank, broker or other nominee. Please consult the voting form or other information sent to you by your bank, broker or other nominee to determine how to obtain a legal proxy in order to vote in person at the Annual Meeting.

Can I revoke my proxy?

Yes. If you are a stockholder of record, you can revoke your proxy at any time before it is exercised by:

·

submitting written notice of revocation to our company, Attn: Corporate Secretary, 717 Texas Avenue, Suite 2900, Houston, Texas, 77002, no later than May10, 2017;

·

submitting another proxy with new voting instructions by mail, telephone or the Internet voting system; or

·

attending the Annual Meeting and voting your shares in person.

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If you are a street name stockholder and you vote by proxy, you may change your vote by submitting new voting instructions to your bank, broker or nominee in accordance with that entity’s procedures.

May I vote confidentially?

Yes. We treat all stockholder meeting proxies, ballots and voting tabulations confidentially if the stockholder has requested confidentiality on the proxy or ballot.

If you so request, your proxy will not be available for examination nor will your vote be disclosed prior to the tabulation of the final vote at the Annual Meeting except (1) to meet applicable legal requirements or (2) to allow the independent election inspectors to count and certify the results of the vote. The independent election inspectors may, however, at any time inform us whether or not a stockholder has voted.

What is the effect of broker non-votes and abstentions and what vote is required to approve each proposal?

If you hold your shares in “street name,” you will receive instructions from your broker or other nominee describing how to vote your shares. If you do not instruct your broker or nominee how to vote your shares, they may vote your shares as they decide as to each matter for which they have discretionary authority under the rules of the NYSE MKT LLC (the “NYSE MKT”).

There are also non-discretionary matters for which brokers and other nominees do not have discretionary authority to vote unless they receive timely instructions from you. When a broker or other nominee does not have discretion to vote on a particular matter, you have not given timely instructions on how the broker or other nominee should vote your shares and the broker or other nominee indicates it does not have authority to vote such shares on its proxy, a “broker non-vote” results. Although any broker non-vote would be counted as present at the Annual Meeting for purposes of determining a quorum, it would be treated as not entitled to vote with respect to non-discretionary matters.

Abstentions occur when stockholders are present at the Annual Meeting but fail to vote or voluntarily withhold their vote for any of the matters upon which the stockholders are voting.

If your shares are held in street name and you do not give voting instructions, the record holder will not be permitted to vote your shares with respect to Proposal 1 (Election of Directors), and your shares will be considered broker non-votes with respect to this proposal. If your shares are held in street name and you do not give voting instructions, the record holder will nevertheless be entitled to vote your shares with respect to Proposal 2 (Ratification of Grant Thornton) in the discretion of the record holder. If you shares are held in street name and you do not give voting instructions, the record holder will not be permitted to vote your shares with respect to Proposal 3 (The Compensation Advisory Vote), Proposal 4 (Approval of the amendment and restatement of the Amended and Restated 2009 Incentive Compensation Plan), Proposal 5 (The 162(m) Re-Approval)  and your shares will be considered broker non-votes with respect to this proposal.

·

Proposal 1 (Election of Directors): To be elected, each nominee for election as a director must receive the affirmative vote of a majority of the votes cast by the holders of our Common Stock, present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal. This means that director nominees who receive the most votes are elected. Votes may be cast in favor of or withheld from the election of each nominee. Votes that are withheld from a director’s election will be counted toward a quorum, but will not affect the outcome of the vote on the election of a director. Broker non-votes will not be counted as votes cast, and, accordingly, will have no effect on the outcome of the vote for directors.

·

Proposal 2 (Ratification of Grant Thornton): Ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017 requires the affirmative vote of the holders of a majority of the votes cast by the holders of our Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon. Abstentions and broker non-votes will not be voted either for or against this proposal, and, accordingly, will not affect the outcome of this proposal.

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·

Proposal 3 (The Compensation Advisory Vote): Approval of the Compensation Advisory Vote requires the affirmative vote of the majority of the votes of the shares of common stock cast on this proposal at the annual meeting. Abstentions and broker non-votes will not be voted either for or against this proposal, and, accordingly, will not affect the outcome of this proposal. While this vote is required by law, it will neither be binding on our company or the Board nor will it create or imply any change in the fiduciary duties of, or impose any additional fiduciary duty on, our company or the Board. However, the views of our stockholders are important to us, and our Compensation Committee will take into account the outcome of the vote when considering future executive compensation decisions. We urge you to read the section entitled “Compensation Discussion and Analysis,” which discusses in detail how our executive compensation program implements our compensation philosophy.

·

Proposal 4 (Approval of the amendment and restatement of the Amended and Restated 2009 Incentive Compensation Plan)  Approval of the Amended and Restated 2009 Incentive Compensation Plan requires the affirmative vote of the holders of a majority of the votes cast by the holders of our Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon.  Abstentions and broker non-votes will not be voted either for or against this proposal, and, accordingly, will not affect the outcome of this proposal.

·

Proposal 5  (The 162(m) Re-Approval).  Re-approval of the material terms of the Amended and Restated 2009 Incentive Compensation Plan, as amended, in accordance with the stockholder approval requirements of Section 162(m) of the Internal Revenue Code, requires the affirmative vote of the holders of a majority of the votes cast by the holders of our Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon.  Abstentions and broker non-votes will not be voted either for or against this proposal, and, accordingly, will not affect the outcome of this proposal.

Our Board has appointed Allan D. Keel and E. Joseph Grady as the management proxy holders for the Annual Meeting. If you are a stockholder of record, your shares will be voted by the management proxy holders in accordance with the instructions on the proxy card you submit by mail, or the instructions provided for any proxy submitted by telephone or Internet, as applicable. For stockholders who have their shares voted by duly submitting a proxy by mail, telephone or Internet, the management proxy holders will vote all shares represented by such valid proxies as our Board recommends, unless a stockholder appropriately specifies otherwise.

Our Board recommends a vote:

·

FOR each of the nominees for director;

·

FOR the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017;

·

FOR the advisory vote to approve named executive officer compensation;

·

FOR the approval of the amended and restatement of the Amended and Restated 2009 Incentive Compensation Plan; and

·

FOR the re-approval of the Amended and Restated 2009 Incentive Compensation Plan, as amended, pursuant to Section 162(m) of the Internal Revenue Code.

What happens if additional proposals are presented at the Annual Meeting?

Other than the matters specified in the Notice, we do not expect any matters to be presented for a vote at the Annual Meeting. If you grant a proxy, the management proxy holders will have the discretion to vote your shares on any additional matters properly presented for a vote at the Annual Meeting. Under our bylaws, the deadline for notifying us of any additional proposals to be presented at the Annual Meeting has passed and, accordingly, stockholders may not present proposals at the Annual Meeting.

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Who will bear the cost of soliciting votes for the Annual Meeting?

We will bear all expenses of soliciting proxies. We have engaged Broadridge Financial Solutions to aid in the distribution of proxy materials and to provide voting and tabulation services for the Annual Meeting for a fee of approximately $9,000, plus reimbursement for reasonable out-of-pocket expenses. Our directors, officers and employees may also solicit proxies in person or by other means of communication. Such directors, officers and employees will not be additionally compensated but may be reimbursed for reasonable out-of-pocket expenses in connection with such solicitation. In addition, we may reimburse brokerage firms, custodians, nominees, fiduciaries and other persons representing beneficial owners of our Common Stock for their reasonable expenses in forwarding solicitation material to such beneficial owners.

May I propose actions for consideration at the 2018 Annual Meeting of Stockholders or nominate individuals to serve as directors?

You may submit proposals for consideration at future stockholder meetings, including director nominations. Please read “Stockholder Proposals and Director Nominations for the 2018 Annual Meeting” for information regarding the submission of stockholder proposals and director nominations for consideration at next year’s annual meeting.

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CORPORATE GOVERNANCE AND OUR BOARD

General

The Company’s Certificate of Incorporation and bylaws provide for the annual election of directors.  At each annual meeting of stockholders, our directors will be elected for a one-year term and serve until their respective successors have been elected and qualified.

Our Board held twelve meetings during 2016.  During 2016, no directors attended fewer than 75% of the total number of meetings of our Board and committees on which that director served.

We encourage, but do not require, our directors to attend annual meetings of stockholders.  At our 2016 Annual Meeting of Stockholders, five out of the seven serving members of our Board attended.

Board Independence

As required under the listing standards of the NYSE MKT, a majority of the members of our Board must qualify as independent, as affirmatively determined by our Board. Our Nominating Committee evaluated all relevant transactions and relationships between each director nominated for election at the Annual Meeting, or any of his or her family members, and our company, senior management and independent registered accounting firm. Based on this evaluation and the recommendation of our Nominating Committee, our Board has determined that B.A. Berilgen, B. James Ford, Lon McCain, and Charles M. Reimer are each an independent director, as that term is defined in the listing standards of the NYSE MKT. In making its independence recommendation, the Committee noted in particular the following at the time of determination:

Mr. Ford

Mr. Ford is a senior advisor to Oaktree Capital Management, L.P. (“Oaktree Capital Management”), which, through its affiliates OCM GW Holdings, LLC (“Oaktree Holdings”) and OCM Crimson Holdings, LLC (“OCM Crimson”), owns approximately 5.1% of our Common Stock. This significant ownership position could result in the interest of Mr. Ford becoming misaligned with those of our smaller stockholders.

Board Committees

Our Board has the authority to appoint committees to perform certain management and administrative functions. Our Board has established a Compensation Committee, Audit Committee, Nominating Committee and Investment Committee. Our Board, in its business judgment, has determined that the Compensation Committee, Audit Committee and Nomination Committee are comprised entirely of independent directors as currently required under the listing standards of the NYSE MKT and applicable rules and requirements of the SEC. The Board may also delegate certain duties and responsibilities to the committees it establishes; for example, the Board may delegate the duty of determining appropriate salaries for our executive officers from time to time.

Audit Committee

The Audit Committee was established to oversee and appraise the audit efforts of our independent registered public accounting firm, and monitor our accounts, procedures and internal controls. During 2016, the Audit Committee consisted of Messrs. McCain (Committee Chairman), Berilgen and Schoonover prior to our 2016 Annual Meeting of Stockholders and Messrs. McCain (Committee Chairman), Berilgen and Ford thereafter.  Following the Annual Meeting, it is expected that the Audit Committee will consist of Messrs. McCain (Committee Chairman), Berilgen and Ford.  Each member of our Audit Committee is considered “independent” as described above. The Audit Committee met four times during 2016. Upon review by and recommendation of our Nominating Committee, our Board has determined that Mr. McCain was an “audit committee financial expert” as defined under applicable rules and regulations of the SEC. Our Audit Committee has adopted a charter, which is posted on our website www.contango.com under “Corporate Governance.”

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Compensation Committee

The responsibilities of the Compensation Committee, which are discussed in detail in the “Compensation Committee Charter” that is posted on our website at www.contango.com under “Corporate Governance,” include among other things, the responsibility to:

·

Periodically review the compensation, employee benefit plans and fringe benefits paid to, or provided for, executive officers of the Company;

·

Review, recommend to the full Board for approval or approve, as applicable, the annual salaries, bonuses and share-based awards paid to the Company’s executive officers;

·

Periodically review and recommend to the full Board total compensation for each non-employee director for services as a member of the Board and its committees; and

·

Exercise oversight of all matters of executive compensation policy.

The Compensation Committee is delegated all authority of the Board as may be required or advisable to fulfill the purposes of the Compensation Committee. The Compensation Committee may form and delegate some or all of its authority to subcommittees when it deems appropriate. Meetings may, at the discretion of the Compensation Committee, include members of the Company’s management, other members of the Board, consultants or advisors, and such other persons as the Compensation Committee or its chairperson may determine.

The Compensation Committee has the sole authority to retain, amend the engagement with, and terminate any compensation consultant to be used to assist in the evaluation of director, CEO or executive officer compensation, including employment contracts and change in control provisions. The Compensation Committee has sole authority to approve the consultant’s fees and other retention terms and has authority to cause the Company to pay the fees and expenses of such consultants.

From time to time the Compensation Committee engages the services of Longnecker & Associates (“Longnecker”), an experienced compensation consulting firm that specializes in the energy industry. In selecting Longnecker as its independent compensation consultant, the Compensation Committee assessed the independence of Longnecker pursuant to SEC rules and considered, among other things, whether Longnecker provides any other services to us, the policies of Longnecker that are designed to prevent any conflict of interest between Longnecker, the Compensation Committee and us, any personal or business relationship between Longnecker and a member of the Compensation Committee or one of our executive officers and whether Longnecker owns any shares of our common stock. Longnecker is engaged by, and reports only to, the Compensation Committee and will perform the compensation advisory services requested by the Compensation Committee. Longnecker does not provide any other services to the Company, and the Compensation Committee has concluded that we do not have any conflicts of interest with Longnecker. Among the services Longnecker has been asked to perform were apprising the Compensation Committee of compensation-related trends, developments in the marketplace and industry best practices; informing the Compensation Committee of compensation-related regulatory developments; providing peer group survey data to establish compensation ranges for the various elements of compensation; providing an evaluation of the competitiveness of the Company’s executive and director compensation and benefits programs; assessing the relationship between executive pay and performance; and advising on the design of the Company’s incentive compensation programs.   As discussed in more detail below, the Compensation Committee has engaged Meridian Compensation Partners, LLC (“Meridian”), an experienced compensation consulting firm with significant energy industry experience, to provide compensation-related services in 2017.

The Compensation Committee annually compares our executive compensation program to those of other companies within the oil and gas industry through the use of energy industry compensation surveys from Effective Compensation Inc. (“ECI”).  ECI surveys are utilized as they are industry-specific and derive their data from direct contributions from a large number of participating companies.  The ECI surveys compile data from many companies that we currently consider to be in our peer group, as well as companies somewhat larger than us but with which we compete for talent.  The surveys were used to compare our executive compensation program against companies (the “Peer Group”) that have comparable market capitalization, revenues, capital expenditure budgets, geographic focus and number of employees.   The Compensation Committee regularly reviews and refines the Peer Group as

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appropriate.  When we refer to “peers,” “Peer Group” or “peer companies” or similar phrases, we are referring to this list of companies, as it may be updated by the Compensation Committee from time to time.

During 2016, the members of the Compensation Committee were Messrs. Ford (Committee Chairman), Berilgen and Reimer. Each member of the Compensation Committee during 2016 was an “outside director” as defined under section 162(m) of the Code and was “independent” as defined in the applicable rules of the NYSE MKT and the SEC. The Compensation Committee held two meetings during 2016.

Nominating Committee

The principal function of the Nominating Committee, which is discussed in detail in the “Nominating Committee Charter” that is posted on our website at www.contango.com under “Corporate Governance,” is to oversee, identify, evaluation and select qualified candidates for election to the Board. The Nominating Committee identifies individuals qualified to become Board members and recommends to the Board nominees for election as directors of the Company, taking into account that the Board as a whole shall have competency in industry knowledge, accounting and finance, and business judgment. While the Company does not have a formal diversity policy, the Nominating Committee seeks members from diverse backgrounds so that the Board consists of members with a broad spectrum of experience and expertise and with a reputation for integrity. Directors should have experience in positions with a high degree of responsibility, be leaders in the companies or institutions with which they are affiliated, and be selected based upon contributions that they can make to the Company. The Nominating Committee shall give the same consideration to candidates for director nominees recommended by Company stockholders as those candidates recommended by others.

During 2016, the members of the Nominating Committee were Messrs. Berilgen (Committee Chairman) and McCain. Each member of the Nominating Committee during 2016 was “independent” as defined in the applicable rules of the NYSE MKT and the SEC. The Nominating Committee held one meeting during 2016.

Because the Nominating Committee believes that director nominees should be considered on a case-by-case basis on each nominee’s merits, regardless of who recommended the nominee, it has not adopted a formal policy with regard to the consideration of any director candidates recommended by stockholders. For a description of the procedures that stockholders must follow in order to timely nominate director candidates, please see “Stockholder Proposals and Director Nominations for the 2018 Annual Meeting.”

Investment Committee

The Investment Committee was created by the Board on October 1, 2013 in connection with the closing of the Company’s merger (the “Merger”) with Crimson Exploration Inc. (“Crimson”). The purpose of the Investment Committee, which is discussed in detail in the “Investment Committee Charter” that is posted on our website at www.contango.com under “Corporate Governance,” is to allocate, subject to Board approval, the amount and nature of all capital expenditures of the Company and its subsidiaries, and review and discuss the plan for such capital expenditures with Company management. The members of the Investment Committee are Messrs. Romano (Chairman) and Keel. The Investment Committee did not hold any formal meetings during 2016 although the members of the Investment Committee met frequently on an informal basis and the full Board was active in the evaluation of potential capital expenditures by the Company.

Code of Ethics

We have adopted a “code of ethics” as defined by the applicable rules of the SEC, and it is posted on our website: www.contango.com under “Corporate Governance.” Any amendment to the code of ethics will be posted promptly on our website.

Board Leadership Structure

The Chairman of the Board is selected by the members of the Board. The positions of Chairman and CEO were separated at the closing of the Merger. The Board has determined that the current structure is appropriate at this time in that it enables Mr. Keel to focus on his role as CEO of the Company, while enabling Mr. Romano, the Chairman of our Board, to continue to provide leadership on policy at the Board level. Although the roles of CEO and

9


 

Chairman are currently separated, the Board has not adopted a formal policy requiring such separation. The Board believes that the right Board leadership structure should, among other things, be informed by the needs and circumstances of the Company and the then current membership of the Board, and that the Board should remain adaptable to shaping the leadership structure as those needs and circumstances change.

Board Risk Assessment and Control

Our risk management program is overseen by our Board and its committees, with support from our management. Our Board oversees an enterprise-wide approach to oil and gas industry risk management, designed to support the achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance and enhance stockholder value. A fundamental part of risk management is a thorough understanding of the risks a company faces, understanding of the level of risk appropriate for our company and the steps needed to manage those risks effectively. The involvement of the full Board in setting our business strategy is a key part of its overall responsibilities and together with management determines what constitutes an appropriate level of risk for our company. Our Board believes that the practice of including all members of our management team in our risk assessments allows the Board to more directly and effectively evaluate management capabilities and performance, allows the Board to more effectively and efficiently communicate its concerns and wishes to the entire management team and provides all members of management with a direct communication avenue to the Board.

While our Board has the ultimate oversight responsibility for the risk management process, other committees of our Board also have responsibility for specific risk management activities. In particular, the Audit Committee focuses on financial risk, including internal controls, and oversees compliance with regulatory requirements. In setting compensation, the Compensation Committee approves compensation programs for the officers and other key employees to encourage an appropriate level of risk-taking behavior consistent with our business strategy.

More information about the Company’s corporate governance practices and procedures is available on the Company’s website at www.contango.com.

Communications with our Board

Stockholders desiring to communicate with our Board, or any director in particular, may do so by mail addressed as follows: Attn: Board of Directors, Contango Oil & Gas Company, 717 Texas Avenue, Suite 2900, Houston, Texas 77002. Our Chief Executive Officer, Chief Financial Officer or Corporate Secretary review each such communication received from stockholders and other interested parties and will forward the communication, as expeditiously as reasonably practicable, to the Board (or individual director) if: (1) the communication complies with the requirements of any applicable policy adopted by us relating to the subject matter; or (2) the communication falls within the scope of matters generally considered by our Board.

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EXECUTIVE OFFICERS

The following table sets forth the names, ages and titles, as of March 17, 2017, of each of our executive officers.

 

 

 

 

 

 

Name

    

Age

    

Position

 

Allan D. Keel

 

57 

 

President, Chief Executive Officer and Director

 

E. Joseph Grady

 

64 

 

Senior Vice President and Chief Financial Officer

 

Jay S. Mengle

 

63 

 

Senior Vice President—Engineering

 

Thomas H. Atkins

 

58 

 

Senior Vice President—Exploration

 

James J. Metcalf Jr.

 

59 

 

Senior Vice President—Operations

 

 

The following provides summary information regarding the experiences of our President and Chief Executive Officer, our Senior Vice President and Chief Financial Officer and our three most highly compensated current executive officers. The named executive officer profiles exclude A. Carl Isaac who served as Senior Vice President – Operations until his resignation from such position on January 15, 2017. Due to his role as Senior Vice President – Operations during the 2016 year, he is required to be identified as a named executive for 2017 in the compensation disclosures that follow these biographies. 

Allan D. Keel’s biographical information may be found on page 35 of this proxy statement.

E. Joseph Grady Mr. Grady was appointed Senior Vice President and Chief Financial Officer on October 1, 2013 following the closing of the Merger. Mr. Grady had previously served as Senior Vice President and Chief Financial Officer of Crimson from March 2005 until the closing of the Merger. Mr. Grady has over 40 years of financial, operational and administrative experience, including over 30 years in the oil and gas industry. Prior to joining Crimson, Mr. Grady was managing director of Vision Fund Advisors, Inc., a financial advisory firm which he co-founded in 2001, until its dissolution in June 2008. He was formerly Senior Vice President-Finance and Chief Financial Officer of Texas Petrochemicals Holdings, Inc. from April 2003 to July 2004, Vice President-Chief Financial Officer and Treasurer of Forcenergy Inc. from 1995 to 2001, and he held various financial management positions with Pelto Oil Company from 1980 to 1990, including Vice President-Finance from 1988 to 1990. Mr. Grady is a CPA and received a Bachelor of Science degree in Accounting from Louisiana State University.

Jay S. Mengle Mr. Mengle was appointed Senior Vice President – Engineering on October 1, 2013 following the closing of the Merger. Mr. Mengle had previously served as Senior Vice President – Operations and Engineering of Crimson from April 2005 until May 2010 and Senior Vice President – Engineering from May 2010 until the closing of the Merger. Mr. Mengle joined Crimson after serving as the Shelf Asset Manager – Gulf of Mexico for Kerr-McGee Corporation subsequent to its 2004 merger with Westport Resources Corporation (“Westport”). Mr. Mengle was with Westport Resources from 1998 to 2004, where he started Westport’s Gulf Coast/Gulf of Mexico drilling and production operations. Prior to joining Westport, Mr. Mengle also served in various drilling, production and marketing management capacities at Norcen Energy Resources, Kirby Exploration and Mobil Oil Corp. Mr. Mengle received his Bachelor of Science degree in Petroleum Engineering from the University of Texas.

Thomas H. Atkins Mr. Atkins was appointed Senior Vice President – Exploration on October 1, 2013 following the closing of the Merger. Mr. Atkins had previously served as Vice President – Exploration of Crimson from April 2005 until the closing of the Merger. Mr. Atkins served as the General Manager – Gulf of Mexico for Newfield Exploration Company where he was employed from 1998 until joining Crimson. Prior to his tenure at Newfield, Mr. Atkins served in various exploration capacities with EOG Resources and its predecessor companies from 1984 to 1998, including prospect generator, development geologist and finally as Exploration Manager. Mr. Atkins also worked at the Superior Oil Company from 1981 through 1984. Mr. Atkins received a Bachelor of Science degree in Geology from the University of Oklahoma.

James J. Metcalf Jr.  Mr. Metcalf was appointed Senior Vice President – Operations on February 6, 2017.  Prior to joining Contango, Mr. Metcalf was Vice President of Operations at Advance Energy Partners, LLC from 2014 through 2016.  Prior to his tenure at Advance Energy Partners, Mr. Metcalf was a consultant to Newfield Exploration Company during 2013 and 2014 and Vice President of Drilling for Newfield from 2005 through 2013.  Before serving as Vice President of Drilling, Mr. Metcalf held several other positions of increasing responsibility at

11


 

Newfield from 1995 and 2005.  Prior to joining Newfield, Mr. Metcalf worked for several other independent oil and gas companies.   Mr. Metcalf earned his Bachelor of Science in Petroleum Engineering from Marietta College.

Our executive officers are elected annually by our Board and serve one-year terms or until their death, resignation or removal by our Board. There are no family relationships between any of our directors and executive officers. In addition, there are no arrangements or understandings between any of our executive officers and any other person pursuant to which any person was selected as an executive officer.

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COMPENSATION DISCUSSION AND ANALYSIS

The following Compensation Discussion and Analysis contains statements regarding future individual and company performance targets and goals. These targets and goals are disclosed in the limited context of our executive compensation program and should not be understood to be statements of management’s expectations or estimates of results or other guidance. We specifically caution stockholders not to apply these statements to other contexts.

Introduction

This Compensation Discussion and Analysis (1) provides an overview of our compensation policies and programs; (2) explains our compensation objectives, policies and practices with respect to our executive officers; and (3) identifies the elements of compensation for each of the individuals identified in the following table (our principal executive officer, principal financial officer and the three most highly compensated executive officers), whom we refer to in this proxy statement as our “named executive officers.”

 

 

 

Name

    

Principal Position  

Allan D. Keel

 

Chief Executive Officer and President

E. Joseph Grady

 

Senior Vice President and Chief Financial Officer

Jay S. Mengle

 

Senior Vice President—Engineering

A. Carl Isaac

 

Senior Vice President—Operations

Thomas H. Atkins

 

Senior Vice President—Exploration

 

Mr. Isaac resigned from the Company effective January 15, 2017.   The SEC’s disclosure rules require that we identify our named executive officers as of December 31, 2016, therefore Mr. Isaac is still deemed to be a named executive officer for the 2016 year.

Objectives and Philosophy of Our Executive Compensation Program

Our executive compensation program is designed to attract and retain highly qualified executives and to motivate them to maximize shareholder return. We strive to achieve a balance between cash and non-cash compensation similar to that of our peers, and believe a significant portion of the compensation for each of our named executive officers should be incentive-based to emphasize a pay-for-performance philosophy. Therefore, overall competitive compensation levels and incentive pay levels vary based on the achievement of company-wide performance objectives and individual performance. Specifically, our compensation program is designed to:

·

Attract and retain individuals with superior ability;

·

Align named executive officers’ incentives with our corporate strategies, business objectives and the long-term interests of our shareholders; and

·

Increase the incentive to achieve key strategic and financial corporate performance measures by linking incentive award opportunities to the achievement of performance objectives in these areas.

To achieve these objectives, we focused in 2016 on the following corporate performance objectives:

·

Attaining a forecasted level of production;

·

Attaining a forecasted level of cash flow;

·

Attaining a specific (reduced) level of operating costs;

·

Minimizing negative revisions to on-shore proved reserve estimates;

·

Minimizing the cost of, and exposure to, liabilities associated with adverse health, safety and environmental activity;

·

Obtaining accretive shareholder return; and

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·

Accomplishing strategic initiatives.

We have also implemented various best practice standards for our compensation program, as follows:

·

Clawback on Incentive Awards -  Incentive awards are subject to clawback or other recovery policies maintained by the Company and its subsidiaries, including, without limitation, any clawback policies adopted by the Company as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Sarbanes-Oxley Act of 2002, or any other applicable law.

·

Incentives Tied to Company Performance and Vesting Periods – Beginning in October 2016, fifty percent (50%) of our long-term equity incentive compensation awards are subject to a performance vesting condition based upon our total shareholder return compared to an industry index over a three year performance period. 

·

No Single Trigger Vesting of Equity-Based Awards for Executive Employment Agreements – In connection with the amendment of the employment agreements in late 2016 (described in more detail below), we determined that the named executive officers should not receive immediate vesting of equity-based awards upon a change in control event or non-renewal of their employment agreement.  The amended employment agreements provide that vesting for equity-based awards will only occur upon a change of control followed by termination of the named executive officer's employment for specified reasons, as defined in such named executive’s employment agreement.  This provision will apply to all awards granted following the adoption of the amended employment agreements.

The Compensation Committee from time to time adjusts and/or replaces objectives and assigns relative weights or rankings to the applicable factors, but also from time to time makes subjective determinations of compensation levels based upon a consideration of all of these factors.

Setting Executive Compensation

On behalf of our Board, the Compensation Committee reviews and evaluates all compensation for our executive officers, including our compensation philosophy, policies and plans. The Board has final approval of all compensation decisions made by the Compensation Committee with respect to our senior executive officers, unless and to the extent that a certain decision or element of compensation has been fully delegated to the Compensation Committee. Our Chief Executive Officer and Chief Financial Officer also typically play important roles in the executive compensation process, including evaluating the other executive officers and assisting in the development of performance target goals, although the Compensation Committee or the Board, as applicable, has the final decision-making authority over compensation decisions. The Compensation Committee takes into consideration our named executive officers’ total compensation, including base salary, annual incentives and long-term incentives, both cash and equity, when considering market based adjustments to our named executive officers’ compensation.

The Compensation Committee also has the authority to retain a compensation consultant from time to time, as further described above under the heading “Corporate Governance and Our Board – Compensation Committee,” to review our compensation policies and programs to determine our competiveness within the oil and gas industry and advise the Compensation Committee as to whether modifications should be adopted in order to attract, motivate and retain key employees. Our Compensation Committee retained Longnecker, an experienced compensation consulting firm that specializes in the energy industry, during 2013 in connection with setting compensation for our named executive officers and directors following the merger with Crimson.  During 2016, the Compensation Committee retained Longnecker to help assess industry compensation trends, including trends associated with the depressed oil and natural gas price environment, for general compensation purposes.  Also during 2016 Longnecker assisted us with the amendment and restatement of the named executive officer’s employment agreements and with the modification of our equity incentive program, each of which are described in more detail below.  For 2016, the Compensation Committee utilized information from Longnecker, along with the most recent ECI survey data, and determined that no increases in base salaries were warranted.  The selected Peer Group included within ECI’s survey data for 2016 included Alta Mesa Holdings, LP, Approach Resources, Inc., Eclipse Resources Corporation, Indigo Minerals LLC, Oasis Petroleum Inc., Panhandle Oil & Gas Inc., Penn Virginia Corporation, Rex Energy Operating Corporation, Sanchez Oil & Gas Corporation, Stone Energy Corporation, and Swift Energy Company. 

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At the beginning of 2017, the Compensation Committee engaged Meridian.  Although Meridian’s engagement will largely be limited to addressing compensation items for the 2017 year, they did provide market comparison data for executives in conjunction with their peer group recommendations that the Compensation Committee utilized, in part, in determining the discretionary portion of our 2016 annual cash bonus awards, which were not determined until the beginning of the 2017 year.  Meridian has or will assist the Compensation Committee in 2017 with the following items: determining an appropriate peer group with respect to 2017 compensation, creating a cash bonus structure for the 2017 year, providing guidance on 2017 equity-based incentive award levels, and determining the number of additional shares to be added to our Amended and Restated 2009 Incentive Compensation Plan (the “2009 Plan”). In selecting Meridian as its independent compensation consultant, the Compensation Committee assessed the independence of Meridian pursuant to SEC rules and considered, among other things, whether Meridian provides any other services to us, the policies of Meridian that are designed to prevent any conflict of interest between Meridian, the Compensation Committee and us, any personal or business relationship between Meridian and a member of the Compensation Committee or one of our executive officers and whether Meridian owns any shares of our common stock. Meridian is engaged by, and reports only to, the Compensation Committee and will perform the compensation advisory services requested by the Compensation Committee. Meridian does not provide any other services to the Company, and the Compensation Committee has concluded that we do not have any conflicts of interest with Meridian.

At our 2016 annual meeting of shareholders, we presented shareholders with a vote to approve, on an advisory basis, the compensation paid to our named executive officers as disclosed in the “Executive Compensation” section of our proxy statement relating to that meeting (referred to as a “say-on-pay” proposal).  Approximately 88% of the votes cast on the say-on-pay proposal voted in favor of the proposal. We believe this strongly affirms shareholders’ support of our approach to executive compensation, and we did not make any material changes to our program solely due to the advisory vote received. The changes described further below with respect to our long-term equity award program were driven by other considerations. At our 2016 annual meeting we also presented our shareholders with an advisory vote to approve the frequency that we would present our shareholders with a say-on-pay proposal, and we recommended that our shareholders approve an annual vote because we believe that periodic shareholder advisory votes on executive compensation are appropriate and our Compensation Committee values the feedback provided by our shareholders through such votes.  Our shareholders agreed and provided an advisory vote for an annual say-on-pay proposal.   We will take the advisory vote on say-on-pay that we conduct at this year’s annual meeting into consideration when making compensation decisions in the future.

Elements of our Executive Compensation Program

General

The principal components of our executive compensation program include:

·

base salary;

·

short-term cash incentive compensation;

·

long-term equity-based incentive compensation;

·

severance benefits; and

·

other health and fringe benefits.

Base Salary

We provide base salaries to our executive officers to compensate them for services rendered during the year at levels that we believe are competitive in the oil and gas industry and that are designed to allow us to attract, motivate and retain executive officers. Base salaries are a major component of the total annual cash compensation paid to our executive officers and are reviewed annually by the Compensation Committee. Unless delegated to the Compensation Committee, base salary determinations are made by our Board taking into consideration salary recommendations from the Compensation Committee. The Compensation Committee considers senior management’s recommendations as to appropriate compensation for members of management reporting to them.

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All of our executive officers were subject to employment agreements that provided for a fixed base salary during the 2016 year. The revised employment agreements we entered into with Messrs. Keel, Grady, Mengle and Atkins also contain a fixed base salary amount that is at the same level as the original 2013 agreements.  These salaries were originally determined by the Compensation Committee and Board in 2013 in connection with the Merger after consultation with Longnecker and taking into account many factors, including:

·

the responsibilities of the officer;

·

the scope, level of expertise and experience required for the officer’s position;

·

the strategic impact of the officer’s position;

·

the potential future contribution and demonstrated individual performance of the officer; and

·

salaries paid for comparable positions at similarly-situated companies.

The table discloses the annual base salaries for each of our named executive officers for the years 2014 to 2017, which were originally set mid-2013.  The base salaries of all of our named executive officers were held constant during the 2015 to 2017 years in recognition of conditions in the oil and gas industry and, as targeted by the Compensation Committee and confirmed by the most recent ECI survey, remain comparable to the 50th percentile of our peer group. 

 

 

 

 

 

 

 

 

 

Name

  

Base Salary for
2014

  

Base Salary for
2015 (1)

  

Base Salary for
2016 (1)

  

Base Salary for
2017

Allan D. Keel

 

$600,000

 

$600,000

 

$600,000

 

$600,000

E. Joseph Grady

 

$400,000

 

$400,000

 

$400,000

 

$400,000

Jay S. Mengle

 

$300,000

 

$300,000

 

$300,000

 

$300,000

A. Carl Isaac

 

$320,000

 

$320,000

 

$320,000

 

$320,000

Thomas H. Atkins

 

$310,000

 

$310,000

 

$310,000

 

$310,000


(1)

In recognition of the difficult and uncertain conditions facing the oil and gas industry and our efforts to reduce cash general and administrative costs and to further align the interests of Company directors and employees with the interests of shareholders, effective September 1, 2015, we implemented a retainer fee and salary replacement program (the “replacement program”), which was applicable to our directors and named executive officers, as well as all other non-field employees.  Pursuant to this program, each named executive officer’s base salary was reduced by ten percent during the final four months of 2015.  The amount of the 2015 base salary reduction for each of our named executive officers was replaced by an early 2016 award of shares of fully vested common stock (with the grant-date value of such shares approximately equal to the amount of the 2015 base salary reduction).  The replacement program remained in place from January 1, 2016 to August 31, 2016 and impacted the amount of 2016 base salary payments that were actually received by our named executive officers for each applicable pay period. The replacement program ended effective September 1, 2016, and the amount of the 2016 reduction was paid in cash to each of our named executive officers on September 16, 2016.

Annual Cash Incentive Compensation

Our named executive officers are eligible to participate in an annual, performance-based cash incentive compensation plan that is designed to reward all employees on the basis of our Company attaining pre-determined performance measures. The annual incentive plan is governed by the 2009 Plan.  The Compensation Committee retains the flexibility to make certain adjustments to the final awards for all employees, including our named executive officers, within the overall parameters of the plan, to better recognize the impact of their general contributions to the Company’s success, individual strengths and individual efforts that each individual officer may have exerted on our behalf during the fiscal year. The Compensation Committee does not have the authority to increase the bonus over the calculated amount under the performance-based cash incentive plan for such individual performance goals, however, the Compensation Committee or Board has the authority to award additional discretionary amounts in recognition of specific contributions unrelated to the targets set for the performance-based cash incentive awards.

The Compensation Committee annually approves the performance metrics and quantitative goals that make up the cash incentive bonus awards, typically within the first three months of the applicable calendar year. The

16


 

performance metrics and quantitative goals are reviewed annually by the Compensation Committee with input from our executive officers, advice from retained experts, when deemed appropriate, and adjusted, as needed, in order to reflect our current structure and operations.  Each year a threshold, target and maximum goal are set for each individual metric.  For 2016, the performance goal categories for our named executive officers consisted of the following metrics and relative weightings:

Elements of our 2016 Annual Cash Incentive Program

 

 

 

 

 

 

Performance Metric

Weight of
Metric to
Total Award

Threshold

Target

Maximum

Oil and Gas Production (1)

6%

25.0 Bcfe

26.3 Bcfe

28.9 Bcfe

Earnings before Interest, Taxes, Depreciation, Amortization and Exploration Expenses (EBITDAX) (2)

6%

$25.9 million

$27.3 million

$30.0 million

Lease Operating Expense (LOE) (3) 

6%

$25.5 million

$24.2 million

$22.8 million

Onshore Negative Reserve Revisions (4)

6%

-2.0 Bcfe

0

+ 4.0 Bcfe

Health, Safety and Environmental Costs (5)

6%

N/A

1

N/A

Relative Total Shareholder Return (TSR) (6)

20%

Equal to index performance

10% over index performance

30% over index performance

Subjective based upon Strategic Initiative Progress  (7)

50%

25%

50%

100%


(1)

The oil and gas production goal is based on achievement of a targeted production level for the year.  Performance levels are measured using a billion cubic feet of natural gas equivalent (utilizing a 6 to 1 conversion ratio) for oil and natural gas liquids (Bcfe).

(2)

EBITDAX represents net income (loss) before interest expense, taxes, and depreciation, depletion and amortization, and exploration expenses.  It is a non-GAAP measure that we use as an approximation of cash flow from operations before tax.  We typically determine EBITDAX by adding interest expense, income tax provision, depreciation, depletion and amortization and exploration expenses to net income.  However, our definition of EBITDAX may differ from that of other companies and excludes exploration expenses, exploration dry hole costs and other non-cash charges normally considered expenses by oil and gas companies utilizing successful efforts method of accounting. We believe EBITDAX is a valuable measure of operating performance because it eliminates items that have less bearing on our operating performance and so highlights trends in our core business.

(3)

LOE represents the costs of efficiently maintaining and operating our oil and gas properties and includes several components such as direct operating costs and repair and maintenance costs.  This measures our ability to contain costs relating to operation of our oil and gas properties.

(4)

This measures our ability to maximize the productivity of, and to accurately estimate, our onshore proved reserves.     Performance levels are measured using a billion cubic feet of natural gas equivalent (utilizing a 6 to 1 conversion ratio) for oil and natural gas liquids (Bcfe).

(5)

This measures our ability to promote a safe and healthy work environment and contain costs relating to health, safety and environmental exposures. This goal is comprised of numerous quantitative and qualitative safety metrics and is measured based on outperformance of our three year trend for each of the metrics. There is only a target goal for this metric, no threshold or maximum. Where performance falls below target, no award is made for the respective metric(s). Where performance is above target, the award is made at target.

(6)

This measures the level by which the Company’s stock (NYSE MKT: MCF) outperforms the SPDR S&P Oil & Gas Exploration & Production Exchange Traded Fund Index (NYSE: XOP) and is determined by measuring the extent to which our stock performance exceeds the performance of the XOP index during the calendar year.  

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(7)

This metric is dependent on the Compensation Committee's subjective evaluation of whether appropriate strategic initiatives were met. The 2016 strategic initiative goals focused on increasing total proved reserves, increasing our acreage position in targeted areas, building long-term drilling inventory, and maintaining a strong credit profile.  The percentages shown represent the percentage increase in the amount calculated for the average for the other metrics that could be awarded by the Committee.

Amounts potentially earned under the performance-based cash incentive awards are set at certain percentages of the participant’s base salary. The employment agreements with our named executive officers provide that they are eligible to participate in our annual cash incentive bonus plan. The employment agreements provide for minimum (referred to herein as “threshold”), target and maximum award levels for each calendar year that are based on a percentage of the executive’s base salary. The bonus target levels, as a percentage of base salary, which each named executive officer is eligible to receive as an incentive bonus under their employment agreements are as follows:

 

 

 

 

 

 

 

 

Name

    

Threshold

    

Target

    

Maximum

 

Allan D. Keel

 

50%

 

100%

 

150%

 

E. Joseph Grady

 

50%

 

90%

 

130%

 

Jay S. Mengle

 

50%

 

80%

 

120%

 

A. Carl Isaac

 

50%

 

80%

 

120%

 

Thomas H. Atkins

 

50%

 

80%

 

120%

 

 

Should our financial and operating results meet or exceed either the pre-determined “threshold,” “target” and “maximum” values assigned a particular performance category (with linear interpolations between each level), then each named executive officer is generally paid a corresponding percentage of his annual salary amount for that metric.  As noted above, the Compensation Committee retains the right to make what it determines to be appropriate adjustments to actual performance results for the year, to the extent it believes that adjustments are warranted.  For example, in determining the actual level of EBITDAX for a particular year, it may exclude the effects of certain non-cash income/expense items such as the mark to market benefit/charge to our results of operations required by FASB ASC Topic 815, “Derivatives and Hedging,” non-cash charges to our results of operations related to FASB ASC Topic 718 or the variance in EBITDAX caused by the variance between actual NYMEX benchmark oil and gas prices and the forecasted NYMEX benchmark prices incorporated into the performance goals (since NYMEX prices are largely not within management’s control).

We satisfied each of the company performance metrics for the 2016 year as follows:

 

 

 

 

 

 

 

 

Performance Metric

    

Percentage of
Target Goal
Achieved
for Metric

    

Approximate
Weighted
Percentage of
Target Award
Level Earned
for Metric (1)

    

Approximate
Percentage  of
Total Award
Attributable
to Metric (1)

 

Oil and Gas Production

 

98.8%

 

5.3%

 

7.3%

 

Earnings before Interest, Taxes, Depreciation, Amortization and Exploration Expenses

 

99.9%

 

5.9%

 

8.2%

 

Lease Operating Expense (LOE)

 

99.3%

 

6.4%

 

8.8%

 

Onshore Negative Reserve Revisions 

 

100.0%

 

9.0%

 

12.4%

 

Health, Safety and Environmental Costs

 

83.0%

 

5.0%

 

6.8%

 

Relative Total Shareholder Return (TSR)

 

69.0%

 

16.9%

 

23.2%

 

Strategic Initiatives (2)

 

N/A

 

25.00%

 

33.3%

 

Total

 

 

 

 

 

100%

 


(1)

Percentage of Target Award Level Earned for Metric and Percentage of Total Award Attributable to Metric provided in this table represent the awarded amounts for our President/CEO. The levels for the other NEO's will be slightly different because of differences in their overall bonus opportunity levels.

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(2)

The Compensation Committee made a subjective determination to award 25% of the strategic initiative oriented discretionary award for the 2016 year (50% of the target award level).  Among the factors considered by the Compensation Committee when evaluating this award were the Company’s acquisition of a high-quality lease position in the high profile Southern Delaware Basin on attractive terms and the use of the acquisition as a catalyst to raise additional equity capital to provide early development capital and to preserve the Company's healthy balance sheet. This acquisition provides a multi-year inventory of oil-weighted drilling locations that should be impactful to oil production and reserve growth.

Our Compensation Committee was conscious of the need to control potential cash incentive awards in an uncertain oil and gas market and determined that 50% of the bonus would be discretionary, dependent on whether the Company achieved appropriate strategic initiative(s) and the state of the market at the time of the award.  Although the discretionary portion of the award comprised a potential 50% of the total award, there were limitations on the amounts that could be discretionarily paid.  The Compensation Committee determined that when the six company performance metrics could be calculated for 2016 with respect to the first 50% of the award that was performance-based, the percentage of the target award that was earned solely based upon the six company performance goals would be determined.  The resulting percentage would then become the maximum percentage that could be awarded to any executive pursuant to the discretionary component of the award.  For example, the 2016 company performance metrics were earned in the aggregate at 91.67% of target, therefore the Compensation Committee was limited to awarding 91.67% of the allotted discretionary portion of the target award.  The Compensation Committee ultimately awarded approximately half of the potential strategic initiative oriented discretionary award with respect to the 2016 year.  Among the factors considered by the Compensation Committee when evaluating the portion of the strategic initiative oriented discretionary award for the 2016 year were the company’s acquisition of an acreage position in the Southern Delaware Basin and the completion of a public offering of shares of the company’s common stock to fund the acquisition and provide capital for the initial development of the acreage.

The awards to each named executive officer with respect to the company components in the 2016 year are reflected within two separate columns of the Summary Compensation Table below.  The amount earned with respect to the company performance metrics are listed below in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table, and the discretionary portion is reflected in the Bonus Awards column of the Summary Compensation Table.  The awards were paid in February 2017.

The revised employment agreements we entered into with Messrs. Keel, Grady, Mengle and Atkins in November 2016 set forth bonus targets for each applicable executive officer beginning with the 2017 year.  Messrs. Keel and Grady will have target bonus amounts set at 100% of base salary, and Messrs. Mengle and Atkins will have a target bonus amount set at 80% of base salary.

Long Term Equity Incentive Compensation

In addition to the annual cash incentive awards described above, our 2009 Plan also allows us to grant equity-based incentive awards to our named executive officers and other eligible employees.  We have adopted a long-term equity award program under the 2009 Plan (the “LTIP”) pursuant to which each of our employees, including our named executive officers, is eligible to participate. The annual equity awards contemplated by the LTIP will provide the named executive officers with a longer-term stake in our Company. The equity awards granted under the LTIP are intended to act as a long-term retention tool and align employee and stockholder interests by increasing compensation as stockholder value increases.  Due to the difficult and uncertain conditions facing the oil and gas industry, when establishing the long-term incentive compensation award parameters for our named executive officers for the beginning of 2016, our Compensation Committee determined that the amount and type of awards granted would be discretionary.

2015 Awards

In recent years the Compensation Committee has granted awards on a “look-back” basis.  The Compensation Committee would analyze the results from the performance metrics utilized in determining cash incentive bonus awards for the year, and would then make decisions regarding the type and level of equity-based awards that should be granted with respect to that year.  Because the company metrics could not be determined until the end of the year in question, awards were not granted until the year following the year for which the awards related to. Under the

19


 

SEC disclosure rules, equity awards are reported in the year of grant, without regard to the year to which the service may have related.  This created a disconnect in our disclosures, as the equity awards reported within the compensation tables that follow the Compensation Discussion and Analysis would not relate to services provided in the applicable year. This grant process was in place during the 2015 year, therefore awards of time-based restricted stock awards that appear in the Summary Compensation Table for the 2016 year actually relate to services provided during the 2015 year. 

 

 

 

 

 

 

Named Executive Officer

    

Restricted Stock Grant (#)(1)

    

Value on Grant Date ($)(2)

 

Allan D. Keel

 

51,486

 

648,724

 

E. Joseph Grady

 

24,518

 

308,927

 

Jay S. Mengle

 

18,388

 

231,689

 

A. Carl Isaac

 

19,614

 

247,136

 

Thomas H. Atkins

 

 

 


(1)

The restricted stock awards reflected vest in four equal annual increments commencing on the first anniversary of the grant date (April 26, 2016), according to the following schedule: 25% (year 1), 25% (year 2), 25% (year 3), and 25% (year 4).

(2)

Value was determined in accordance with the same grant date accounting principles used to report stock grants within the Summary Compensation Table below.

2016 Awards 

In October 2016 our Board determined to modify our annual equity program, and engaged Longnecker to assist in determining the appropriate modifications.  The Compensation Committee first desired to clarify the award process by granting equity-based awards on a “look-forward” basis, a trend within the oil and gas industry.  LTIP awards will be granted as an incentive to superior performance in future years, which will be accomplished by having the awards subject to both time-based and performance-based vesting conditions.  Due to the SEC disclosure rules described above, this has resulted in both the 2015 LTIP awards and the new 2016 LTIP awards being disclosed within the compensation tables for the 2016 year, but the overlap in awards is due solely to our change in process and is not expected to occur in the future. 

20


 

The second change the Compensation Committee made in October 2016 was the inclusion of a performance-based vesting component to our equity grants.  The Board determined that the annual equity awards granted pursuant to the LTIP should be granted 50% in time-based restricted stock awards that vest in three annual installments, and 50% in performance-based restricted stock unit awards.  The performance period for the performance awards will be three years.   During this period, our stock performance will be measured against the performance of the companies comprising the S&P Oil & Gas Exploration & Production Exchange Traded Fund over the same period (the “XOP Index”). At the end of the period, the target number of stock units will be multiplied by a modifier. The modifier will be based on our performance during the applicable performance period compared to the fund over the same period, as reflected in the following table:  

 

 

 

 

 

 

 

 

 

    

MCF Price
Performance Over
XOP Index

    

% of Award Payout (1)

    

% of Award Payout
if MCF Absolute
Performance is
Negative (1)(2)

 

Maximum:

 

30.00%

 

200%

 

100%

 

 

 

28.00%

 

190%

 

95%

 

 

 

26.00%

 

180%

 

90%

 

 

 

24.00%

 

170%

 

85%

 

 

 

22.00%

 

160%

 

80%

 

 

 

20.00%

 

150%

 

75%

 

 

 

18.00%

 

140%

 

70%

 

 

 

16.00%

 

130%

 

65%

 

 

 

14.00%

 

120%

 

60%

 

 

 

12.00%

 

110%

 

55%

 

Target:

 

10.00%

 

100%

 

50%

 

 

 

8.00%

 

90%

 

45%

 

 

 

6.00%

 

80%

 

40%

 

 

 

4.00%

 

70%

 

35%

 

 

 

2.00%

 

60%

 

30%

 

Threshold:

 

0%

 

50%

 

25%

 

 


(1)

For performance levels between the levels listed in the table, payout levels will be interpolated relative to the actual performance attained. For performance levels between the threshold and target level, a proportionate fraction of the modifier between 50% and 100% will be applied, and for performance between the target level and maximum level, a proportionate fraction of the modifier between 100% and 200% will be applied.

(2)

In the event the absolute performance of the Company’s stock is negative for the performance period, the possible award payout will be reduced by 50%.

The number of time-based restricted stock, and the threshold, target and maximum number of performance-based restricted stock unit awards granted to our named executive officers during the 2016 year are reflected below:

 

 

 

 

 

 

 

 

 

 

 

 

Named
Executive Officer

    

Restricted
Stock (#) (1)

    

Restricted
Stock
Value on
Grant Date
($)(2)

    

Performance
Based
Restricted
Stock Units
(#) (3)

    

Performance-
Based
Restricted
Stock Units
Value on
Grant Date
($)(2)

    

Total Value
on
Grant Date

 

Allan D. Keel

 

60,300

 

628,326

 

60,300

 

984,096

 

1,612,422

 

E. Joseph Grady

 

28,700

 

299,054

 

28,700

 

468,384

 

767,438

 

Jay S. Mengle

 

21,500

 

224,030

 

21,500

 

350,880

 

574,910

 

A. Carl Isaac

 

23,000

 

239,660

 

23,000

 

375,360

 

615,020

 

Thomas H. Atkins

 

22,300

 

232,366

 

22,300

 

363,936

 

596,302

 

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(1)

The restricted stock awards reflected vest in three equal annual increments commencing on the first anniversary of the grant date (October 20, 2016), according to the following schedule: 33% (year 1), 33% (year 2), and 34% (year 3).

(2)

Value was determined in accordance with the same grant date accounting principles used to report stock and stock unit grants within the Summary Compensation Table below.

(3)

The performance-based restricted stock units reflected were granted October 20, 2016 and vest at the end of a three year performance period beginning January 1, 2016 and ending December 31, 2018. The actual number of shares that may vest will range from 0% to 200% of the original units granted depending upon the Company’s stock (NYSE MKT: MCF) performance over the XOP Index.Share amounts shown for performance-based units reflect the target award level.

Replacement Program Awards

The remaining equity grants reflected within the Summary Compensation Table and the Grants of Plan-Based Awards Table for the 2016 year reflect the fully vested grants of our common stock that were provided to our named executive officers in connection with the replacement program described above.  Although the stock was granted pursuant to the 2009 Plan, it does not relate to equity awards that we have granted pursuant to our annual equity compensation program described above. The replacement program was terminated during the 2016 year.  The shares of stock issued to our named executive officers during 2016 pursuant to the replacement program are reflected below:

 

 

 

 

 

 

Named Executive Officer

  

Number of Shares

  

Value on Grant Date ($)(2)

 

Allan D. Keel

 

3,125 

 

20,000 

 

E. Joseph Grady

 

2,084 

 

13,338 

 

Jay S. Mengle

 

1,563 

 

10,003 

 

A. Carl Isaac

 

1,667 

 

10,669 

 

Thomas H. Atkins

 

1,615 

 

10,336 

 


(1)

Value was determined in accordance with the same grant date accounting principles used to report stock grants within the Summary Compensation Table below.

Severance Benefits

Each of the current employment agreements with our named executive officers provide for severance payments upon a termination for any reason other than cause, including termination pursuant to a change of control. These agreements also provide for the accelerated vesting of certain equity awards in the event of an involuntary termination in connection with a change of control. We believe that the executive officers should be provided an incentive to consummate a change of control that would generate attractive returns for our stockholders. Without such an incentive, the executive officers may not diligently pursue such opportunities. In addition, severance provisions were included as a means of attracting and retaining executives and to provide replacement income if their employment is terminated under certain circumstances. Each employment agreement contains similar but not identical provisions regarding severance payments and relevant provisions of those agreements are provided in the section titled “Executive Compensation—Potential Payments upon Termination or Change of Control.”

Other Benefits

Our named executive officers are eligible to participate in all of our employee benefit plans, such as medical, dental, vision, group life, short and long-term disability, and our 401(k) plan, in each case, on the same basis as other employees, subject to applicable laws. We also provide vacation and other paid holidays to all employees, including our named executive officers. We pay membership dues for private clubs for two of our named executive officers as these memberships are intended to be used in part for business entertainment purposes.  

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Other Matters

Tax Considerations

Although our Compensation Committee considers the tax and accounting treatment associated with the cash and equity grants it makes, these considerations are not dispositive. Section 162(m) of the Code places a limit of $1.0 million per person on the amount of compensation that we may deduct in any year with respect to our chief executive officer and our three most highly compensated executive officers other than the chief executive officer and the chief financial officer. There is an exemption from the $1.0 million limitation for performance-based compensation that meets certain requirements. Our benefit plans are generally designed to permit compensation to be structured to meet the qualified performance-based compensation exception. To maintain flexibility in compensating named executive officers in a manner designed to promote varying company goals, our Compensation Committee has not adopted a policy requiring all compensation to be deductible. The Compensation Committee therefore retains the ability to evaluate the performance of our executive officers and to pay appropriate compensation, even if some of it may be non-deductible, to ensure competitive levels of total compensation is paid to certain individuals.

We account for stock-based awards based on their grant date fair value, as determined under FASB ASC Topic 718. In connection with its approval of stock-based awards, the Compensation Committee is cognizant of and sensitive to the impact of such awards on stockholder dilution and our financial statements.

Risk Considerations in our Overall Compensation Program

When establishing and reviewing our executive compensation program, the Compensation Committee has considered whether the program encourages unnecessary or excessive risk taking and has concluded that it does not. While behavior that may result in inappropriate risk taking cannot necessarily be prevented by the structure of compensation practices, we believe that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on us. Our compensation program is comprised of both fixed and incentive-based elements. The fixed compensation (i.e., base salary) provides reliable, foreseeable income that mitigates the focus of our employees on our immediate financial performance or our stock price, encouraging employees to make decisions in our best long-term interests. The incentive components are designed to be sensitive to both our short- and long-term goals, performance and stock price. In combination, we believe that our compensation structures do not encourage our officers and employees to take unnecessary or excessive risks in performing their duties. In conclusion, we believe that our compensation policies and practices for all employees, including executive officers, do not create risks that are reasonably likely to have a material adverse effect on our company.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board of Directors of Contango Oil & Gas Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

THE COMPENSATION COMMITTEE

B. James Ford (Chairman)
B.A. Berilgen
Charles M. Reimer

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the Compensation Committee is or was during 2016 an employee, or is or ever has been an officer, of the Company or its subsidiaries.  No executive officer of the Company has served as a director or a member of the compensation committee of another company whose executive officers serve as a member of the Company’s Board or Compensation Committee.

23


 

24


 

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the compensation and benefits that were paid to or earned by our named executive officers for years 2014, 2015 and 2016. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name and Principal Position

 

Year

 

Salary
($)(1)

 

Bonus
($)(2)

 

Stock
Awards
($)(3)

 

Option
Awards ($)

 

Non-Equity
Incentive Plan
Compensation
($)(4)

 

All Other
Compensation
($)(5)

 

Total ($)

 

Allan D. Keel

 

2016

 

600,000 

 

145,410 

 

2,281,146 

 

 

290,819 

 

50,212 

 

3,367,587 

 

Chief Executive Officer

 

2015

 

580,000 

 

 

975,336 

 

 

108,000 

 

51,014 

 

1,715,151 

 

and President

 

2014

 

600,000 

 

 

 

 

426,800 

 

50,494 

 

1,077,294 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E. Joseph Grady

 

2016

 

400,000 

 

87,348 

 

1,089,702 

 

 

174,696 

 

51,394 

 

1,803,140 

 

Senior Vice President

 

2015

 

386,667 

 

 

480,212 

 

 

65,800 

 

53,220 

 

985,899 

 

and Chief Financial Officer

 

2014

 

400,000 

 

 

 

 

259,600 

 

54,139 

 

713,739 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A. Carl Isaac

 

2016

 

320,000 

 

 

872,825 

 

 

 

41,113 

 

1,233,938 

 

Senior Vice President –

 

2015

 

309,334 

 

 

381,715 

 

 

48,400 

 

41,633 

 

781,082 

 

Operations

 

2014

 

320,000 

 

 

 

 

188,300 

 

43,952 

 

552,252 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jay S. Mengle

 

2016

 

300,000 

 

59,330 

 

816,602 

 

 

118,659 

 

33,792 

 

1,328,383 

 

Senior Vice President –

 

2015

 

290,000 

 

 

357,847 

 

 

45,400 

 

34,328 

 

727,574 

 

Engineering

 

2014

 

300,000 

 

 

 

 

176,500 

 

35,747 

 

512,247 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thomas H. Atkins

 

2016

 

310,000 

 

61,307 

 

606,638 

 

 

122,615 

 

40,099 

 

1,140,659 

 

Senior Vice President –

 

2015

 

299,667 

 

 

369,781 

 

 

46,900 

 

43,630 

 

759,977 

 

Exploration

 

2014

 

310,000 

 

 

 

 

182,400 

 

51,734 

 

544,134 

 


(1)

For 2015 and 2016, the amounts included in this column reflect application of the replacement program.  

(2)

The amounts included in this column represent the discretionary portion of the cash incentive bonus awarded to our named executive officers for 2016. Mr. Isaac did not receive a bonus for 2016 as he was no longer employed at the time that bonuses were paid.

(3)

This column reflects a combination of equity-based awards made during 2016.  The equity awards that we granted to our named executive officers with respect to 2015 services were not granted until the 2016 year, thus they are reflected in this table as 2016 awards.  The 2016 awards also reflect fully vested common stock granted in January 2016 that relate to the replacement program that was in place during the 2015 year. The modification to our equity program late in the 2016 year also resulted in the October 2016 time-based and performance-based equity awards being granted within the 2016 year.  Going forward, we expect that this column will only reflect the annual equity awards granted with respect to the applicable year as we switch to a forward-looking equity grant practice.  The amounts reported in this column reflect the aggregate grant date fair value of all restricted stock, performance-based restricted stock units and fully granted stock awards granted during fiscal 2016, computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. See note 7 to our consolidated financial statements for the fiscal year ended December 31, 2016 included in our Annual Report on Form 10-K for a discussion of the assumptions used in determining the FASB ASC Topic 718 grant date fair value of these awards. 

(4)

The amounts included in this column represent the performance-based cash incentive bonuses awarded to our named executive officers for 2014, 2015 and 2016. Mr. Isaac was no longer employed at the time that bonuses were paid.

(5)

For 2016, the amounts included in this column are attributable as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Matching 401(k)
Contributions ($)

    

Insurance
Premiums* ($)

    

ORRI
Payments** ($)

    

Club Dues*** ($)

    

Total ($)

 

Allan D. Keel

 

15,900 

 

15,804 

 

 

18,508 

 

50,212 

 

E. Joseph Grady

 

15,900 

 

31,856 

 

 

3,637 

 

51,394 

 

A. Carl Isaac

 

15,900 

 

25,213 

 

 

 

41,113 

 

Jay S. Mengle

 

15,900 

 

17,892 

 

 

 

33,792 

 

Thomas H. Atkins

 

15,900 

 

23,012 

 

1,187 

 

 

40,099 

 

 


*     Represents premium payments made on behalf of the executive officers for medical, dental, vision, life insurance and accidental death and dismemberment coverage.

**   Mr. Atkins receives royalty payments attributable to overriding royalty interests granted to him pursuant to an Overriding Royalty Interest Plan that was previously maintained by Crimson and terminated in 2010. Mr. Atkins also

25


 

received royalty payments from third-party operators attributable to overriding royalty interests granted to him pursuant to the Crimson Overriding Royalty Interest Plan; such amounts are not reflected above.

*** Represents payments made on behalf of the executive officers for membership dues at private clubs

Grants of Plan-Based Awards during the Year Ending December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards (5)

 

Estimated Future Payouts Under
Equity Incentive Plan Awards

 

All Other
Stock

 

Grant Date
Fair Value

 

Name

 

Grant Date

 

Threshold ($)

 

Target
($)

 

Maximum
($)

 

Threshold
(#)

 

Target (#)

 

Maximum
(#)

 

Awards:
Number of
Shares (#)

 

of Stock and
Option
Awards ($)

 

Allan D. Keel

  

1/4/2016 (1)

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

 

 

4/26/2016 (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10/20/2016 (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

60,300 

 

628,326 

 

 

 

10/20/2016 (4)

 

 

 

 

 

 

 

30,150 

 

60,300 

 

120,600 

 

 

 

984,096 

 

 

 

 

 

150,000 

 

300,000 

 

450,000 

 

 

 

 

 

 

 

 

 

 

 

E. Joseph Grady

 

1/4/2016 (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

2,084 

 

13,338 

 

 

 

4/26/2016 (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

24,518 

 

308,927 

 

 

 

10/20/2016 (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

28,700 

 

299,054 

 

 

 

10/20/2016 (4)

 

 

 

 

 

 

 

14,350 

 

28,700 

 

57,400 

 

 

 

468,384 

 

 

 

 

 

100,000 

 

180,000 

 

260,000 

 

 

 

 

 

 

 

 

 

 

 

A. Carl Isaac

 

1/4/2016 (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

1,667 

 

10,669 

 

 

 

4/26/2016 (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

19,614 

 

247,136 

 

 

 

10/20/2016 (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

23,000 

 

239,660 

 

 

 

10/20/2016 (4)

 

 

 

 

 

 

 

11,500 

 

23,000 

 

46,000 

 

 

 

375,360 

 

 

 

 

 

80,000 

 

128,000 

 

192,000 

 

 

 

 

 

 

 

 

 

 

 

Jay S. Mengle

 

1/4/2016 (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

1,563 

 

10,003 

 

 

 

4/26/2016 (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

18,388 

 

231,689 

 

 

 

10/20/2016 (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

21,500 

 

224,030 

 

 

 

10/20/2016 (4)

 

 

 

 

 

 

 

10,750 

 

21,500 

 

43,000 

 

 

 

350,880 

 

 

 

 

 

75,000 

 

120,000 

 

180,000 

 

 

 

 

 

 

 

 

 

 

 

Thomas H. Atkins

 

1/4/2016 (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

1,615 

 

10,336 

 

 

 

10/20/2016 (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

22,300 

 

232,366 

 

 

 

10/20/2016 (4)

 

 

 

 

 

 

 

11,150 

 

22,300 

 

44,600 

 

 

 

363,936 

 

 

 

 

 

77,500 

 

124,000 

 

186,000 

 

 

 

 

 

 

 

 

 

 

 


(1)

Reflects fully vested shares of common stock granted in connection with the replacement program for the portion of 2015 base salaries subject to the program.  

(2)

Reflects restricted stock awards granted pursuant to our LTIP with respect to the 2015 performance year, which will vest in four annual installments.

(3)

Reflects restricted stock awards granted pursuant to our LTIP with respect to the 2016 performance year, which will vest in three annual installments

(4)

Reflects performance-based restricted stock unit awards granted pursuant to our LTIP with respect to the 2016 performance year. During the three-year performance period (January 1, 2016 – December 31, 2018), our stock performance will be measured against the performance of the companies comprising the XOP Index over the same period.  At the end of the period, the target number of stock units will be multiplied by a modifier based on our performance during the applicable performance period, which will determine the number of shares granted to the applicable named executive officer.  

(5)

As noted above, our Compensation Committee was conscious of the need to reduce cash costs in a depressed oil and gas market and determined in early 2016 that only 50% of the target bonus should be calculated using the applicable performance-based criteria would be paid.  The discretionary portion of the award is not reflected within this table.

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table

The table below reflects the ratio of base salary and discretionary cash bonuses to total compensation for each of our named executive officers:

 

 

 

 

Named Executive Officer

    

Base Salary and Discretionary
Bonus as a Percent of Total
Compensation

 

Allan D. Keel

 

22.13%

 

E. Joseph Grady

 

27.03%

 

A. Carl Isaac

 

25.93%

 

Jay S. Mengle

 

27.05%

 

Thomas H. Atkins

 

32.41%

  

26


 

Outstanding Equity Awards at 2016 Year-End

The table below reflects the unexercised and unvested equity compensation awards that each of our named executives held as of December 31, 2016.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

Stock Awards

 

Performance-Based
Restricted Stock Unit
Awards

 

 

 

 

 

 

 

 

 

Market

 

Market

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

 

 

 

Value of

 

Value of

 

 

 

 

 

 

 

 

 

 

 

Number of

 

Securities

 

 

 

Number of

 

Shares or

 

 

 

Number of

 

Unearned

 

 

 

 

 

Securities

 

Underlying

 

 

 

Shares or

 

Units of

 

 

 

Unearned

 

Shares

 

 

 

 

 

Underlying

 

Unexercised

 

 

 

Units of Stock

 

Stock That

 

 

 

Shares,

 

That

 

 

 

 

 

Unexercised

 

Options (#)

 

Option

 

Option

 

That Have Not

 

 

 

Have Not

 

That Have

 

Have Not

 

 

 

Options (#)

 

Unexercisable

 

Exercise

 

Expiration

 

Vested

 

 

 

Vested

 

Not Vested

 

Vested

 

Name

 

Exercisable

 

(1)

 

Price ($)

 

Date

 

(#)(1)

 

 

 

 ($)(2)

 

 (#)(1)

 

($)(2)

 

Allan D. Keel

  

41,439 

  

  

60.33 

  

2/17/21

  

32,425 

  

(3)

  

302,850 

  

120,600 (6)

  

1,126,404 

 

 

 

14,504 

 

 

60.33 

 

6/16/21

 

51,486 

 

(4)

 

480,879 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60,300 

 

(5)

 

563,202 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E. Joseph Grady

 

18,647 

 

 

60.33 

 

2/17/21

 

15,964 

 

(3)

 

149,104 

 

57,400 (6)

 

536,116 

 

 

 

 

 

 

 

 

 

 

 

24,518 

 

(4)

 

228,998 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28,700 

 

(5)

 

268,058 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A. Carl Isaac (7)

 

8,288 

 

 

39.94 

 

5/9/20

 

23,000 

 

(5)

 

214,820 

 

46,000 (6)

 

429,640 

 

 

 

6,216 

 

 

41.63 

 

8/15/21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jay S. Mengle

 

3,729 

 

 

60.33 

 

2/17/21

 

11,896 

 

(3)

 

111,109 

 

43,000 (6)

 

401,620 

 

 

 

 

 

 

 

 

 

 

 

18,388 

 

(4)

 

171,744 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,500 

 

(5)

 

200,810 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thomas H. Atkins

 

3,174 

 

 

60.33 

 

2/17/21

 

12,293 

 

(3)

 

114,817 

 

44,600 (6)

 

416,564 

 

 

 

 

 

 

 

 

 

 

 

22,300 

 

(5)

 

208,282 

 

 

 

 

 

 


(1)

For events that could result in accelerated vesting or forfeiture of the awards, see the section entitled “Potential Payments upon Termination or Change of Control—Severance Payments” below.

(2)

The market value of the unvested awards were determined using the closing price of our Common Stock on December 31, 2016 of $9.34 per share (which was the closing price on December 30, 2016, the last trading day of the year).

(3)

The restricted stock awards reflected vest in four equal annual increments commencing on the first anniversary of the date of grant (March 13, 2015), according to the following schedule: 25% (year 1), 25% (year 2), 25% (year 3), and 25% (year 4).

(4)

The restricted stock awards reflected vest in four equal annual increments commencing on the first anniversary of the date of grant (April 26, 2016), according to the following schedule: 25% (year 1), 25% (year 2), 25% (year 3), and 25% (year 4). 

(5)

The restricted stock awards reflected vest in three annual increments commencing on the first anniversary of the date of grant (October 20, 2016), according to the following schedule: 33% (year 1), 33% (year 2), 34% (year 3).

(6)

The performance-based restricted stock units reflected were granted October 20, 2016 and vest at the end of a three year performance period beginning January 1, 2016 and ending December 31, 2018. The actual number of shares that vest range from 0% to 200% of the original shares granted depending upon the Company’s stock (NYSE MKT: MCF) performance over the XOP Index. As our actual performance as of December 31, 2016 would have vested the awards between the target and maximum levels, we have reflected maximum levels within this table, although the number that will be eligible to vest cannot be determined until December 31, 2018. 

(7)

Under the terms of Mr. Isaac’s employment agreement dated June 6, 2013, upon expiration and non-renewal of the agreement all outstanding incentive plan awards vested on November 15, 2016.  

27


 

Option Exercises and Stock Vested

The following table provides information concerning the vesting of restricted stock awards during 2016 on an aggregated basis with respect to each of our named executive officers. During 2016, none of our named executive officers exercised any stock option awards.

 

 

 

 

 

 

 

Option Exercises and Stock Vested During 2016

 

 

 

 

Stock Awards

 

 

 

 

Number of

 

 

 

 

 

    

Shares Acquired

    

Value Realized

    

 

Name

 

on Vesting (#)

 

on Vesting ($)

 

 

Allan D. Keel

 

23,365 (1)

 

217,061 

 

 

 

 

10,808 (2)

 

100,082 

 

 

 

 

 

 

 

 

 

E. Joseph Grady

 

10,515 (1)

 

97,684 

 

 

 

 

5,322 (2)

 

49,282 

 

 

 

 

 

 

 

 

 

A. Carl Isaac

 

7,010 (1)

 

65,123 

 

 

 

 

4,230 (2)

 

29,170 

 

 

 

 

12,690 (3)

 

114,250 

 

 

 

 

19,614 (4)

 

176,526 

 

 

 

 

 

 

 

 

 

Jay S. Mengle

 

7,010 (1)

 

65,123 

 

 

 

 

3,966 (2)

 

36,725 

 

 

 

 

 

 

 

 

 

Thomas H. Atkins

 

7,010 (1)

 

65,123 

 

 

 

 

4,098 (2)

 

37,947 

 

 

 

 

 

 

 

 

 

 


(1)

The restricted stock reflected here vested November 12, 2016. The value was determined using the closing price of our Common Stock of $9.29/share on the vesting date. Each of Messrs. Keel, Grady, Isaac, Mengle and Atkins elected to satisfy all or some portion of their individual federal tax withholding obligations with vested shares based on the $9.29/share price. Accordingly, 6,390; 2,875; 1,917; 1,917; and 1,917 shares, respectively, were withheld from the amounts reflected in the table above.

(2)

The restricted stock reflected here vested March 13, 2016. The value was determined using the closing price of our Common Stock of $9.26/share on the vesting date. Each of Messrs. Keel, Grady, Isaac, Mengle and Atkins elected to satisfy all or some portion of their individual federal tax withholding obligations with vested shares based on the $9.26/share price. Accordingly, 2,895; 1,587; 1,381; 1,294; and 1,337 shares, respectively, were withheld from the amounts reflected in the table above.

(3)

The restricted stock reflected here vested on November 15, 2016 per the non-renewal terms of Mr. Isaac’s employment agreement. The value was determined using the closing price of our Common Stock of $9.00/share on the vesting date. Mr. Isaac elected to satisfy all or some portion of his individual federal tax withholding obligations with vested shares based on the $9.00/share price. Accordingly, 3,470 shares were withheld from the amount reflected in the table above.

(4)

The restricted stock reflected here vested on November 15, 2016 per the non-renewal terms of Mr. Isaac’s employment agreement. The value was determined using the closing price of our Common Stock of $9.00/share on the vesting date. Mr. Isaac elected to satisfy all or some portion of his individual federal tax withholding obligations with vested shares based on the $9.00/share price. Accordingly, 5,364 shares were withheld from the amount reflected in the table above.

Potential Payments Upon Termination or Change in Control

Our named executive officers are eligible to receive certain severance benefits and change in control benefits pursuant to their employment agreements and the terms of our LTIP awards.  The potential severance and change in control benefits that our named executive officers could have received as of December 31, 2016 are described and quantified below. 

Employment Agreements

28


 

During the majority of the 2016 year, the employment relationship of our named executive officers was governed by employment agreements that we entered into with each executive in 2013. The original employment agreements with Messrs. Keel, Grady, Isaac, Mengle and Atkins provided for potential payments to the executives upon certain terminations of employment and a change in control. On November 30, 2016, we entered into amended employment agreements with Messrs. Keel, Grady, Mengle and Atkins, which governed their employment relationship as of December 31, 2016 and are described below.

The employment agreements have new employment terms beginning on the effective date of the agreement. With respect to Messrs. Keel and Grady, the original term will be three years following the effective date, and with respect to Messrs. Mengle and Atkins the original term will be two years following the effective date. Each of the employment agreements will be automatically renewed for additional one year terms if neither party has provided notice of a non-renewal at least 90 days prior to the date of the scheduled renewal.

Base salaries were not modified for any of the Executives from the amounts set forth in their original 2013 employment agreements. Each applicable executive will be eligible to participate in our cash incentive bonus plan for each applicable employment calendar year, with target annual awards set at the following percentages of base salary for each executive: Messrs. Keel and Grady, 100%; Messrs. Mengle and Atkins, 80% (the “Target Bonus”). Each executive will also be eligible to participate in our equity compensation plans under the terms and conditions as the Company may determine for any applicable calendar year.

In the event that an executive incurs a termination from employment by us without Cause (defined below) or by an executive for Good Reason (defined below), in either case outside of a Protection Period (defined below), the executive would be entitled to receive the following benefits provided that he complies with the restrictive covenants described below and signs a release in our favor: (a) a cash payment equal to two times the executive’s current base salary; (b) a cash payment equal to the greater of (1) the average amount of the annual cash bonus the executive has received during the two years prior to the year of termination (the “Average Bonus”) or (2) the Target Bonus; (c) pro-rata vesting acceleration or adjustment of all equity compensation awards, (d) reimbursements for continued health benefits pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) and (e) a pro-rata cash bonus for the year in which the termination occurs, calculated based on actual performance for the full year but pro-rated for the number of days the executive was employed during the year.  

In the event that an executive is terminated from employment by us without Cause or by an executive for Good Reason, in either case during a Protection Period, the terminated executive would be entitled to receive the following benefits provided that he complies with the restrictive covenants described below and executes and delivers a release of liability in our favor: (i) a cash payment equal to two times the executive’s then current base salary; (ii) a cash payment equal to two times the greater of (1) the Average Bonus or (2) the Target Bonus; (iii) full acceleration of vesting with respect to all equity compensation awards with time-based vesting; (iv) acceleration of vesting to the end of the performance period applicable to all equity compensation awards with performance-based vesting; (v) reimbursements for continued health benefits pursuant to COBRA and (vi) a pro-rata cash bonus for the year in which the termination occurs, calculated based on actual performance for the full year but pro-rated for the number of days the executive was employed during the year.

The benefits each executive (or his estate) could receive upon an executive’s termination of employment due to a death or Permanent Disability (as defined below) were not modified from the original 2013 employment agreement provisions. The executives (or their estate, as applicable) would each be entitled to receive a pro-rata salary and Target Bonus amount for the year of termination and acceleration of vesting for all equity compensation awards. The executive (or his estate) would also receive a cash payment equal to the greater of (a) the remainder of base salary that would have been earned by the executive under the employment agreement until the end of the term of the agreement or (b) twelve months of base salary plus the Target Bonus amount for the year of termination. We will reimburse the executive (or his estate) for continued health care costs for the executive (or his dependents) pursuant to COBRA following a termination due to death or Permanent Disability.

In the event that an executive is terminated for Cause or resigns without Good Reason, either outside or during a Protection Period, or we do not renew the employment agreements, the executive would not receive severance payments.   The employment agreements contain confidentiality, non-competition and non-solicitation covenants, and the executive will be bound to the non-compete and non-solicitation restrictions for one year in the event that he

29


 

is terminated for any reason other than Cause. In order to receive any severance payments, the executive is required to execute a general release of claims against us.

The employment agreements provide that no gross-up payment for any excise taxes under Section 4999 of the Code will be made in connection with a change in control event. In that event, if payments to any of the executives would otherwise constitute a parachute payment under Section 280G of the Code, then the payments will be limited to the dollar amount that can be paid to the executive without triggering an excise tax under Section 4999 of the Code, unless the net after-tax amount payable to the executive, after taking into account any excise tax incurred under Section 4999, would be greater without a limitation on the payments.

For purposes of the employment agreements, the capitalized terms described above shall generally be defined as follows:

·

“Cause” shall generally be defined as (a) the continued failure by an executive to perform his duties that results in material injury to us; (b) an executive’s engagement in conduct that is willful, reckless or grossly negligent and that is materially injurious to us or any affiliate; (c) in certain situations, an executive’s indictment for crimes involving moral turpitude or a felony; (d) in certain situations, an executive’s indictment for an act of criminal fraud, misappropriation or personal dishonesty; or (e) an executive’s material breach of the employment agreement in a way that is materially injurious to us.

·

“Good Reason” is generally defined within the employment agreements as the occurrence of one of the following events that occurs within the six month period prior to an executive’s termination and without the executive’s consent: (i) a material breach by us of any provision of the employment agreement; (ii) an assignment of duties that materially and adversely alters the nature or status of an executive’s position, job description, title or responsibilities; (iii) we require an executive to relocate to a location outside of the Houston, Texas metropolitan area, (iv) we materially reduce an executive’s base salary; or (v) an executive is excluded from eligibility for our bonus or benefit plans or incurs a material decrease in the level of participation in such plans.

·

A “Permanent Disability” will generally occur when an executive is unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that is expected to result in death or last for a period that is not less than twelve months, or an executive begins receiving income replacement benefits for a period of not less than three months under our accident and health plan due to qualifying as having a disability under that plan.

·

The “Protection Period” for the employment agreement is the eighteen month period immediately following the closing of a qualifying change in control transaction.

Mr. Isaac did not enter into a revised employment agreement in November 2016, therefore his original 2013 employment agreement terminated and he was serving as an “at-will” employee at the end of the 2016 year.  With respect to Mr. Isaac, his 2013 employment agreement provided that in the event that his employment agreement was not renewed, he was entitled to receive the vesting of his outstanding time-based equity awards that he held on the date that the employment agreement expired.  He received the vesting of 32,304 shares of restricted stock awards on November 15, 2016 (which was reported in the Option Exercises and Stock Vested table above), but he was not entitled to any severance payments or other severance benefits in connection with the nonrenewal of his 2013 employment agreement.

Equity Award Agreements

The award agreements governing the named executive officer’s equity awards also contain provisions that would govern a termination of employment or a change in control that may be different from the provisions described within the employment agreements.  However, the provisions within the employment agreements control over the equity award agreements for the named executive officers (other than Mr. Isaac) if there is a conflict between the two agreements, therefore with respect to awards granted following amendment and restatement of the employment agreements described above, the named executive officers will not receive accelerated vesting of equity awards upon a change in control alone.  The named executive officers will also have to incur a termination of employment without cause or a termination for good reason in connection with a change in control to receive

30


 

accelerated vesting for all awards entered into following the amendment of the employment agreements.   For equity awards that were granted prior to the November 2016 employment agreements, the provisions of the named executive officer’s prior employment agreements would control in the event there is a conflict between the award agreements and the prior employment agreements.  Due to the fact that Mr. Isaac’s employment relationship was not governed by an employment agreement as of December 31, 2016, his outstanding equity awards were governed by the individual award agreements (described below) rather than his original employment agreement that was not renewed in 2016.      

The time-based restricted stock award agreements that govern the outstanding restricted stock awards held by each of our named executive officers prior to the amendment of the employment agreements in November 2016 provide for the acceleration of vesting of such outstanding restricted stock awards upon a change in control.  Under these agreements a “change in control” is deemed to have occurred if: (A) any person becomes the beneficial owner of more than 25% of the voting power of our outstanding securities unless it is in connection with a transaction in which we become a subsidiary of another corporation in which our stockholders own more than 50% following such transaction; (B) the consummation of a merger or consolidation with another company where our stockholders prior to the transaction will not hold 50% or more of all votes to which stockholders of the surviving corporation would be entitled, a sale or other disposition of all or substantially all of our assets, or liquidation or dissolution of the Company; or (C) the majority of the members of our board of directors shall have been members for less than two years unless the election of such new members was approved by two-thirds of the directors then still in office who were directors at the beginning of such period. In the event of a change in control with respect to the performance-based restricted stock unit awards granted to our named executive officers in October 2016, the change in control event will be deemed to be the end of the performance period and performance will be calculated using actual performance achievements as of that date. 

In the event that an executive’s employment agreement does not override the October 2016 restricted stock and performance-based restricted stock unit award agreements, the restricted stock grant agreements also provide for the accelerated vesting of the tranche of restricted stock scheduled to vest on the next vesting date following a termination of employment due to death, disability or without cause, although the performance-based restricted stock unit awards will be forfeited upon a termination of employment for any reason prior to the end of the performance period.

Change of Control Severance Plan

The Contango Oil & Gas Company Change of Control Severance Plan provides employees with cash severance and continued benefits in the event their employment is involuntarily terminated within one year following a change of control.  The provisions within the employment agreements for our named executive officers govern the severance benefits to which those officers are entitled such that this plan does not apply to them.  Because Mr. Isaac no longer had an employment agreement during late 2016, the change of control severance plan would have applied to the termination of his employment under certain circumstances.  Mr. Isaac would have been entitled, subject to providing a waiver and release, to a severance payment equal to eighteen months of his base salary and continued coverage under the Company’s medical and dental benefit plans for eighteen months had his employment been involuntarily terminated within one year following a change of control.

The table below quantifies our best estimates as to the amounts that the applicable named executive officers could have received in connection with a termination of their employment or change in control on December 31, 2016.  We have also assumed that all vacation and expenses were paid currently as of December 31, 2016.  Equity acceleration was calculated using our closing stock price on December 30, 2016 of $9.34, as December 31, 2016 was not a trading day. All amounts shown below should be considered estimates, as the actual amount of any benefit or payment could not be determined with any accuracy until the actual event occurred. 

31


 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

Termination

    

 

 

 

 

 

 

 

 

without

 

 

 

 

 

 

 

 

 

Cause or for

 

 

 

 

 

 

 

 

 

Good

 

 

 

 

 

 

 

Termination

 

Reason in

 

 

 

 

 

 

 

without

 

Connection

 

 

 

 

 

Death or

 

Cause or for

 

with a

 

 

 

 

 

Disability

 

Good

 

Change in

 

Change in

 

Name

 

($)(1)

 

Reason ($)

 

Control ($)

 

Control ($)

 

Allan D. Keel

 

 

 

 

 

 

 

 

 

Salary

 

1,749,041 

 

1,200,000 

 

1,200,000 

 

 

Bonus (2)

 

436,229 

 

1,036,229 

 

1,636,229 

 

 

Vesting of Equity (3)

 

2,360,694 

 

1,346,931 

 

2,360,694 

 

2,360,694 

 

Continued Benefits

 

44,493 

 

44,493 

 

44,493 

 

 

Total

 

4,590,458 

 

3,627,653 

 

5,241,416 

 

2,360,694 

 

 

 

 

 

 

 

 

 

 

 

E. Joseph Grady

 

 

 

 

 

 

 

 

 

Salary

 

1,166,027 

 

800,000 

 

800,000 

 

 

Bonus (2)

 

262,044 

 

662,044 

 

1,062,044 

 

 

Vesting of Equity

 

1,128,664 

 

646,160 

 

1,128,664 

 

1,128,664 

 

Continued Benefits

 

52,039 

 

52,039 

 

52,039 

 

 

Total

 

2,608,774 

 

2,160,243 

 

3,042,747 

 

1,128,664 

 

 

 

 

 

 

 

 

 

 

 

Jay S. Mengle

 

 

 

 

 

 

 

 

 

Salary

 

574,521 

 

600,000 

 

600,000 

 

 

Bonus (2)

 

177,989 

 

417,989 

 

657,989 

 

 

Vesting of Equity

 

845,121 

 

483,663 

 

845,121 

 

845,121 

 

Continued Benefits

 

43,366 

 

43,366 

 

43,366 

 

 

Total

 

1,640,996 

 

1,545,017 

 

2,146,475 

 

845,121 

 

 

 

 

 

 

 

 

 

 

 

Thomas H. Atkins

 

 

 

 

 

 

 

 

 

Salary

 

593,671 

 

620,000 

 

620,000 

 

 

Bonus (2)

 

183,922 

 

431,922 

 

679,922 

 

 

Vesting of Equity (3)

 

698,006 

 

323,099 

 

698,006 

 

698,006 

 

Continued Benefits

 

43,366 

 

43,366 

 

43,366 

 

 

Total

 

1,518,965 

 

1,418,386 

 

2,041,294 

 

698,006