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SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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Callon Petroleum Company
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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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):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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Our Values
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Responsibility
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The safety of our employees, contractors and communities is of utmost importance – this is not negotiable. We recognize that we earn the right to operate every day by developing our assets responsibly and with respect for the environment. We focus on safety and protection of the environment in every operation, and all Callon representatives are authorized to “stop work” if these are at risk.
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Integrity
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We always strive to do the right thing and pride ourselves on being a preferred partner. We are consistently open, honest, ethical and genuine. We do what we say and are accountable for our actions.
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Drive
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Keenly focused on leading, we relentlessly challenge the status quo to meet and exceed our expectations for top-tier performance in all aspects of our business.
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Respect
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We value the ideas and contributions of all team members and show consideration and appreciation for one another. We recognize and embrace each other’s differences and work towards our common goals.
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Excellence
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Our business requires focused innovation and evaluation of new opportunities for resource extraction. We balance the application of new technologies and testing of new concepts with prudent risk management and thorough data analysis.
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A JOINT LETTER FROM OUR CHAIRMAN AND OUR CHIEF EXECUTIVE OFFICER
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April 28, 2020
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DEAR FELLOW SHAREHOLDERS,
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On behalf of the Board of Directors of Callon Petroleum Company, we are pleased to invite you to our 2020 Annual Meeting of Shareholders, which will take place on June 8, 2020 at 9:00 a.m. Central Daylight Time (CDT), in the La Scala Room of The Moran Hotel, located at 800 Sorella Court in Houston, Texas.
Today we are filing the Notice of Annual Meeting of Shareholders and the Proxy Statement which describe the matters to be acted upon at the meeting. This year we are asking our shareholders to elect directors, approve our 2020 incentive plan, ratify the appointment of our auditors, approve, on a non-binding advisory basis, the compensation of our named executive officers, and allow our Board to approve amendments to our certificate of incorporation to effect a reverse stock split and a pro rata reduction to the number of authorized shares .
2019 was a transformational year for Callon. The Company continued its long-term value creation focus with the execution of multiple strategic initiatives across operations, finance, environmental, social and governance. The Company’s development program successfully transitioned to larger projects featuring multi-zone co-development, leading to improved capital efficiency, lower costs and the preservation of industry-leading margins.
The year culminated with the successful closing of the Carrizo Acquisition, which more than doubled the Company’s production, reserves, acreage, and cash flow. Importantly, the acquisition also brought together two talented organizations that are grounded in strong values and a shared commitment to responsible operations, integrity and a drive to deliver results. Together, we face the challenges brought on by the global outbreak of the COVID-19 virus with a diversified asset base that provides optionality to support cash generation amid commodity price volatility.
Your vote is important, and we encourage you to review this proxy statement and to vote promptly so that your shares will be represented at the meeting. On behalf of everyone at Callon, we want to thank you, our valued shareholders, for your continued support of the work we do.
Sincerely,
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L. Richard Flury
Chairman of the Board |
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Joseph C. Gatto, Jr.
President, Chief Executive Officer and Director |
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L. Richard Flury
Chairman of the Board
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Joseph C. Gatto, Jr.
President, Chief Executive Officer and Director
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NOTICE OF ANNUAL
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MEETING OF SHAREHOLDERS
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Dear Shareholders,
You are invited to participate in the 2020 Annual Meeting of Shareholders (the “Annual Meeting”) of Callon Petroleum Company (“Callon,” the “Company,” “us,” “we,” “our” or like terms), a Delaware corporation.
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When
June 8, 2020, at 9:00 a.m. Central Daylight Time (“CDT")
Where
The Moran Hotel
La Scala Room
800 Sorella Court
Houston, Texas 77024
We are monitoring coronavirus (COVID-19) developments and the related recommendations and protocols issued by public health authorities and federal, state and local governments, and we are sensitive to the public health and travel concerns that our shareholders may have. In the event we determine it is necessary or appropriate to postpone or move the Annual Meeting to another location or hold the Annual Meeting virtually, we will announce this decision in advance in a press release and post details on our website, which will also be filed with the Securities and Exchange Commission.
Whether or not you plan to attend the Annual Meeting, please vote electronically via the Internet, by telephone, or by mail as soon as possible.
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Voting matters
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Board
Recommendation |
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Proposal 1:
To elect three Class II directors to serve on our Board of Directors (the “Board”), each for three years. |
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FOR each of the Class II directors
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See page 11
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Proposal 2:
To approve, on a non-binding advisory basis, the compensation of our named executive officers (“NEOs”). |
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FOR
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See page 34
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Proposal 3:
To approve the Company's 2020 Omnibus Incentive Plan (the "2020 Plan"). |
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FOR
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See page 62
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Proposal 4:
To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020. |
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FOR
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See page 70
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Proposal 5:
To approve an amendment to our certificate of incorporation to permit us to effect a reverse stock split of our issued and outstanding common stock, par value $0.01 per share (the “common stock”), at a ratio that will be determined by the Board and that will be within a range of 1-for-10 and 1-for-50 (the “Reverse Stock Split”), if the Board determines, in its sole discretion, at any time prior to the first anniversary of the Annual Meeting, that the Reverse Stock Split is in the best interests of the Company and its shareholders. |
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FOR
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By Internet or telephone following the simple instructions on the enclosed proxy card or voting instruction form
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By mail
mark, date and sign your proxy card, and return it in the reply envelope provided
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See page 72
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Proposal 6:
To approve an amendment to our certificate of incorporation to reduce the number of authorized shares of common stock by the reverse stock split ratio determined by the Board (the “Authorized Share Reduction”). |
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FOR
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YOUR VOTE IS IMPORTANT!
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders. This Proxy Statement and our 2019 Annual Report on Form 10-K are available at: www.viewproxy.com/ CallonPetroleum/2020. If you have any questions or need assistance voting your shares, please call our proxy solicitor, Innisfree M&A Incorporated, 501 Madison Avenue, 20th Floor, New York, NY 10022
Banks and Brokerage Firms, please call: (212) 750-5833
Shareholders, please call toll-free:(888) 750-5834
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See page 79
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We will also transact other business that may properly come before the Annual Meeting.
This Notice of Annual Meeting of Shareholders and the Proxy Statement herein provide further information on the Company’s performance and corporate governance and describe the matters to be presented at the Annual Meeting. The Board set April 14, 2020, as the record date (the “Record Date”) for the Annual Meeting. Holders of record of our common stock at the close of business on the Record Date are entitled to receive this notice of, and vote at, the Annual Meeting. A list of the names of shareholders entitled to vote at the Annual Meeting will be available for ten days prior to the Annual Meeting for examination by any shareholder for any purpose germane to the Annual Meeting between the hours of 9:00 a.m. and 5:00 p.m., Central Time, at our headquarters at 2000 W. Sam Houston Parkway South, Suite 2000, Houston, TX 77042. This list will also be available for such purposes during the Annual Meeting at the place of the Annual Meeting or, in the event that the Annual Meeting is held virtually, at a website to be provided in the announcement notifying shareholders of the change in meeting format.
Beginning on or about April 28, 2020, we mailed an Important Notice Regarding the Availability of Proxy Materials (the “Notice”) to our holders of record. The Notice contained instructions on how to access the Proxy Statement and related materials on the Internet and how to enter your voting instructions. Instructions for requesting a paper copy of the proxy materials are contained in the Notice.
We thank you for your continued support and look forward to seeing you at the Annual Meeting.
By Order of the Board of Directors,
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Michol L. Ecklund
Senior Vice President, General Counsel and Corporate Secretary.
Houston, Texas
April 28, 2020 |
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Shareholders’ Proposals and Director Nominations for the 2021 Annual Meeting
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PREPARATION
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PURPOSE
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EXECUTION OF PURPOSE
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• Significant scale and high operational control of ~200,000 net acres in Texas's producer-friendly Permian Basin and Eagle Ford Shale
• Robust infrastructure network from multiple years of thoughtful planning and investment reduces overall capital intensity
• Liquidity flexibility and free cash flow initiatives support long-term co-development for inventory and balance sheet preservation
• Talented workforce with growing technical expertise identifies with a culture of responsibility and adaptability in a cyclical commodity business
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• Long-term value creation focuses on growing corporate level returns through capital efficiency and reserve recovery optimization
• Sustainable business model balances capital efficiency improvements with longer-term reinvestment reduction initiatives
• Stakeholder alignment through governance structure and ongoing engagement across shareholders, employees, and communities in which we operate
• Expanding ESG oversight to maximize impact of initiatives and ensure corporate responsibility priorities are achieved
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• Accelerate corporate returns on capital through margin preservation, capital intensity reduction, and portfolio optimization
• Generate meaningful free cash flow through breakeven cost reduction and moderation of production declines
• Improve financial profile with simplified capital structure and no near-term maturities with asset monetization upside
• Long term vision focused on safety and sustainability to maximize reserve capture through prudent co-development operations
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• With the closing of the Carrizo Acquisition, more than doubled our acreage position to nearly 200,000 net acres in Texas's producer-friendly Permian Basin and Eagle Ford Shale.
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• Generated over $500 million in Adjusted EBITDA(i).
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• Completed over $300 million of non-core asset monetizations.
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• Redeemed approximately $270 million of preferred securities resulting in prospective dividend savings of nearly $25 million annually.
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• Generated $58.2 million in free cash flow(ii) during the fourth quarter of 2019 (on a pro forma basis).
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• Maintained an industry leading EBITDA margin of $33.28 per Boe for 2019.(i)
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• Achieved record production (top of guidance) with operational capital spending below the bottom of full year guidance range.
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• Initiated full-field co-development across all asset areas, lowering target development costs and improving capital efficiency.
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• Grew total proved reserves to 540 MMBoe with a PV-10(i) value of $5.4 billion as of December 31, 2019.
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• Achieved record safety performance metrics, including a Total Recordable Incident Rate that was 50% lower than prior year.
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• 2x recycled water volumes from 2018, further reducing environmental impact of operations.
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• Reduced flaring by more than 40% year over year and was in the lowest third of all Texas producers in flaring intensity per the most recent TX RRC report.(iii)
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(i)
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See Appendix A for a reconciliation of Non-GAAP financial measures
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Free cash flow is defined as Adjusted EBITDA minus the sum of operational capital, capitalized interest, capitalized G&A, and interest expense. Adjusted EBITDA is a Non-GAAP financial measure; please refer to Appendix A for a reconciliation
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TX RRC defines flare intensity as gross daily flare volumes divided by gross daily oil production
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Based on flaring intensity MCF/Bbl as defined by the Texas Railroad Commission (TX RRC). TX RRC defines flare intensity as gross daily flare volumes divided by gross daily oil production.
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Safety
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50% reduction in Total Recordable Incident Rate (TRIR) (2019 best year on record for safety performance)
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At Callon, protecting our people and our communities is our top priority. We believe that a strong safety culture is tantamount to being a leading operator in the exploration and production (E&P) business.
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At Callon, we are committed to high ethical standards and effective and sustainable corporate governance. We believe this commitment promotes the long-term interests of our shareholders, helps build public trust in our Company and strengthens Board and management accountability. We continually assess our governance principles to ensure that we are operating our business responsibly, ethically and in a manner aligned with the interests of our shareholders. Our CD&A beginning on page 36 provides additional information on governance practices for executive compensation.
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Our Board expanded the scope of our independent Nominating & Corporate Governance committee to enhance oversight of the Company’s ESG policies, performance and disclosure.
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Two female directors
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Less than five year tenure for over half the directors
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Independent, non-executive director serves as chair of the Board
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Proposal 1
Election of
Class II Directors |
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The Board of Directors recommends a vote FOR each of the Class II director nominees named in this Proxy Statement.
• Our director nominees provide experience and perspectives that enhance the overall strategic and oversight functions of Callon’s Board.
• For more information about the nominees’ experience, skills, and qualifications, please see page 13.
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Relevant oil and gas exploration and production industry knowledge and experience;
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Complimentary mix of backgrounds and experience in areas including business, finance, accounting, technology, and strategy;
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Personal qualities of leadership, character, judgment and personal and professional integrity and high ethical standards;
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The candidate’s ability to exercise independent and informed business judgment;
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Whether the candidate is free of conflicts and has the time required for preparation, participation, and attendance at meetings;
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Diversity, including differences in viewpoints, background, education, gender, race or ethnicity, age, and other individual qualifications and attributes;
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The ability to work with other members of the Board, the Chief Executive Officer (the "CEO"), and senior officers of the Company in a constructive and collaborative fashion to achieve the Company’s goals and implement its strategy; and
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In the case of an incumbent director, such director’s past performance on the Board.
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6/11
directors will have tenures of five or fewer years.
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10/11
directors will be independent.
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The Board recommends a vote FOR each of the three Class II director nominees.
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Matthew R. Bob
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President of Eagle Oil and Gas; Managing Member of MB Exploration
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Matthew Bob has served as a member of the Board since 2014. Mr. Bob currently serves as President of Eagle Oil and Gas and has been the founder and managing member of MB Exploration and affiliated companies since 1994. Previously, Mr. Bob served as President of Hall Phoenix Energy LLC, a privately held oil and gas exploration company, from 2009 to 2011. Prior to forming MB Exploration, Mr. Bob was Chief Geophysicist at Pitts Oil Company. He began his career at Union Oil Company of California where he held various geological positions.
Mr. Bob currently serves as an independent director of Southcross Energy, a natural gas processing and transportation company with operations in South Texas.
Mr. Bob holds a B.A. in Geology from St. Louis University and an M.S. in Geology from Memphis University, and is a graduate of Harvard University’s Executive Management Program. He is a member of the American Association of Petroleum Geologists, the Society of Exploration Geophysicists and the Dallas Petroleum Club, and is a registered Geoscientist in the States of Texas, Mississippi and Louisiana.
SKILLS AND QUALIFICATIONS:
Mr. Bob’s extensive knowledge of the exploration and production industry and technical expertise are assets to the Board and qualify him as a director. His experience as a senior executive further strengthens the strategic and oversight functions of the Board.
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INDEPENDENT
Age 63
Director Since 2014
Callon Committees:
Compensation (Chairman), Nominating and Corporate Governance, Strategic Planning and Reserves
Other Current Directorships:
Southcross Energy |
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Anthony J. Nocchiero
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Former SVP and Chief Financial Officer (Retired) of CF Industries, Inc.
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Anthony Nocchiero has served as a member of the Board since 2011. Mr. Nocchiero retired as Senior Vice President and Chief Financial Officer for CF Industries, Inc. in 2010, a position he had held since 2007. From 2005 to 2007, he was the Vice President and Chief Financial Officer for Merisant Worldwide, Inc. Prior to that, Mr. Nocchiero was self-employed as an advisor and private consultant from 2002 to 2005. From 1999 to 2001, Mr. Nocchiero served as Vice President and CFO of BP Chemicals, the global petrochemical business of BP plc. Prior to that, he spent 24 years with Amoco Corporation in various financial and management positions, including service as Amoco’s Vice President and Controller from 1998 to 1999.
Mr. Nocchiero has previous experience serving as a board member of various public and private companies, including Terra Nitrogen LP, Keytrade AG, Vysis Corporation and the Chicago Chamber of Commerce.
Mr. Nocchiero holds a B.S. degree in Chemical Engineering from Washington University in St. Louis and an M.B.A. degree from the Kellogg Graduate School of Management at Northwestern University.
SKILLS AND QUALIFICATIONS:
Mr. Nocchiero’s broad financial, accounting and operating experience within the energy industry are valuable to the Board and make him a meaningful contributor as a director. Additionally, Mr. Nocchiero’s status as a “financial expert” and knowledge of public company reporting requirements add meaningful insights to the Board and Audit Committee.
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INDEPENDENT
Age 69
Director Since 2011
Callon Committees:
Audit (Chairman), Compensation, Strategic Planning and Reserves |
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James M. Trimble
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Former Chief Executive Officer and President (Retired) of Stone Energy Corporation
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James Trimble has served as a member of the Board since 2014. Most recently, Mr. Trimble served as the interim Chief Executive Officer and President of Stone Energy Corporation from 2017 to 2018. Prior to that, Mr. Trimble served as CEO and President of PDC Energy, Inc. from 2011 until his retirement in 2015. Mr. Trimble was Managing Director of Grand Gulf Energy Limited, a public company traded on the Australian Securities Exchange, and President and CEO of Grand Gulf’s U.S. subsidiary Grand Gulf Energy Company LLC, an exploration and development company focused primarily on drilling in mature basins in Texas, Louisiana and Oklahoma, from 2005 to 2010. Earlier in his career, Mr. Trimble was CEO of TexCal (formerly Tri-Union Development) and CEO of Elysium Energy, a privately held oil and gas exploration company. Prior to that, he was Senior Vice President of Exploration and Production for Cabot Oil and Gas, a publicly-traded independent energy company.
Mr. Trimble currently serves as a director of Talos Energy, a publicly-traded oil and gas exploration company, and Chairman of the Board of Crestone Peak Resources LLC, a privately held oil and gas exploration company. Previously, Mr. Trimble was a director of Stone Energy Corporation from 2017 to 2018, PDC Energy from 2009 to 2016, C&J Energy Services from 2016 to 2017, Seisgen Exploration from 2008 to 2015, Grand Gulf Energy from 2009 to 2012, and Blue Dolphin Energy from 2002 to 2006.
Mr. Trimble was an officer of PDC Energy in September 2013, when each of the twelve partnerships for which the company was the managing general partner filed for bankruptcy in the federal bankruptcy court, Northern District of Texas, Dallas Division and was on the board of C&J Energy Services when it filed for bankruptcy in the court of the Southern District of Texas, Houston Division in July 2016.
Mr. Trimble graduated from Mississippi State University where he majored in petroleum engineering for undergraduate (Bachelor of Science) and graduate studies. He is a Registered Professional Engineer in the State of Texas.
SKILLS AND QUALIFICATIONS:
Mr. Trimble’s deep knowledge of the exploration and production industry and his leadership experience at previous companies strengthen the strategic and oversight functions of the Board. His experience on the boards of several other public companies provide valuable perspective on best practices relating to corporate governance, management and strategic transactions.
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INDEPENDENT
Age 71
Director Since 2014
Callon Committees:
Nominating and Corporate Governance (Chairman), Compensation, Strategic Planning and Reserves
Other Current Directorships:
Talos Energy |
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Michael L. Finch
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Former Chief Financial Officer (Retired) of Stone Energy Corporation
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Michael Finch has served as a member of the Board since 2015. He spent nearly 20 years affiliated with Stone Energy Corporation, a publicly-traded oil and gas exploration company, from which he retired as Chief Financial Officer and a member of the Board of Directors in 1999. Prior to his service with Stone Energy, he was employed by Arthur Andersen & Co.
Mr. Finch was an independent director of Petroquest Energy, Inc. a publicly-traded oil and gas company, from 2003 to 2016, where he served as chairman of the Audit Committee and as a member of the Compensation Committee and the Nominating and Corporate Governance Committee. Mr. Finch currently serves on the advisory board of C.H. Fenstermaker & Associates, a multi-disciplinary consulting firm that specializes in surveying and mapping, engineering and environmental consulting.
Mr. Finch holds a B.S. in Accounting from the University of South Alabama and was licensed as a Certified Public Accountant (currently inactive).
SKILLS AND QUALIFICATIONS:
Mr. Finch’s extensive financial, accounting, and operating experience within the oil and gas industry are extremely valuable to the Board and qualify him as a director. In particular, Mr. Finch’s accounting background and status as a “financial expert” provide the Board valuable perspective on issues facing audit committees.
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INDEPENDENT
Age 64
Director Since 2015
Callon Committees:
Audit, Compensation, Strategic Planning and Reserves |
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S. P. Johnson IV
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Former President, Chief Executive Officer and Co-Founder (Retired) of Carrizo Oil & Gas, Inc.
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Mr. Johnson was a co-founder of Carrizo and served as the President and Chief Executive Officer and as a director from December 1993 to December 2019, when Carrizo merged with the Company. Prior to that, he worked for Shell Oil Company for 15 years, where his managerial positions included Operations Superintendent, Manager of Planning and Finance and Manager of Development Engineering.
Mr. Johnson was also a director of Basic Energy Services, Inc., an oilfield service provider, and served as a director of Pinnacle Gas Resources, Inc., a coalbed methane exploration and production company, from 2003 to 2011.
Mr. Johnson is a Registered Petroleum Engineer and holds a B.S. in Mechanical Engineering from the University of Colorado.
SKILLS AND QUALIFICATIONS:
Mr. Johnson brings to the Board extensive experience in oil and gas exploration and production and the energy industry through his roles at Carrizo and other energy companies.
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INDEPENDENT
Age 64
Director Since 2019
Callon Committees:
Strategic Planning and Reserves |
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Larry D. McVay
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Managing Director of Edgewater Energy, LLC
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Larry McVay has served as a member of the Board since 2007. Mr. McVay has been a Managing Director of Edgewater Energy, LLC, a privately held oil and gas investment company, since 2007. From 2003-2006, he served as Chief Operating Officer of TNK-BP Holding, one of the largest oil producing companies in Russia. From 2000-2003, he served as Technology Vice President and Vice President of Health, Safety and Environment for BP plc. Prior to joining BP, Mr. McVay held numerous positions at Amoco, including engineering management and senior operating leadership positions.
Mr. McVay is a director of Linde plc, a publicly-traded industrial gas and engineering company. Previously, Mr. McVay was a director of Praxair, Inc., an industrial gases company in North and South America, until Praxair, Inc. and Linde AG combined to create Linde plc in 2018. Additionally, Mr. McVay was previously a director of Chicago Bridge and Iron Company, N.V., a publicly-traded engineering, procurement and construction company, until it merged into McDermott International in 2018.
Mr. McVay earned a B.S. in Mechanical Engineering from Texas Tech University, where he was recognized as a Distinguished Engineer in 1995.
SKILLS AND QUALIFICATIONS:
Mr. McVay has been directly involved in nearly all aspects of the oil and gas industry, including drilling, production, finance, environmental, risk, and safety. We believe that this experience and his knowledge of the exploration and production industry, particularly in the Permian Basin, as well as his senior executive experience, service on other boards, and independence, provide valuable insight in the development of our long-term strategies and qualify him for service on the Board.
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INDEPENDENT
Age 72
Director Since 2007
Callon Committees:
Strategic Planning and Reserves (Chairman), Audit, Nominating and Corporate Governance
Other Current Directorships:
Linde plc |
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Steven A. Webster
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Former Chairman of the Board and Co-Founder of Carrizo Oil & Gas, Inc.
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Mr. Webster was a co-founder of Carrizo for which he served as a director since 1993 and as its Chairman of the Board since 1997 until December 2019, when Carrizo merged with the Company. Since 2016, Mr. Webster has served as Managing Partner of AEC Partners, a private equity firm engaged in energy investment which was the successor to Avista Capital Partners, a private equity firm he co-founded in 2005 and for which he served as Co-Managing Partner. From 2000 through 2005, Mr. Webster served as Chairman of Global Energy Partners, an affiliate of DLJ Merchant Banking and CSFB Private Equity. From 1988 through 1999, Mr. Webster was the CEO and President of R&B Falcon Corporation and Chairman and CEO of one of its predecessor companies, Falcon Drilling Company, which he founded. Mr. Webster has been a founder or seed investor in numerous other private and public companies.
He has held numerous board positions and currently serves as a director of ERA Group, Oceaneering International and various private companies. Since its founding in 1993, Mr. Webster has served as a Trust Manager of Camden Property Trust, a REIT.
Mr. Webster holds an M.B.A. from Harvard Business School where he was a Baker Scholar. He also holds a B.S. in Industrial Management and an Honorary Doctorate in Management from Purdue University.
SKILLS AND QUALIFICATIONS:
Mr. Webster brings to the Board experience in, and knowledge of, the energy industry, business leadership skills from his tenure as chief executive officer of publicly traded companies and his over 30-year career in private equity and investment activities, and experience as a director of several other public and private companies.
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INDEPENDENT
Age 68
Director Since 2019
Callon Committees:
Audit, Strategic Planning and Reserves
Other Current Directorships:
Camden Property Trust; Era Group Inc.; Oceaneering International, Inc. |
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Major General (Ret.) Barbara J. Faulkenberry
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Major General (Ret.) of the U.S. Air Force
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Barbara Faulkenberry has served as a member of the Board since 2018. Ms. Faulkenberry retired from the U.S. Air Force in 2014 as a Major General (2-stars) after a 32-year career, finishing in the top 150 leaders of a 320,000-person global organization. Her last assignment was as Vice Commander (COO) and interim Commander (CEO) of a 37,000-person organization conducting all global Department of Defense air cargo, passenger, and medical patient movements with 1,100 military aircraft plus contracted commercial aircraft.
Ms. Faulkenberry is currently an independent director for USA Truck, a publicly-traded provider of logistics and trucking services across North America, where she serves as chair of the Technology Committee and as a member of the Nominating and Corporate Governance Committee.
Ms. Faulkenberry received a B.S. degree from the Air Force Academy in 1982, an M.B.A. from Georgia College in 1986, and a Master of National Security from the National Defense University in 1999. She has also attended strategic leadership courses at Harvard, Cambridge, and Syracuse Universities.
SKILLS AND QUALIFICATIONS:
Ms. Faulkenberry brings to the Company senior leadership experience in the areas of supply chain management, logistics, strategic planning, risk management, technology, cyber security, and leadership development. Additionally, she is a NACD Board Leadership Fellow and earned the Carnegie Mellon/NACD CERT Certificate in Cybersecurity Oversight, both of which contribute to best practices in corporate governance and cyber security and provide great value to the Board.
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INDEPENDENT
Age 60
Director Since 2018
Callon Committees:
Audit, Nominating and Corporate Governance, Strategic Planning and Reserves
Other Current Directorships:
USA Truck, Inc. |
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L. Richard Flury
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Chairman of the Board
Former Chief Executive (Retired) for Gas, Power & Renewables of BP plc |
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Richard Flury has served as a member of the Board since 2004 and has served as Chairman since 2017. He spent over 30 years with Amoco Corporation, and later, BP plc, from which he retired as Chief Executive for Gas and Power and Renewables in 2001. Prior to Amoco’s merger with BP in 1998, he served in various executive positions and was Chief Executive for Worldwide Exploration and Production and Executive Vice President of Amoco Corporation at the time of the merger.
Mr. Flury is a director of McDermott International, a publicly-traded engineering, procurement and construction company, including when it filed voluntary petitions for reorganization in the United States Bankruptcy Court for the Southern District of Texas in January 2020. Mr. Flury was a director and the non-executive Chairman of Chicago Bridge and Iron Company, N.V., a publicly-traded engineering, procurement and construction company, until it merged into McDermott International in 2018. Previously, Mr. Flury was a member of the Board of QEP Resources, Inc., a publicly-traded oil and gas exploration company, from 2010 to 2015.
He is a graduate of the University of Victoria (Canada) where he studied geology.
SKILLS AND QUALIFICATIONS:
Mr. Flury’s deep knowledge of the energy industry and years of executive and management experience provide him with valuable insights into the strategic issues affecting companies in the oil and gas industry that are helpful to our Company and Board. His service on the boards of other publicly-traded companies has provided him exposure to different industries and approaches to governance that we believe further enhances the Board.
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INDEPENDENT
Age 72
Director Since 2004
Callon Committees:
Audit, Compensation, Strategic Planning and Reserves
Other Current Directorships:
McDermott International |
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Joseph C. Gatto, Jr.
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President, Chief Executive Officer and Director
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Joseph C. Gatto, Jr. is President, Chief Executive Officer and Director of Callon. Mr. Gatto was elected to the Board in 2018. He has served as the Company's CEO since 2017 and as President since 2016. Prior to his appointment as CEO, he served as Chief Financial Officer and Treasurer of the Company from 2014 to 2017, and held various other senior leadership positions within the Company since joining Callon in 2012.
Prior to joining the Company, Mr. Gatto served as Head of Structuring and Execution with Merrill Lynch Commodities from 2010 to 2011, as the founder of MarchWire Capital, LLC, a financial advisory and strategic consulting firm in 2009, and as a Managing Director in the energy investment banking groups of Merrill Lynch & Co. and Barclays Capital from 1997 to 2009.
Mr. Gatto graduated from Cornell University with a B.S. degree and The Wharton School of the University of Pennsylvania with an M.B.A.
SKILLS AND QUALIFICATIONS:
Mr. Gatto’s extensive experience in investment banking and the oil and gas industry make him a valuable addition to the Board. Additionally, Mr. Gatto's knowledge of the Company and strong background in capital markets, transactions, strategic planning, and investor relations provide the Board with essential insight and guidance.
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Age 49
Director Since 2018
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Frances Aldrich Sevilla-Sacasa
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Former Chief Executive Officer of Banco Itaú International
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Ms. Aldrich Sevilla-Sacasa is a private investor and was Chief Executive Officer of Banco Itaú International, Miami, Florida, from April 2012 to December 2016. Prior to that time, she served as Executive Advisor to the Dean of the University of Miami School of Business from 2011 to 2012, Interim Dean of the University of Miami School of Business from 2011 to 2011, President of U.S. Trust, Bank of America Private Wealth Management from 2007 to 2008, President and Chief Executive Officer of US Trust Company in 2007, and President of US Trust Company from November 2005 until June 2007. She previously served in a variety of roles with Citigroup’s private banking business, including President of Latin America Private Banking, President of Europe Private Banking, and Head of International Trust Business.
Ms. Aldrich Sevilla-Sacasa holds a Bachelor of Arts Degree from the University of Miami and an M.B.A. from the Thunderbird School of Global Management.
SKILLS AND QUALIFICATIONS:
Ms. Aldrich Sevilla-Sacasa brings to the Board considerable experience in financial services, banking and wealth management. In addition, her experience as a former president and chief executive officer of a trust and wealth management company, and as a director of other corporate and not-for-profit boards has provided her with expertise in the area of corporate governance.
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Age 64
Director Since 2019
Callon Committees:
Nominating and Corporate Governance; Strategic Planning and Reserves
Other Current Directorships:
Camden Property Trust |
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Board member cash retainer
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$
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80,000
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Restricted Stock Unit (RSU) Grant Value
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$
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165,000
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Chairmen Fees
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Non-Executive Chair
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$
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120,000
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Audit Committee Chair
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$
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20,000
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Compensation Committee Chair
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$
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15,000
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Nominating and Corporative Governance Committee Chair
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$
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10,000
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Strategic Planning and Reserves Committee Chair
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$
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10,000
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NON-EMPLOYEE DIRECTOR COMPENSATION FOR 2019
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Director
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Fees Earned or
Paid in Cash(a)
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Stock
Awards(b)
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All Other
Compensation
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Total
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||||||
Matthew R. Bob
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$
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95,000
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(c)
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$
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165,000
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$0
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$
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260,000
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Barbara J. Faulkenberry
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$
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80,000
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(d)
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$
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165,000
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$0
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$
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245,000
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Michael L. Finch
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$
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80,000
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(d)
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$
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165,000
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$0
|
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$
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245,000
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L. Richard Flury
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$
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200,000
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(e)
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$
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165,000
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|
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$0
|
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$
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365,000
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S. P. Johnson IV(i)
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$
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0
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|
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$
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0
|
|
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$0
|
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$
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0
|
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Larry D. McVay
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$
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90,000
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(f)
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$
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165,000
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|
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$0
|
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$
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255,000
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Anthony J. Nocchiero
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$
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100,000
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(g)
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$
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165,000
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|
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$0
|
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$
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265,000
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Frances Aldrich Sevilla-Sacasa(i)
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$
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0
|
|
|
$
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0
|
|
|
$0
|
|
$
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0
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James M. Trimble
|
$
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90,000
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(h)
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$
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165,000
|
|
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$0
|
|
$
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255,000
|
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Steven A. Webster(i)
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$
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0
|
|
|
$
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0
|
|
|
$0
|
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$
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0
|
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(a)
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Does not include reimbursement of expenses associated with attending Board and Committee meetings.
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(b)
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Amounts calculated utilizing the provisions of FASB ASC Topic 718. These amounts are equal to the grant date fair value of the awards. The aggregate number of stock unit awards outstanding as of December 31, 2019 for each director is as follows: Messrs. Bob, Flinch, Flury, McVay, Nocchiero and Trimble - 24,076; Ms. Faulkenberry - 20,370; Messrs. Johnson and Webster - 0; and Ms. Sevilla-Sacasa - 0.
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(c)
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Represents annual retainer of $80,000 and an additional $15,000 for acting as Chairman of the Compensation Committee.
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(d)
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Represents annual retainer of $80,000.
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(e)
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Represents annual retainer of $80,000 and an additional $120,000 for acting as the non-executive Chairman of the Board. Mr. Flury elected to have his annual retainer and his non-executive Chairman of the Board fees deferred pursuant to the terms of the Deferred Compensation Plan , under which participants may elect to convert cash fees earned to phantom shares and defer the receipt of the proceeds in cash until separation from service as a director.
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(f)
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Represents annual retainer of $80,000 and an additional $10,000 for acting as Chairman of the Strategic Planning and Reserves Committee.
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(g)
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Represents annual retainer of $80,000 and an additional $20,000 for acting as Chairman of the Audit Committee.
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(h)
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Represents annual retainer of $80,000 and an additional $10,000 for acting as Chairman of the Nominating and Corporate Governance Committee.
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(i)
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Messrs. Johnson and Webster and Ms. Sevilla-Sacasa were not members of Callon's Board prior to December 20, 2019. Amounts shown for Messrs. Johnson and Webster and Ms. Sevilla-Sacasa represent compensation paid by Callon following the Carrizo Acquisition.
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•
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Ten of our eleven directors are independent. Joseph C. Gatto, Jr., our President and CEO, is the only non‑independent member of the Board.
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•
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All Board committees are comprised entirely of independent directors.
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An independent, non-executive director serves as the Company’s Chairman of the Board.
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The Company encourages a paced refreshment of the Board. Six of the eleven directors have joined within the last five years.
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The Board includes a balance of experience, tenure, and qualifications in areas important to our business.
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•
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Election of directors by majority of votes cast in an uncontested election
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•
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We have an over-boarding policy in place for directors.
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The Board conducts regular executive sessions with our independent directors.
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•
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We regularly refresh our governance documents.
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The Board and its committees conduct annual self-evaluations.
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•
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We have adopted stringent insider trading, anti-hedging, and anti-pledging policies.
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We engage in active shareholder engagement practices.
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•
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The Board oversees environmental, social and governance practices.
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•
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The Board oversees succession planning for the CEO and executive officer positions.
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We engage an independent executive compensation consultant that reports directly to the Compensation Committee.
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•
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The Company adopted Annual Say-On-Pay voting.
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The Compensation Committee has implemented significant director and executive officer stock ownership guidelines.
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We do not have employment agreements with any executive officers, with the exception of an employment agreement with Gregory F. Conaway that was adopted by the Company as a result of the acquisition of Carrizo (the "Carrizo Acquisition").
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•
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We have double-trigger change in control provisions in our severance agreements and equity awards.
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•
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We do not have a Poison Pill (Shareholder Rights Plan).
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BOARD OF DIRECTORS
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The Audit Committee, among other duties, is charged with overseeing material risk exposures in the areas of financial reporting, internal controls, compliance, hedging and cybersecurity. This Committee also oversees responses to any alleged violations of our Code of Business Conduct.
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The Nominating and Corporate Governance Committee focuses on issues relating to corporate governance and Board committee composition. This Committee also assists the Board in fulfilling its oversight responsibilities with respect to succession planning for our directors and executive officers and ESG matters.
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The Compensation Committee oversees the Company's compensation programs and reviews the potential risks that may result from our compensation policies to ensure they do not encourage unnecessary or excessive risk taking by management.
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The Strategic Planning and Reserves Committee oversees the development and implementation of our strategic plan and the integrity of our reserve estimation reporting process and related disclosures.
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Callon Committees
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Name, Age, Independence
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Audit
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Compensation
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Nominating
and Corporate Governance |
Strategic
Planning and Reserves |
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Class I Directors (term expires in 2022)
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Michael L. Finch, 64
Independent
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○
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○
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○
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S. P. Johnson IV, 64
Independent
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○
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Larry D. McVay, 72
Independent
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○
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○
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●
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Steven A. Webster, 68
Independent
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○
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○
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Class II Directors (term expires in 2020)
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Matthew R. Bob, 63
Independent
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●
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○
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○
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Anthony J. Nocchiero, 69
Independent
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●
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○
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○
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James M. Trimble, 71
Independent
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○
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●
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○
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Class III Directors (term expires in 2021)
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Barbara J. Faulkenberry, 60
Independent
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○
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○
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○
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L. Richard Flury, 72
Independent Chairman of the Board
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○
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○
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○
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Joseph C. Gatto, Jr., 49
President and Chief Executive Officer
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Frances A. Sevilla-Sacasa, 64
Independent
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○
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○
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● Chairman ○ Member
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Audit Committee
Anthony J. Nocchiero (Chairman and Financial Expert)
Barbara J. Faulkenberry Michael L. Finch (Financial Expert) L. Richard Flury Larry D. McVay Steven A. Webster |
PURPOSE
The principal function of the Audit Committee is to assist the Board in overseeing the areas of financial reporting, accounting integrity, compliance, and risk management.
MEETINGS IN 2019
Five meetings; all members attended at least 75% of Committee meetings during the time he or she served on the Committee.
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•
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Overseeing the quality, integrity and reliability of the financial statements and other financial information we provide to any governmental body or the public;
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•
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Overseeing our compliance with legal and regulatory requirements;
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•
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Selecting and hiring (subject to ratification by our shareholders) the independent public accounting firm;
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•
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Overseeing the qualifications, independence and performance of the independent auditor;
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•
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Overseeing the effectiveness and performance of our internal audit function;
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•
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Overseeing our internal controls regarding finance, accounting, legal compliance and ethics;
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•
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Establishing and overseeing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or audit matters, including the confidential, anonymous submission of concerns regarding such matters;
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•
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Assessing matters related to risk, risk controls and compliance, including the review and approval of hedging practices and policies;
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•
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Overseeing matters related to cybersecurity and the security of information technology systems, including management’s plans, programs and policies designed to mitigate cybersecurity risks and third party reports on the information technology control environment;
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•
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Producing the Audit Committee Report for inclusion in our annual proxy statement; and
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•
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Performing such other functions the Board may assign to the Audit Committee from time to time.
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Compensation Committee
Matthew R. Bob (Chairman)
Michael L. Finch L. Richard Flury Anthony J. Nocchiero James M. Trimble |
PURPOSE
The purpose of the Compensation Committee is to establish our compensation programs and oversee the alignment of our compensation with our business strategies.
MEETINGS IN 2019
Five meetings; all members attended at least 75% of Committee meetings.
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•
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Evaluating the performance of and establishing the compensation of the CEO;
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•
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Establishing, with input from the CEO, the compensation for our other executive officers;
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•
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Establishing and reviewing our overall executive compensation philosophy and approving changes to our compensation program;
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•
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Reviewing incentive compensation arrangements to confirm that executive compensation does not encourage unnecessary risk taking;
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•
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Administering our long-term incentive plans;
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•
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Reviewing and approving the Compensation Discussion and Analysis ("CD&A") for inclusion in the annual proxy statement;
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•
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Reviewing and recommending to the Board compensation for non-employee directors;
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•
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Retaining and overseeing compensation consultants, including the independence of the consultants;
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•
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Reviewing and approving performance criteria and results for bonus and performance-based equity awards for executive officers and approving awards to those officers; and
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•
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Performing such other functions as the Board may assign to the Compensation Committee from time to time.
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Nominating and Corporate
Governance Committee
James M. Trimble (Chairman)
Matthew R. Bob Barbara J. Faulkenberry Larry D. McVay Frances A. Sevilla-Sacasa |
PURPOSE
The purpose of the Nominating and Corporate Governance Committee is to identify and recommend qualified candidates to the Board for nomination as members of the Board; assess director, Board and committee effectiveness; develop and implement our Corporate Governance Guidelines; oversee succession planning for executive officers; oversee ESG matters; and otherwise take a leadership role in shaping the corporate governance of our Company.
MEETINGS IN 2019
Four meetings; all members attended at least 75% of Committee meetings during the time he or she served on the Committee.
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•
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Evaluating a set of specific criteria for Board membership and identifying individuals qualified to become Board members, recommending nominees for election at the next annual meeting of shareholders, reviewing the suitability for continued service as a director of each Board member, and filling any vacancies;
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•
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Assessing the size and composition of the Board and its committees and recommending to the Board the members and chair for each Board committee;
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•
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Advising the Board and making recommendations regarding appropriate corporate governance practices and assisting the Board in implementing those practices, including periodically reviewing the adequacy of our Corporate Governance Guidelines, our Code of Business Conduct and Ethics, and the various Board committee charters, and making recommendations for changes thereto to the Board;
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•
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Overseeing the annual self-evaluation of the performance of the Board and its committees;
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•
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Overseeing and approving plans for management continuity and succession;
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•
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Recommending to the Board a successor to the CEO when a vacancy occurs;
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•
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Reviewing directorships in other public companies held by or offered to directors or executive officers of the Company;
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•
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Overseeing ESG policies, performance and disclosure, and develop recommendations for the Board on emerging issues related to our industry;
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•
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Overseeing continuing education for the Board; and
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•
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Performing other such functions as the Board may assign to the Nominating and Corporate Governance Committee from time to time.
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Strategic Planning and
Reserves Committee
Larry D. McVay (Chairman)
Matthew R. Bob Barbara J. Faulkenberry Michael L. Finch L. Richard Flury S. P. Johnson IV Anthony J. Nocchiero Frances A. Sevilla-Sacasa James M. Trimble Steven A. Webster |
PURPOSE
The purpose of the Strategic Planning and Reserves Committee is to manage and oversee the Board’s participation in the development of the Company’s strategic plan, and oversee the integrity of the determination of our oil and natural gas reserve estimates.
MEETINGS IN 2019
Five meetings; all members attended at least 75% of Committee meetings during the time he or she served on the Committee.
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•
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Overseeing the Board’s participation in the development of a strategic plan and the consideration and assessment of strategic decisions;
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•
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Monitoring management's implementation of the strategic plan, and advising the Board if additional Board action appears to be needed;
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•
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Assuring that management is addressing the personnel requirements for the successful implementation of the strategic plan;
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•
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Overseeing our reserve engineering reports and reserve engineering firm, including: (i) the integrity of our reserve reports, (ii) determinations regarding the qualifications and independence of our independent reserve engineering firm, (iii) the performance of our independent reserve engineering firm, and (iv) our compliance with certain legal and regulatory requirements relating to reserve reporting; and
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•
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Performing other such functions as the Board may assign to the Strategic Planning and Reserves Committee from time to time.
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•
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Corporate Governance Guidelines;
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•
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Code of Business Conduct and Ethics; and
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•
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Charters for the Audit, Compensation, Nominating and Corporate Governance, and Strategic Planning and Reserves Committees.
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Joseph C. Gatto, Jr.
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James P. Ulm, II
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Jeffrey S. Balmer
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Michol L. Ecklund
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Gregory F. Conaway
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Proposal 2
Approve, on an Advisory Basis,
the Compensation of the Company’s NEOs |
|
The Board of Directors recommends a vote FOR the compensation paid to the Company’s named executive officers, as disclosed in this Proxy Statement.
• Provides performance-based and market-aligned pay opportunities that are intended to foster alignment, engagement, and retention of key talent to drive Company performance and long-term shareholder value.
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•
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Performance-based compensation. Our executive compensation program seeks to align executive compensation with shareholder value on an annual and long-term basis through a combination of base pay, annual incentives and long-term incentives. By design, a significant portion of our NEO compensation is performance-based, with variable pay comprising 86 percent of compensation opportunity for our CEO and 71 percent for NEOs in 2019. Please review the CD&A for more information on how our 2019 compensation was linked to Company performance.
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•
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Pay practices reflect individual and market factors. The Compensation Committee considers the skills, experience and performance of each of our NEOs as well as competitive market data in setting annual compensation opportunities, and directs our independent compensation consultant to provide benchmarking data which serves as one of the considerations of compensation decisions.
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•
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“Double trigger” severance agreements with fixed term. Change in control severance agreements with our executive officers require an actual or constructive termination of employment before benefits are paid following any change in control.
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•
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Stock ownership guidelines. Each of the NEOs has been granted equity to provide the officer a stake in our long-term success. The purpose of the ownership requirement is to further our goal of increasing shareholder value by aligning the interests of our NEOs with those of our long-term shareholders.
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•
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Clawback Policy. The Compensation Committee has adopted a clawback policy that establishes conditions under which the Committee may recoup previously-paid compensation in event of error, misconduct, or certain other circumstances.
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•
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Hedging policy. Our directors and executive officers are prohibited from entering into transactions in puts, calls and other derivative securities with respect to our securities and from engaging in short sales of our securities. We believe these activities are often perceived as involving insider trading and may focus the holder’s attention on our short-term performance rather than our long-term objectives.
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|
The Board recommends a vote FOR the compensation paid to the Company’s named executives.
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Recent Market Disruption and Callon’s Response
|
||||||
Consistent with regulatory requirements, the below CD&A highlights our historic performance and executive compensation decisions for 2019. In light of the precipitous decline in commodity prices in recent weeks due to substantial demand destruction from the global outbreak of the COVID-19 virus and concurrent supply-related decisions by OPEC+ producers, Callon’s Board and management team are taking proactive steps to reduce costs and revise our plans to realign with the macroeconomic outlook. On April 16, 2020, Callon announced certain cost-saving measures including the following voluntary compensation reductions:
•
Board members agreed to reduce their total compensation by 35%;
•
Chief Executive Officer agreed to reduce his salary by 20% and his total target cash compensation by 35%; and
•
All other officers agreed to reduce their total target cash compensation by at least 25%, including salary reductions of 15% and 10% by senior vice presidents and vice presidents, respectively.
The Board and management will continue to evaluate the Company’s executive compensation and incentive programs in light of the volatility and uncertainty in financial and commodity markets, and next year’s CD&A will discuss and describe the eventual realized compensation from the performance periods that conclude at the end of 2020.
|
Key Committee Actions for 2019
|
|||||
• Instituted a formulaic approach for the Company’s annual incentive compensation program with a 60/40 weighting of quantitative/qualitative factors that included shareholder priorities of corporate-level returns, capital efficiency, cash flow, balance sheet strength and ESG performance
• Revised our peer group, used as the basis for evaluating the competitiveness of compensation opportunities and relative long-term TSR performance, in light of the Company’s growth and industry consolidation
• Assessed the annual salaries and incentive compensation opportunities of the CEO and other NEOs based on their experience, performance and growth in their roles, as well as competitive market data
• Talented workforce with growing technical expertise identifies with a culture of responsibility and adaptability in a cyclical commodity business
• Conducted a review of long-term incentive program design, resulting in the addition of an absolute TSR modifier to the PSUs granted in January 2020 to further align long-term incentives with absolute shareholder returns
• Developed the framework for a peer-leading Clawback Policy (adopted in January 2020), which allows the Committee to recoup previously-paid compensation in event of error, fraud, misconduct, or certain other circumstances
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NEO
|
Age
|
Title
|
Joseph C. Gatto, Jr.
|
49
|
President, Chief Executive Officer and Director
|
James P. Ulm, II
|
57
|
Senior Vice President and Chief Financial Officer
|
Jeffrey S. Balmer
|
55
|
Senior Vice President and Chief Operating Officer
|
Michol L. Ecklund
|
45
|
Senior Vice President, General Counsel and Corporate Secretary
|
Gregory F. Conaway
|
44
|
Vice President and Chief Accounting Officer
|
Mitzi P. Conn
|
51
|
Former Vice President and Chief Accounting Officer
|
|
• With the closing of the Carrizo Acquisition, more than doubled our acreage position to nearly 200,000 net acres in Texas's producer-friendly Permian Basin and Eagle Ford Shale.
|
• Generated over $500 million in Adjusted EBITDA(i).
|
• Completed over $300 million of non-core asset monetizations.
|
• Redeemed approximately $270 million of preferred securities resulting in prospective dividend savings of nearly $25 million annually.
|
• Generated $58.2 million in free cash flow(ii) during the fourth quarter of 2019 (on a pro forma basis).
|
• Maintained an industry leading EBITDA margin of $33.28 per Boe for 2019.(i)
|
• Achieved record production (top of guidance) with operational capital spending below the bottom of full year guidance range
|
• Initiated full-field co-development across all asset areas, lowering target development costs and improving capital efficiency.
|
• Grew total proved reserves to 540 MMBoe with a PV-10(i) value of $5.4 billion as of December 31, 2019.
|
• Achieved record safety performance metrics, including a Total Recordable Incident Rate that was 50% lower than the prior year
|
• Increased recycled water volumes by 80% from 2018, further reducing environmental impact of operations.
|
• Reduced flaring by more than 40% year over year and was in the lowest third of all Texas producers in flaring intensity per the most recent TX RRC report.(iii)
|
(i)
|
See Appendix A for a reconciliation of Non-GAAP financial measures
|
(ii)
|
Free cash flow is defined as Adjusted EBITDA minus the sum of operational capital, capitalized interest, capitalized G&A, and interest expense. Adjusted EBITDA is a Non-GAAP financial measure; please refer to Appendix A for a reconciliation
|
(ii)
|
TX RRC defines flare intensity as gross daily flare volumes divided by gross daily oil production
|
|
What We Do
|
|
|
What We Don’t Do
|
|
|
|
||
• Substantial focus on performance-based pay
• Strong alignment with shareholder returns through significant weighting on long-term incentives
• Review of peer group benchmarks when establishing compensation
• Robust stock ownership guidelines for our NEOs and directors
• Clawback policy applies in the event of error, fraud or misconduct
• Double-trigger change in control severance for both cash severance and equity vesting
|
|
• NO hedging or pledging of our stock
• NO employment agreements*
• NO excessive benefits or perquisites
• NO single trigger change in control benefits
|
*
|
Callon assumed an employment agreement with Mr. Conaway as a result of the Carrizo Acquisition. See “Employment Agreements, Termination of Employment and Change in Control Arrangements” on page 57.
|
•
|
Reward the management team for delivering results against its strategic objectives, thereby creating value for the shareholders;
|
•
|
Emphasize pay for performance, in which Company and individual performance against preset goals are inherently linked to the amount realized by an NEO;
|
•
|
Attract and retain a qualified and motivated management team by offering industry competitive opportunities;
|
•
|
Incentivize NEOs and appropriately reward them for their contributions to the achievement of our key short-term and long-term strategic objectives through the use of variable compensation; and
|
•
|
Align the compensation of our NEOs with the interests of our long-term shareholders by weighting the programs toward at-risk, performance-based compensation, consisting of an objective-driven annual incentive program, TSR-contingent incentive awards, and retention stock grants with three-year vesting.
|
2019 CEO COMPENSATION MIX
|
|
2019 CEO COMPENSATION – TARGET vs. REALIZABLE
|
|
BASE SALARY
|
|
Purpose
|
Philosophy
|
• Pay for expertise and experience;
• Attract and retain talented executives;
• Provide compensation stability; and
• Compete with comparable companies.
|
• Fixed component of compensation reflective of individual skills, experience and expertise necessary to execute our business strategy; and
• Competitive with similarly sized peers.
|
ANNUAL CASH BONUS INCENTIVE
|
|
Purpose
|
Philosophy
|
• Motivate our NEOs to achieve our short-term business objectives that drive long-term performance;
• Reward achievement of financial, operating, and strategic goals for which NEOs are held accountable; and
• Promote and encourage pay-for-performance.
|
• At-risk component of compensation, with modest or no reward for performance below expectations and potential for increased reward for exceptional performance;
• Goals aligned with our annual business plan and performance targets;
• Provide balance in compensation programs and avoid encouraging undue risk-taking; and
• Competitive with similarly-sized peers.
|
OTHER (RETIREMENT; HEALTH BENEFITS; CHANGE IN CONTROL SEVERANCE)
|
|
Purpose
|
Philosophy
|
• Provide financial security for the NEOs and their families;
• Provide competitive benefits to attract and retain NEOs; and
• Ensure NEOs consider all possible transactions to increase shareholder value related to changes in control of the Company.
|
• Attracts and retains NEOs with a comprehensive benefits package;
• Provides financial security and maximizes the efficiency of tax-advantaged compensation vehicles; and
• Ensures NEOs act in the best interests of the shareholders in a change in control.
|
At Callon, we are committed to high ethical standards and effective and sustainable corporate governance. We believe this commitment promotes the interests of our long-term shareholders, helps build public trust in our Company and strengthens Board and management accountability. We continually assess our governance principles to ensure that we are operating our business responsibly, ethically and in a manner aligned with the interests of our long-term shareholders.
|
|
Approximately 97% of the votes were cast in favor of our 2018 executive compensation programs
|
•
|
In 2019, the Committee established that 60% of each NEO's annual cash bonus incentive would be based on a formulaic assessment of quantitative results and 40% would be based a subjective assessment of quantitative and qualitative factors. The 60% formulaic results were heavily weighted towards investor priorities of corporate-level returns, capital efficiency, cash flow, and balance sheet strength; and
|
•
|
For 2020, the Committee added an absolute TSR modifier to the 2020 PSU grants, which creates a further tie to absolute shareholder returns.
|
•
|
Regularly attending meetings of the Compensation Committee and meeting privately in executive session with the Compensation Committee to discuss its recommendations;
|
•
|
Providing recommendations on executive compensation matters to align the Committee’s actions with shareholder interests, our business strategy and pay philosophy, prevailing market practices and relevant legal and regulatory requirements;
|
•
|
Periodically evaluating the Peer Group and providing peer company data for the Committee to use in its decision-making process, including assessment of pay and performance relative to peers;
|
•
|
Providing competitive market data to consider in evaluating the competitiveness of the executive base salaries and short and long-term incentive plans and awards;
|
•
|
Reviewing data in connection with the Committee’s determination of annual cash incentive performance objectives and performance-based incentive vesting levels for completed performance periods;
|
•
|
Advising on the Company’s compensation arrangements for its non-employee directors, including providing Peer Group data;
|
•
|
Reviewing and providing feedback on our SEC filings relating to executive compensation disclosures, including our CD&A disclosures; and
|
•
|
Informing the Committee about compensation trends in the industry, best practices and other general trends and developments affecting executive compensation.
|
•
|
Size, including enterprise value and market capitalization;
|
•
|
Similar geographic footprint and operational focus;
|
•
|
Comparability of asset portfolio; and
|
•
|
Availability of compensation data.
|
|
|
|
|
2019 Peer Group
|
|||
• Carrizo Oil & Gas, Inc.
• Centennial Resource Development, Inc. (PSUs only)
• Energen Corporation (compensation only)
• HighPoint Resources Corporation
|
• Jagged Peak Energy, Inc.
• Laredo Petroleum, Inc.
• Matador Resources, Inc.
• Oasis Petroleum Inc.
• Parsley Energy, Inc.
|
• PDC Energy, Inc.
• QEP Resources, Inc.
• SM Energy Company
• SRC Energy, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 Peer Group - Compensation
|
|
|
|
|
|
|
|
|
2020 Peer Group - Compensation
|
|
|
• Carrizo Oil & Gas, Inc.
• Energen Corporation
• HighPoint Resources Corporation
• Jagged Peak Energy, Inc.
• Laredo Petroleum, Inc.
• Matador Resources, Inc.
• Oasis Petroleum Inc.
• Parsley Energy, Inc.
• PDC Energy, Inc.
• QEP Resources, Inc.
• SM Energy Company
• SRC Energy, Inc.
|
|
|
|
|
|
|
• Centennial Resource Development, Inc.
• Cimarex Energy Co.
• Jagged Peak Energy, Inc.
• EP Energy Corporation
• Matador Resources, Inc.
• Oasis Petroleum Inc.
• Parsley Energy, Inc.
• PDC Energy, Inc.
• QEP Resources, Inc.
• SM Energy Company
• Whiting Petroleum Corp.
• WPX Energy, Inc.
|
|
||
|
|
|
|
ADDED
|
|
|
|
||||
|
|
|
• Centennial Resource Development, Inc..
• Cimarex Energy Co.
• Whiting Petroleum Corp.
• WPX Energy, Inc.
|
|
|
|
|||||
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
||||
|
|
|
|
REMOVED
|
|
|
|
||||
|
|
|
• Carrizo Oil & Gas, Inc.
• Energen Corporation
• Highpoint Resources Corp.
• Laredo Petroleum, Inc.
• SRC Energy, Inc.
|
|
|
|
|||||
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
•
|
A balance of short-term and long-term programs to focus management on both elements of Callon’s performance;
|
•
|
Annual grants of long-term incentives designed to be the largest component of each NEO’s compensation package, with typical vesting periods of three years that are based on the value of our common stock and not on any particular metric that could encourage excessive risk-taking;
|
•
|
Performance criteria and targets for our annual bonus program designed to encourage performance, but not excessive risk taking, and discretion to decrease payouts if it is believed management exercised excessive risk taking;
|
•
|
Performance targets measured at the corporate level, rather than at the individual or business unit level;
|
•
|
Clawback policy that provides the Committee authority to recoup compensation due to error, fraud or other misconduct;
|
•
|
Reasonable change in control severance protections; and
|
•
|
Significant executive stock ownership requirements.
|
•
|
Individual officer’s experience, skills, contributions and tenure with Callon;
|
•
|
Changes to the individual’s position within Callon;
|
•
|
Competitive market data within our Peer Group and industry; and
|
•
|
The NEO’s roles, responsibilities and expected future contributions to Callon’s success.
|
NEO
|
2018 Target Bonus Opportunity
(% of Base Salary) |
2019 Target Bonus Opportunity
(% of Base Salary) |
Joseph C. Gatto, Jr.
|
100%
|
110%
|
James P. Ulm, II
|
90%
|
90%
|
Jeffrey S. Balmer
|
85%
|
85%
|
Michol L. Ecklund
|
70%
|
80%
|
Gregory F. Conaway(i)
|
—
|
70%
|
Mitzi C. Conn
|
70%
|
70%
|
(i)
|
Mr. Conaway’s 2019 target annual bonus opportunity of 70% was established by Carrizo. See page 46 for more information about the 2019 Carrizo annual incentive bonus program.
|
Quantitative Objective
|
Description
|
Weighting
|
Net Debt/Adjusted EBITDA(i)
|
Measure of our ability to cover our debt, which is impacted by cash flow, and ensures focus on a strong balance sheet
|
15%
|
Cash Return on Cash Invested(ii)
|
Measure of total corporate returns on capital
|
12.5%
|
(LOE + Cash G&A)/BOE
|
Measure of critical cash margin components that are controlled by management
|
12.5%
|
Oil Production
|
Key component in our ability to deliver cash flow and returns on capital investment
|
10%
|
Proved Developed F&D/BOE(iii)
|
Measure of capital efficiency for annual proved developed reserve base additions
|
10%
|
TOTAL
|
|
60%
|
(i)
|
Net Debt to Adjusted EBITDA is calculated as the sum of total long-term debt less unrestricted cash and cash equivalents, divided by the Company’s Adjusted EBITDA inclusive of annualized pro forma results from its acquisitions and divestitures completed over the last twelve month period. See Appendix A for a reconciliation of Non-GAAP financial measures.
|
(ii)
|
Cash Return on Invested Capital is defined as (GAAP cash flow from operations + after tax interest expense) / (average total debt + average stockholders’ equity). 2019 CROCI based on Callon standalone.
|
(iii)
|
Proved Developed F&D/BOE reflects all operational capital including facilities costs (development costs + exploratory costs) / (total proved extensions, discoveries, and other additions except those related to PUD reserves + PUD reserves converted to proved developed reserves during the period).
|
•
|
Health, safety and environmental performance
|
•
|
Organizational and talent development
|
•
|
Other strategic initiatives, including selective divestitures of non-core assets and advancement of "life of field" development plans
|
Quantitative Objective
|
Weighting
|
Threshold
(50%) |
Target
(100%) |
Max
(200%) |
|
Actuals(i)
|
Weighted
Contribution |
Net Debt/Adjusted EBITDA
|
15%
|
2.8x
|
2.6x
|
2.3x
|
|
2.5x
|
20%
|
Cash Return on Cash Invested
|
12.5%
|
11.00%
|
12.25%
|
14.00%
|
|
12.96%
|
17.6%
|
(LOE + Cash G&A)/BOE
|
12.5%
|
$8.85
|
$8.30
|
$7.60
|
|
$8.10
|
16.1%
|
Oil Production
|
10%
|
29,600
|
31,000
|
32,400
|
|
30,787
|
9.2%
|
Proved Developed F&D/BOE
|
10%
|
$15.25
|
$14.00
|
$12.50
|
|
below threshold
|
0%
|
Quantitative Total
|
60%
|
|
|
|
|
|
63%
|
(i)
|
Reflects actual results for standalone Callon 2019 performance, pro forma for the sale of the Southern Midland Basin assets that was announced in April 2019.
|
Qualitative Factors
|
2019 Achievements
|
Health, Safety, and Environmental
|
• Achieved the Company’s best safety performance on record, reducing the total recordable incident rate by 50%
• Reduced environmental impact by increasing recycled water volumes by 80% and reducing flaring intensity by more than 40%.
• Published inaugural Sustainability web site to enhance communication of the Company’s ESG initiatives
|
Organizational and Talent Development
|
• Named a “Best Place to Work” by the Houston Chronicle for third year in a row
• Enhanced leadership development with new training and goal-setting initiatives
• Advanced succession planning and critical talent initiatives for key leadership roles across the organization
|
Strategic Initiatives
|
• Successfully closed the Carrizo Acquisition to advance returns, cash flow, capital efficiency and development plan flexibility
• Completed over $300 million of non-core asset monetizations
• Advanced large-scale, multi-zone development in the Midland and Delaware Basins
• Achieved free cash flow generation in 4Q on a stand-alone and pro forma basis
|
NEO
|
2019 Annual Bonus
|
||
Joseph C. Gatto, Jr.
|
$
|
1,043,625
|
|
James P. Ulm, II
|
$
|
481,275
|
|
Jeffrey S. Balmer
|
$
|
439,875
|
|
Michol L. Ecklund
|
$
|
368,000
|
|
Gregory F. Conaway(a)
|
$
|
197,400
|
|
Mitzi P. Conn
|
$
|
209,300
|
|
(a)
|
Mr. Conaway's bonus was determined under Carrizo’s 2019 annual bonus program and in accordance with the Merger Agreement as described below.
|
•
|
Long-term value creation by linking compensation with long-term operational success;
|
•
|
Alignment of the interests of our executive officers with those of our long-term shareholders by directly linking rewards to shareholder return;
|
•
|
Retention incentives for our executive officers; and
|
•
|
Meaningful equity participation by our executive officers that further aligns their interests with shareholders.
|
NEO
|
Total Value
$(a) |
RSUs Payable in
Common Stock |
PSUs Payable in
50% Stock and 50% cash(b) |
|||
Joseph C. Gatto, Jr.
|
$
|
4,299,996
|
|
211,301
|
(c)
|
316,954
|
James P. Ulm, II
|
$
|
1,743,995
|
|
85,700
|
(c)
|
128,550
|
Jeffrey S. Balmer
|
$
|
1,629,097
|
|
90,000
|
(d)
|
128,378
|
Michol L. Ecklund
|
$
|
999,999
|
|
49,140
|
(c)
|
73,710
|
Gregory F. Conaway
|
$
|
0
|
|
0
|
|
0
|
Mitzi P. Conn
|
$
|
363,996
|
|
17,885
|
(c)
|
26,832
|
(a)
|
Represents the intended target value of the awards based on the trading price of Callon stock on the grant date, which is different from the grant date fair value computed in accordance with FASB ASC Topic 718 as reported in the Summary Compensation Table.
|
(b)
|
Amounts represent PSUs that are scheduled to vest on December 31, 2021 at a variable rate between 0% and 200% based on our TSR when compared to pre-determined peer companies and will be settled in 50% Company common stock and 50% cash.
|
(c)
|
Amounts represent RSUs that are subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche vested on April 1, 2020; the second on April 1, 2021; and the third on April 1, 2022; and each tranche will settle in Company common stock on the vesting date.
|
(d)
|
Amounts represent RSUs granted to Dr. Balmer upon joining the Company that are subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche vested on January 1, 2020; the second will vest on January 1, 2021; and the third will vest on January 1, 2022; and each tranche will settle in Company common stock on the vesting date.
|
Callon’s TSR Percentile Rank Among the Peer Companies
|
PSUs Vesting as a Percentage of Target
|
|
>=90th Percentile
|
200
|
%
|
70th Percentile
|
150
|
%
|
50th Percentile
|
100
|
%
|
30th Percentile
|
50
|
%
|
<30th Percentile
|
0
|
%
|
NEO
|
Target Number
of PSUs |
Percent of Target
PSUs Earned |
Actual Vested PSUs
(Settled 50% Cash and 50% Shares) |
Joseph C. Gatto, Jr.
|
64,304
|
100%
|
64,304
|
James P. Ulm, II(a)
|
—
|
—
|
—
|
Jeffrey S. Balmer(a)
|
—
|
—
|
—
|
Michol L. Ecklund(a)
|
—
|
—
|
—
|
Gregory F. Conaway(a)
|
—
|
—
|
—
|
Mitzi P. Conn
|
16,324
|
100%
|
16,324
|
(a)
|
Executive was not employed by the Company in May 2017 when award was granted.
|
•
|
Group medical and dental insurance program for employees and their qualified dependents;
|
•
|
Group life insurance for employees and their spouses;
|
•
|
Accidental death and dismemberment coverage for employees;
|
•
|
Long-term disability coverage;
|
•
|
Callon's sponsored cafeteria plan; and
|
•
|
401(k) employee savings and protection plan (the "401(k) plan").
|
Executive Officers/Directors
|
Required Common Stock Ownership as a Multiple of Annual Base Salary / Annual Retainer
|
CEO
|
6x
|
Directors
|
5x
|
Other Executive Officers
|
2x
|
•
|
If there is a correction to previously approved performance metrics (not necessarily limited to a financial restatement), the Committee may clawback from executive officers any annual or long-term incentive compensation paid in error during the prior three years.
|
•
|
If an executive officer engages in fraud or misconduct, or was grossly negligent in a supervisory role, where such action caused or could reasonably lead to material financial or reputational harm to Callon, the Committee may clawback annual and long-term incentive compensation from the past year from the executive officer
|
(a)
|
Cash bonus awarded in first quarter of following year in recognition of previous year's performance.
|
(b)
|
The amounts reported in the “Stock Awards” column represent the aggregate grant date fair value of RSUs and PSUs computed in accordance with FASB ASC Topic 718, disregarding any estimates of forfeiture. The performance unit awards granted in 2019, 2018 and 2017 are subject to market conditions and have been valued based on the probable outcome of the market conditions as of the grant date of the awards. The assumptions utilized in the calculation of these amounts for 2019 are set forth in footnotes 9 and 10 to our consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2019.
|
(c)
|
The amounts reported in the “Non-Equity Incentive Plan Compensation” column represent payouts under the 2019 annual performance bonus program. See “Performance-Based Annual Cash Incentive” in the CD&A above for further information.
|
(d)
|
See the "Table of All Other Compensation” below and related footnotes for reconciliation.
|
(e)
|
Mr. Gatto was promoted to Chief Executive Officer in May 2017.
|
(f)
|
Mr. Gatto’s salary was increased from $700,000 to $825,000 effective March 2019.
|
(g)
|
Mr. Ulm began serving as our Chief Financial Officer in December 2017.
|
(h)
|
Dr. Balmer was not an NEO prior to 2019.
|
(i)
|
Ms. Ecklund was not an NEO prior to 2018.
|
(j)
|
Ms. Ecklund's salary was increased from $350,000 to $400,000 effective March 2019.
|
(k)
|
Mr. Conaway was appointed to an executive officer role with the Company as of the closing of the Carrizo Acquisition on December 20, 2019.
|
(l)
|
The amount in Non-Equity Incentive Plan Compensation represents the amount paid to Mr. Conaway by the Company as a 2019 annual performance bonus in accordance with the terms of Carrizo’s 2019 annual bonus program and the Merger Agreement. See “Performance-Based Annual Cash Incentive” in the CD&A above for further information.
|
(m)
|
Ms. Conn's salary was increased from $245,000 to $260,000 effective March 2019.
|
NEO
|
Year
|
Company
Contributions to 401(k)(a) |
Company
Provided Auto(b) |
Additional Perquisites
|
Total
|
|||||||||
Joseph C. Gatto, Jr.
|
2019
|
$
|
26,250
|
|
$
|
6,805
|
|
$
|
0
|
|
|
$
|
33,055
|
|
|
2018
|
$
|
25,000
|
|
$
|
6,430
|
|
$
|
0
|
|
|
$
|
31,430
|
|
|
2017
|
$
|
31,500
|
|
$
|
10,316
|
|
$
|
0
|
|
|
$
|
41,816
|
|
James P. Ulm, II
|
2019
|
$
|
28,000
|
|
$
|
14,352
|
|
$
|
0
|
|
|
$
|
42,352
|
|
|
2018
|
$
|
26,493
|
|
$
|
12,752
|
|
$
|
0
|
|
|
$
|
39,245
|
|
|
2017
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
$
|
0
|
|
Jeffrey S. Balmer
|
2019
|
$
|
24,642
|
|
$
|
1,851
|
|
$
|
30,857
|
|
(c)
|
$
|
57,350
|
|
Michol L. Ecklund
|
2019
|
$
|
25,962
|
|
$
|
12,991
|
|
$
|
0
|
|
|
$
|
38,953
|
|
|
2018
|
$
|
25,312
|
|
$
|
12,819
|
|
$
|
0
|
|
|
$
|
38,131
|
|
Gregory F. Conaway
|
2019
|
$
|
174
|
|
$
|
0
|
|
$
|
0
|
|
|
$
|
174
|
|
Mitzi P. Conn
|
2019
|
$
|
23,654
|
|
$
|
12,090
|
|
$
|
0
|
|
|
$
|
35,744
|
|
|
2018
|
$
|
23,961
|
|
$
|
7,026
|
|
$
|
0
|
|
|
$
|
30,987
|
|
|
2017
|
$
|
22,500
|
|
$
|
7,618
|
|
$
|
0
|
|
|
$
|
30,118
|
|
(a)
|
Subject to IRS limits, Company contributions to each employee's 401(k) account for 2019 consist of a 5% non-matching contribution plus a matching contribution at the rate of 1% in cash for every 1% that the participant deferred up to 5%.
|
(b)
|
The imputed value for personal use of a company-provided automobile represents annual depreciation based on a three-year life, plus insurance, fuel, maintenance and repairs, pursuant to IRS rules.
|
(c)
|
Dr. Balmer received $30,857 for reimbursement for certain reasonable relocation expenses which included transportation expenses, home sale and purchase assistance, shipment of additional household goods, and tax gross-ups on these payments.
|
|
Grant
Date |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(a)
|
Estimated Future Payouts Under Equity Incentive Plan Awards(b)
|
Other Awards
(Shares or Units)(c) |
Grant Date
Fair Value of Stock Awards(d) |
||||||||||||
NEO
|
Threshold
|
Target
|
Maximum
|
Threshold
|
Target
|
Maximum
|
|||||||||||
Joseph C. Gatto, Jr.
|
1/1/2019
|
$
|
0
|
|
$
|
907,500
|
|
$
|
1,815,000
|
|
|
|
|
|
|
|
|
|
1/31/2019
|
|
|
|
—
|
|
|
211,301
|
$
|
1,719,990
|
|
||||||
|
1/31/2019
|
|
|
|
—
|
316,954
|
633,908
|
|
$
|
3,416,764
|
|
||||||
James P. Ulm, II
|
1/1/2019
|
$
|
0
|
|
$
|
418,500
|
|
$
|
837,000
|
|
|
|
|
|
|
||
|
1/31/2019
|
|
|
|
|
|
|
85,700
|
$
|
697,598
|
|
||||||
|
1/31/2019
|
|
|
|
—
|
128,550
|
257,100
|
—
|
$
|
1,385,769
|
|
||||||
Jeffrey S. Balmer
|
1/1/2019
|
$
|
0
|
|
$
|
382,500
|
|
$
|
765,000
|
|
|
|
|
|
|
||
|
1/1/2019
|
|
|
|
|
|
|
90,000(e)
|
$
|
584,100
|
|
||||||
|
1/31/2019
|
|
|
|
|
128,378
|
245,756
|
|
$
|
1,383,915
|
|
||||||
Michol L. Ecklund
|
1/1/2019
|
$
|
0
|
|
$
|
320,000
|
|
$
|
640,000
|
|
|
|
|
|
|
||
|
1/31/2019
|
|
|
|
—
|
—
|
—
|
49,140
|
$
|
400,000
|
|
||||||
|
1/31/2019
|
|
|
|
—
|
73,710
|
147,420
|
—
|
$
|
794,594
|
|
||||||
Gregory F. Conaway
|
—
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
|
|
|
|
||
|
—
|
|
|
|
—
|
—
|
—
|
—
|
$
|
0
|
|
||||||
Mitzi P. Conn
|
1/1/2019
|
$
|
0
|
|
$
|
182,000
|
|
$
|
364,000
|
|
|
|
|
|
|
||
|
1/31/2019
|
|
|
|
—
|
—
|
—
|
17,885
|
$
|
145,584
|
|
||||||
|
1/31/2019
|
|
|
|
—
|
26,832
|
53,664
|
—
|
$
|
289,249
|
|
(a)
|
Amounts represent the threshold, target, and maximum payouts for the 2019 annual performance bonus program. The actual amounts paid under the 2019 annual performance bonus program are set forth in the "Non-Equity Incentive Compensation" column in the Summary Compensation Table above.
|
(b)
|
Amounts represent PSUs payable 50% in cash and 50% in stock on the vesting date, currently scheduled for December 31, 2021. See "PSU Program" in the CD&A above for further details.
|
(c)
|
Except as otherwise indicated, amounts represent RSUs granted to our NEOs on January 31, 2019. The first tranche vested on April 1, 2020; the second and third tranches are scheduled to vest in equal installments on April 1, 2021 and 2022, subject to the NEO’s continued service.
|
(d)
|
This column shows the grant date fair value of the awards granted to the NEOs on the date indicated computed in accordance with FASB ASC Topic 718. The value ultimately realized by the executive upon the actual vesting of the awards may be more or less than the grant date fair value.
|
(e)
|
Amount represents RSUs granted to Dr. Balmer on January 1, 2019 at a grant price of $6.49. The first tranche vested on January 1, 2020; the second and third tranches are scheduled to vest in equal installments on January 1, 2021 and 2022, subject to Dr. Balmer’s continued service.
|
|
Stock Awards
|
|||||||||||
NEO
|
Number of Shares or Units of Stock That Have Not Vested (#)
|
|
Market Value of Shares or Units of Stock That Have Not Vested(a)
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
|
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(a)
|
||||||
Joseph C. Gatto, Jr.
|
211,301
|
|
(c)
|
$
|
1,020,584
|
|
—
|
|
|
$
|
0
|
|
|
—
|
|
|
$
|
0
|
|
158,477
|
|
(d)
|
$
|
765,444
|
|
|
|
|
$
|
0
|
|
158,477
|
|
(e)
|
$
|
765,444
|
|
|
|
42,868
|
|
(f)
|
$
|
207,052
|
|
—
|
|
|
$
|
0
|
|
|
40,049
|
|
(g)
|
$
|
193,437
|
|
—
|
|
|
$
|
0
|
|
|
73,446
|
|
(h)
|
$
|
354,744
|
|
—
|
|
|
$
|
0
|
|
|
—
|
|
|
$
|
0
|
|
82,627
|
|
(i)
|
$
|
399,088
|
|
|
—
|
|
|
$
|
0
|
|
82,627
|
|
(j)
|
$
|
399,088
|
|
James P. Ulm, II
|
85,700
|
|
(c)
|
$
|
413,931
|
|
—
|
|
|
$
|
0
|
|
|
—
|
|
|
$
|
0
|
|
64,275
|
|
(d)
|
$
|
310,448
|
|
|
—
|
|
|
$
|
0
|
|
64,275
|
|
(e)
|
$
|
310,448
|
|
|
60,000
|
|
(k)
|
$
|
289,800
|
|
—
|
|
|
$
|
0
|
|
|
—
|
|
|
$
|
0
|
|
37,500
|
|
(i)
|
$
|
181,125
|
|
|
—
|
|
|
$
|
0
|
|
37,500
|
|
(j)
|
$
|
181,125
|
|
Jeffrey S. Balmer
|
90,000
|
|
(b)
|
$
|
434,700
|
|
—
|
|
|
$
|
0
|
|
|
—
|
|
|
$
|
0
|
|
64,189
|
|
(d)
|
$
|
310,033
|
|
|
—
|
|
|
$
|
0
|
|
64,189
|
|
(e)
|
$
|
310,033
|
|
Michol L. Ecklund
|
|
|
|
|
|
|
||||||
|
49,140
|
|
(c)
|
$
|
237,346
|
|
—
|
|
|
$
|
0
|
|
|
—
|
|
|
$
|
0
|
|
36,855
|
|
(d)
|
$
|
178,010
|
|
|
—
|
|
|
$
|
0
|
|
36,855
|
|
(e)
|
$
|
178,010
|
|
|
25,000
|
|
(l)
|
$
|
120,750
|
|
—
|
|
|
$
|
0
|
|
|
13,182
|
|
(h)
|
$
|
63,669
|
|
—
|
|
|
$
|
0
|
|
|
—
|
|
|
$
|
0
|
|
14,831
|
|
(i)
|
$
|
71,634
|
|
|
—
|
|
|
$
|
0
|
|
14,831
|
|
(j)
|
$
|
71,634
|
|
Gregory F. Conaway(m)
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
||
Mitzi P. Conn
|
17,885
|
|
(c)
|
$
|
86,385
|
|
—
|
|
|
$
|
0
|
|
|
—
|
|
|
$
|
0
|
|
13,416
|
|
(d)
|
$
|
64,799
|
|
|
—
|
|
|
$
|
0
|
|
13,416
|
|
(e)
|
$
|
64,799
|
|
|
10,881
|
|
(f)
|
$
|
52,555
|
|
—
|
|
|
$
|
0
|
|
|
6,232
|
|
(h)
|
$
|
30,101
|
|
—
|
|
|
$
|
0
|
|
|
—
|
|
|
$
|
0
|
|
7,013
|
|
(i)
|
$
|
33,873
|
|
|
—
|
|
|
$
|
0
|
|
7,013
|
|
(j)
|
$
|
33,873
|
|
(a)
|
Amounts calculated using the closing price of $4.83 per share of our common stock on the last trading day of 2019.
|
(b)
|
Stock settleable RSUs awarded on January 1, 2019 subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche vested on January 1, 2020. The second tranche will vest on January 1, 2021. The third and final tranche will vest on January 1, 2022.
|
(c)
|
Stock settleable RSUs awarded on January 31, 2019 subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche vested on April 1, 2020. The second tranche will vest on April 1, 2021. The third and final tranche will vest on April 1, 2022.
|
(d)
|
Stock settleable PSUs awarded on January 31, 2019 with vesting terms subject to performance criteria related to the TSR of the Company compared to a group of peer companies from December 31, 2018 through December 31, 2021. The number of units subject to vest under this award can range from 0% to 200%.
|
(e)
|
Cash settleable PSUs awarded on January 31, 2019 with vesting terms subject to performance criteria related to the TSR of the Company compared to a group of peer companies from December 31, 2018 through December 31, 2021. The number of units subject to vest under this award can range from 0% to 200%.
|
(f)
|
Stock settleable RSUs awarded on May 11, 2017 subject to cliff vesting on May 11, 2020.
|
(g)
|
Stock settleable RSUs awarded to Mr. Gatto upon his promotion to CEO on July 11, 2017 subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche vested on July 1, 2018, and the second tranche vested on July 1, 2019. The third and final tranche will vest on July 1, 2020.
|
(h)
|
Stock settleable RSUs awarded on May 10, 2018 subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche vested on June 1, 2019. The second tranche will vest on June 1, 2020. The third and final tranche will vest on June 1, 2021.
|
(i)
|
Stock settleable PSUs awarded on May 10, 2018 with vesting terms subject to performance criteria related to the TSR of the Company compared to a group of peer companies from May 2018 through December 31, 2020. The number of units subject to vest under this award can range from 0% to 200%.
|
(j)
|
Cash settleable PSUs awarded on May 10, 2018 with vesting terms subject to performance criteria related to the TSR of the Company compared to a group of peer companies from May 2018 through December 31, 2020. The number of units subject to vest under this award can range from 0% to 200%.
|
(k)
|
Stock settleable RSUs awarded to Mr. Ulm upon his hiring on December 11, 2017 subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche vested on January 1, 2019. The second tranche vested on January 1, 2020. The third and final tranche will vest on January 1, 2021.
|
(l)
|
Stock settleable RSUs awarded to Ms. Ecklund upon her hiring on November 6, 2017 subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche vested on January 1, 2019. The second tranche vested on January 1, 2020. The third and final tranche will vest on January 1, 2021.
|
(m)
|
Mr. Conaway held the following outstanding cash-settled stock appreciation right awards as of December 31, 2019:
|
|
Option/SAR Awards
|
||||||||||
NEO
|
Number of Securities Underlying Unexercised Options/
SARs (#) Exercisable
|
|
Number of Securities Underlying Unexercised Options/
SARs (#) Unexercisable
|
Equity Incentive Plan Awards:
Number of Securities Underlying Exercised Unearned Options/SARs (#)
|
Option/
SARs Exercise Price
($)
|
Option/
SARs Expiration Date
|
|||||
Gregory F. Conaway
|
19,960
|
|
(1)
|
—
|
|
—
|
|
$
|
15.60
|
|
3/17/2021
|
|
20,051
|
|
(2)
|
—
|
|
—
|
|
$
|
15.40
|
|
3/23/2022
|
|
31,442
|
|
(3)
|
—
|
|
—
|
|
$
|
8.39
|
|
3/17/2025
|
|
42,588
|
|
(4)
|
—
|
|
—
|
|
$
|
6.28
|
|
3/17/2026
|
(1)
|
Cash-settled stock appreciation rights received in connection with the Carrizo Acquisition in exchange for 11,406 Carrizo stock appreciation rights with an exercise price of $27.295 pursuant to the Merger Agreement.
|
(2)
|
Cash-settled stock appreciation rights received in connection with the Carrizo Acquisition in exchange for 11,458 Carrizo stock appreciation rights with an exercise price of $26.94 pursuant to the Merger Agreement.
|
(3)
|
Cash-settled stock appreciation rights received in connection with the Carrizo Acquisition in exchange for 17,967 Carrizo stock appreciation rights with an exercise price of $14.67 pursuant to the Merger Agreement.
|
(4)
|
Cash-settled stock appreciation rights received in connection with the Carrizo Acquisition in exchange for 24,336 Carrizo stock appreciation rights with an exercise price of $10.98 pursuant to the Merger Agreement.
|
|
Stock Awards(a)
|
|||||
NEO
|
Number of Shares
Acquired on Vesting (#) |
|
Value Realized on Vesting $(b)
|
|||
Joseph C. Gatto, Jr.
|
6,510
|
|
(c)
|
$
|
50,453
|
|
|
36,890
|
|
(d)
|
$
|
281,471
|
|
|
36,723
|
|
(e)
|
$
|
229,519
|
|
|
40,049
|
|
(f)
|
$
|
267,127
|
|
|
50,000
|
|
(g)
|
$
|
209,500
|
|
|
64,304
|
|
(h)
|
$
|
310,588
|
|
James P. Ulm, II
|
30,000
|
|
(i)
|
$
|
194,700
|
|
Jeffrey S. Balmer
|
—
|
|
|
$
|
—
|
|
Michol L. Ecklund
|
6,591
|
|
(e)
|
$
|
41,194
|
|
|
12,500
|
|
(j)
|
$
|
81,125
|
|
Gregory F. Conaway
|
—
|
|
|
$
|
—
|
|
Mitzi P. Conn
|
1,790
|
|
(c)
|
$
|
13,873
|
|
|
10,145
|
|
(d)
|
$
|
77,406
|
|
|
3,117
|
|
(e)
|
$
|
19,481
|
|
|
10,000
|
|
(g)
|
$
|
41,900
|
|
|
16,324
|
|
(h)
|
$
|
78,845
|
|
(a)
|
No options were awarded, outstanding, expired, or exercised by any NEO in 2019.
|
(b)
|
Except as otherwise indicated, represents the aggregate dollar amount realized on the date of vesting, based on the closing market price per share of Company common stock on the vesting date or last business day prior to the vesting date if such date fell on a weekend or holiday.
|
(c)
|
Represents phantom stock units awarded on May 13, 2016 ,that settled in cash on May 13, 2019.
|
(d)
|
Represents RSUs awarded on May 13, 2016, that cliff-vested on May 13, 2019.
|
(e)
|
Represents RSUs awarded on May 10, 2018, the first tranche of which vested on June 1, 2019.
|
(f)
|
Represents RSUs awarded to Mr. Gatto upon his promotion to CEO on July 11, 2017, the second tranche of which vested on July 1, 2019.
|
(g)
|
Represents RSUs awarded on August 24, 2016, that cliff vested on August 24, 2019.
|
(h)
|
Represents PSUs awarded on May 12, 2017, that settled 50% in stock and 50% in cash on December 31, 2019, at 100% of target.
|
(i)
|
Represents RSUs awarded to Mr. Ulm upon his hiring on December 11, 2017, the first tranche of which vested on January 1, 2019.
|
(j)
|
Represents RSUs awarded to Ms. Ecklund upon her hiring on November 6, 2017, the first tranche of which vested on January 1, 2019.
|
NEO / Reason for Termination
|
Base
Salary(a) |
Cash
Bonus(a) |
Accelerated
Stock Award Vesting(b) |
Continued
Employee Benefits(c) |
Total
|
||||||||||
Joseph C. Gatto, Jr. - CIC(d)
|
$
|
2,475,000
|
|
$
|
2,722,500
|
|
$
|
4,104,882
|
|
$
|
52,650
|
|
$
|
9,355,032
|
|
Death, Disability or Retirement(e)
|
$
|
0
|
|
$
|
0
|
|
$
|
4,104,882
|
|
$
|
0
|
|
$
|
4,104,882
|
|
James P. Ulm, II - CIC(d)
|
$
|
930,000
|
|
$
|
837,000
|
|
$
|
1,686,877
|
|
$
|
52,650
|
|
$
|
3,506,527
|
|
Death, Disability or Retirement(e)
|
$
|
0
|
|
$
|
0
|
|
$
|
1,686,877
|
|
$
|
0
|
|
$
|
1,686,877
|
|
Jeffrey S. Balmer - CIC(d)
|
$
|
900,000
|
|
$
|
765,000
|
|
$
|
1,054,766
|
|
$
|
52,650
|
|
$
|
2,772,416
|
|
Death, Disability or Retirement(e)
|
$
|
0
|
|
$
|
0
|
|
$
|
1,054,766
|
|
$
|
0
|
|
$
|
1,054,766
|
|
Michol L. Ecklund - CIC(d)
|
$
|
800,000
|
|
$
|
640,000
|
|
$
|
921,053
|
|
$
|
52,650
|
|
$
|
2,413,703
|
|
Death, Disability or Retirement(e)
|
$
|
0
|
|
$
|
0
|
|
$
|
921,053
|
|
$
|
0
|
|
$
|
921,053
|
|
Gregory F. Conaway - CIC(d)
|
$
|
546,000
|
|
$
|
382,200
|
|
$
|
0
|
|
$
|
52,650
|
|
$
|
980,850
|
|
Without Cause, Good Reason, Death or Disability(f)
|
$
|
409,500
|
|
$
|
477,750
|
|
$
|
0
|
|
$
|
39,488
|
|
$
|
926,738
|
|
Mitzi P. Conn - CIC(d)
|
$
|
520,000
|
|
$
|
364,000
|
|
$
|
351,339
|
|
$
|
52,250
|
|
$
|
1,287,589
|
|
Death, Disability or Retirement(e)
|
$
|
0
|
|
$
|
0
|
|
$
|
351,339
|
|
$
|
0
|
|
$
|
351,339
|
|
(a)
|
In accordance with Mr. Gatto’s SCA, the computation uses a 3x multiple with respect to the severance amount relating to salary and target bonus, while a 2x multiple is used for the other NEOs. See “Employment Agreements, Termination of Employment and Change in Control Arrangements.”
|
(b)
|
The amounts are calculated based on unvested stock awards at December 31, 2019 using the closing price of $4.83 per share of our common stock on the last trading day of 2019. The table above assumes that PSUs vest at the target level. Actual vesting of PSUs would be determined based on performance at the time of such executive's separation.
|
(c)
|
Benefits consist of twenty-four months of employer provided family medical and dental insurance and disability and life insurance for the NEOs in the table.
|
(d)
|
We entered into an SCA with each of the NEOs listed in the table above. See “Employment Agreements, Termination of Employment and Change in Control Arrangements.”
|
(e)
|
“Disability,” for purposes of the SCAs, is generally defined as the employee’s inability to carry out the normal and usual duties of his employment on a full-time basis for an entire period of six continuous months together with the reasonable likelihood, as determined by the Board after consultation of a qualified physician, he will be unable to carry out his normal and usual duties of employment. “Retirement” is generally defined as the employee’s attainment of age 55 with at least 10 years of service.
|
(f)
|
Mr. Conaway would be entitled to payments of 1.5 times the sum of his annual base salary and target annual bonus, a pro-rated target annual bonus for the calendar year in which his termination occurs, accelerated vesting of outstanding equity awards, and 18 months of continued subsidized benefits continuation under the Carrizo Change in Control Severance Plan in the event he is terminated without cause or for good reason or due to death or disability within two years after the closing of the Carrizo Acquisition. “Disability,” for purposes of the Carrizo Change in Control Severance Plan, has the same meaning assigned to such term in the Company’s long-term disability plan, as in effect from time to time, or if no such plan is in effect. “Disability” means “permanent and total disability” as defined in Section 22(e)(3) of the Tax Code. The Carrizo Change in Control Severance Plan does not provide for severance benefits upon retirement or a voluntary resignation by the executive. See "Employment Agreements, Termination of Employment and Change in Control Agreements."
|
|
|
|
Proposal 3
Approve the Company's
2020 Omnibus Incentive Plan |
|
The Board of Directors recommends a vote FOR the approval of the Company’s 2020 Omnibus Incentive Plan (the "2020 Plan").
• Provides the Company the ability to remain competitive in our industry in attracting and retaining experienced talent while aligning executive, director and employee interests with those of our long-term shareholders.
|
|
|
|
•
|
Callon’s Growth. Since the Prior Incentive Plan was approved, we have grown our average daily production by 475% and our employee base by 55%. Additional shares are needed to continue equity awards for the larger employee population.
|
•
|
Consolidation of Legacy Carrizo Share Pool. The Prior Plan maintains a separate share pool that is only available for legacy Carrizo employees. Shareholder approval to merge this pool with shares available for grant under the 2020 Plan would better accomplish the integration of the Carrizo Acquisition.
|
•
|
Broad-based Equity Awards under the Plan. Equity incentives are utilized to motivate and retain employees outside of the named executives officers. Under the Prior Plan, equity incentives were awarded to approximately 70% of Callon employees for fiscal 2019.
|
•
|
Pay-for-Performance. For fiscal 2019, equity awards comprised of 86% of total direct compensation for the CEO, including a significant majority of equity being awarded with performance conditions. We continue to evolve our compensation program to align with shareholder priorities, including the inclusion of a returns-based metric in our annual incentive program and, as of 2020, an “absolute” shareholder return multiplier for our performance share awards.
|
•
|
Consistent Shareholder Support. Callon’s annual Say on Pay proposal has consistently received over 95% shareholder approval in each of the last 8 years.
|
•
|
2020 Plan Incorporates Shareholder-Friendly Practices. The plan submitted for shareholder approval includes an express prohibition on repricing without shareholder approval, no evergreen provisions, and other provisions that protect the incentive value of awards. If Proposal 5 is approved and a Reverse Stock Split is effectuated, the number of shares of common stock available for grant under the 2020 Plan, as well as shares subject to outstanding equity awards, would be reduced in proportion to the Reverse Stock Split. See page 76 for more information.
|
2020 Plan Highlights
|
|||||
• Express prohibition of repricing of Options and SARs, or cash buyout of outstanding awards without shareholder approval
• Newly adopted one-year minimum vesting provision (for at least 95% of authorized shares)
• Awards are subject to clawbacks under Callon policy as well as legal requirements
• The exercise price of a stock option or SAR award may not be less than the fair market value of the stock on the date of grant
• Annual compensation cap of $1,000,000 for non-employee directors
• No liberal CIC vesting
• No evergreen provision
• No recycling of shares used to pay the exercise price of stock option or SAR awards
• No dividends or other distributions payable with respect to plan awards unless and until the underlying award vests
• No tax gross-ups or reload grants
|
•
|
Independent Oversight. The Compensation Committee, composed solely of independent directors, will approve all grants made under the 2020 Plan, other than grants made to directors, which shall be approved by the Board. Additionally, the Compensation Committee may delegate to any committee of the Board, to the CEO and to any of our other senior officers its duties under the 2020 Plan other than the authority to make awards to participants who are subject to Section 16 of the Exchange Act.
|
•
|
No Repricing of Options or Stock Appreciation Rights. The 2020 Plan prohibits repricing, replacement and regranting of stock options or stock appreciation rights (“SARs”) at lower prices, unless approved by our shareholders.
|
•
|
Minimum Vesting Period. Subject to limited exceptions described below, awards under the 2020 Plan are subject to a one-year minimum vesting period..
|
•
|
No Discounted Options or SARs. Stock options and SARs may not be granted with an exercise price below the closing price of our common stock on the date of grant.
|
•
|
No Dividends on Options or SARs. Dividends and Dividend Equivalents (as defined in the 2020 Plan) may not be paid or accrued on stock options or SARs.
|
•
|
Limited Terms for Options and SARs. Stock options and SARs granted under the 2020 Plan are limited to 10-year terms.
|
•
|
No Liberal Share Counting with Respect to Options or SARs. Shares that are tendered by a participant or withheld as full or partial payment of withholding taxes related to the exercise or settlement of options or SARs or as payment for the option exercise price and shares repurchased in the open market with the proceeds of the payment of the option exercise price will not become available again for awards under the 2020 Plan.
|
•
|
No Dividends or Dividend Equivalents on Unvested Awards. Any dividends or Dividend Equivalents will only be paid if the underlying shares vest pursuant to the terms of the award.
|
•
|
Annual Limitation on Director Awards and Compensation. The aggregate grant value of awards and cash compensation paid to any individual non-employee director may not exceed $1,000,000 in any calendar year.
|
•
|
Clawback or Recoupment. All awards granted under the 2020 Plan will be subject to the clawback policy implemented by the Company.
|
•
|
No Transferability. Awards generally may not be transferred, except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order, unless otherwise provided in the applicable award agreement.
|
•
|
No “Evergreen” Provision. Shares authorized for issuance under the 2020 Plan will not be replenished automatically. Any additional shares to be issued over and above the amount for which we are seeking authorization must be approved by our shareholders.
|
•
|
No Automatic Grants. There are no automatic grants to new participants or “reload” grants when outstanding awards are exercised, expire or are forfeited.
|
•
|
No Tax Gross-Ups. Participants do not receive tax gross-ups under the 2020 Plan.
|
Plan Category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a)(1) |
Weighted-average exercise price of outstanding options, warrants and rights
(b)(2) |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a))
(c)(3)(4) |
|||
Equity compensation plans approved by security holders
|
10,870,000
|
|
—
|
|
5,850,000
|
|
Equity compensation plans not approved by security holders
|
—
|
|
—
|
|
—
|
|
Total
|
10,870,000
|
|
—
|
|
5,850,000
|
|
(1)
|
Reflects 4,620,000 outstanding RSUs and 6,250,000 stock-settled PSUs assuming vesting at maximum performance level.
|
(2)
|
The weighted-average exercise prices of outstanding options is omitted because no options or equity-based stock appreciation rights were outstanding as of April 3, 2020.
|
(3)
|
The number of securities remaining available for future issuances has been reduced by the number of securities to be issued pursuant to RSUs subject to time vesting and PSUs subject to certain market‑based performance goals over a specified period of time assuming vesting at the maximum performance level.
|
(4)
|
The number of securities remaining available for future issuance includes approximately 3,430,000 shares available for grant only to legacy Carrizo employees and approximately 2,420,000 shares available for grant to any eligible grantee.
|
|
The Board recommends a vote FOR the approval of the 2020 Plan.
|
|
|
|
|
Proposal 4
Ratification of the Appointment of the Independent Registered Public Accounting Firm, Grant Thornton LLP, for 2020.
|
|
The Board recommends that you vote “FOR” the ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020.
• The Board and the Audit Committee believe the retention of Grant Thornton LLP is in the best interests of Callon and its shareholders based on the information presented below.
|
|
|
|
Fee Category
|
2018
|
2019
|
||||
Audit fees(a)
|
$
|
959,652
|
|
$
|
1,187,217
|
|
Audit-related fees(b)
|
$
|
0
|
|
$
|
0
|
|
Tax fees(c)
|
$
|
21,647
|
|
$
|
108,385
|
|
All other fees(d)
|
$
|
0
|
|
$
|
0
|
|
Total
|
$
|
981,299
|
|
$
|
1,295,602
|
|
(a)
|
Audit fees consist of the aggregate fees billed for professional services related to the audit and quarterly reviews of our financial statements and for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.
|
(b)
|
Audit-related fees consist of the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements that are not reported above under “Audit” fees.
|
(c)
|
Tax fees consist of the aggregate fees billed for professional services rendered for tax compliance (including filing state and federal tax returns), tax advice and tax planning. Tax fees do not include fees for services rendered in connection with the audit.
|
(d)
|
Other fees consist of the aggregate fees billed for professional services other than the services reported above.
|
|
The Board recommends a vote FOR the ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm.
|
|
•
|
The Audit Committee’s review of the audited financial statements;
|
•
|
Discussion of the financial statements with management;
|
•
|
Discussion with our independent registered public accounting firm, Grant Thornton LLP, of the matters required to be discussed by auditing standards generally accepted in the United States of America, including the communication matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, issued by the Public Company Accounting Oversight Board;
|
•
|
Receipt from Grant Thornton LLP of the written disclosures and letter required by Public Company Accounting Standards Board Rule 3526 (Communications with Audit Committees Concerning Independence);
|
•
|
Discussions with Grant Thornton LLP regarding its independence from Callon, the Board and our management;
|
•
|
Grant Thornton LLP’s confirmation that it would issue its opinion that the consolidated financial statements present fairly, in all material respects, our financial position and the results of our operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America; and
|
•
|
Other matters the Audit Committee deemed relevant and appropriate.
|
|
|
|
Proposal 5
Approve the Reverse Stock Split
|
|
The Board of Directors recommends a vote FOR the approval of an amendment to the certificate of incorporation to permit us to effect the Reverse Stock Split, as disclosed in this Proxy Statement.
• Provides the Company with the flexibility to effect, at any time on or prior to the first anniversary of the Annual Meeting and without the need for any further action on the part of our shareholders, a Reverse Stock Split of our common stock in a manner designed to maximize the anticipated benefits for our shareholders.
|
|
|
|
•
|
the existing and expected marketability and liquidity of our common stock;
|
•
|
the historical trading prices and trading volume of our common stock;
|
•
|
listing requirements of the NYSE or other applicable exchange or trading venues;
|
•
|
the number of shares of our common stock outstanding;
|
•
|
the then-prevailing trading price and trading volume of our common stock and the anticipated or actual impact of the Reverse Stock Split on the trading price and trading volume for our common stock;
|
•
|
the anticipated impact of a particular ratio on our ability to reduce administrative and transactional costs; and
|
•
|
the outlook for oil price volatility and other prevailing general market and economic conditions.
|
(a)
|
Please see Proposal 3, and specifically the table on page 68, for more information about the Prior Incentive Plan and the shares available for issuance thereunder. If the 2020 Plan is approved by the shareholders, the shares available for issuance under the Prior Incentive Plan will be transferred to the 2020 Plan.
|
(b)
|
These shares will become available only if Proposal 3 is approved by the shareholders. Please see Proposal 3 for more information about the 2020 Plan.
|
•
|
an individual who is a citizen or resident of the United States;
|
•
|
a corporation (or any other entity or arrangement treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District of Columbia;
|
•
|
an estate, the income of which is subject to U.S. federal income tax regardless of its source; or
|
•
|
a trust if (1) its administration is subject to the primary supervision of a court within the United States and all of its substantial decisions are subject to the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Tax Code), or (2) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person.
|
|
The Board recommends a vote FOR the approval of the Reverse Stock Split.
|
|
|
|
|
Proposal 6
Approve the Authorized Share Reduction
|
|
The Board recommends a vote FOR the approval of the amendment to the Company’s certificate of incorporation to effect the Authorized Share Reduction.
• Provides the Company with the flexibility to effect, at any time on or prior to the first anniversary of the Annual Meeting, and without the need for any further action on the part of our shareholders, a reduction in the amount of authorized shares of the Company in proportion to the reverse stock split ratio.
|
|
|
|
|
Number of Shares of Common Stock Prior to Reverse Stock Split
|
Number of Shares of Common Stock After Reverse Stock Split and Authorized Share Reduction
|
|
|
1:10
|
1:50
|
|
Authorized
|
525,000,000
|
52,500,000
|
10,500,000
|
Issued and Outstanding(a)
|
397,002,537
|
39,700,253
|
7,940,050
|
Authorized and Reserved for Issuance(b)
|
16,723,143
|
1,672,314
|
334,462
|
Authorized and Unreserved and Available for Future Issuances(c)
|
111,274,320
|
11,127,432
|
2,225,486
|
(a)
|
Subject to adjustment for fractional shares in connection with the Reverse Stock Split.
|
(b)
|
Includes shares of common stock reserved for issuance (i) upon the settlement of restricted stock units and performance share units, and (ii) remaining under the Incentive Plans.
|
(c)
|
Excludes shares of common stock reserved for issuance (i) upon the settlement of restricted stock units and performance share units, and (ii) remaining under the Incentive Plans.
|
|
The Board recommends a vote FOR the approval of the Authorized Share Reduction.
|
|
|
Beneficial Ownership(1)
|
|||
Name of Beneficial Owner
|
Shares (#)
|
Percent of Class
|
||
Holders of More Than 5%:
|
|
|
||
BlackRock, Inc.(2)
|
61,419,994
|
|
15.5
|
%
|
The Vanguard Group, Inc.(3)
|
41,484,255
|
|
10.5
|
%
|
Dimensional Fund Advisors LP(4)
|
25,991,513
|
|
6.6
|
%
|
State Street Corporation(5)
|
25,571,822
|
|
6.4
|
%
|
Named Executive Officers:
|
|
|
||
Joseph C. Gatto, Jr.(6)
|
505,965
|
|
*
|
|
James P. Ulm, II(7)
|
65,368
|
|
*
|
|
Jeffrey S. Balmer(8)
|
21,615
|
|
*
|
|
Michol L. Ecklund(9)
|
42,157
|
|
*
|
|
Gregory F. Conaway(10)
|
422,908
|
|
*
|
|
Mitzi P. Conn(11)
|
137,875
|
|
*
|
|
Directors:
|
|
|
||
Matthew R. Bob(12)
|
101,991
|
|
*
|
|
Barbara J. Faulkenberry(13)
|
40,112
|
|
*
|
|
Michael L. Finch(14)
|
70,441
|
|
*
|
|
L. Richard Flury(15)
|
270,681
|
|
*
|
|
S. P. Johnson IV(16)
|
1,545,518
|
|
*
|
|
Larry D. McVay(17)
|
190,976
|
|
*
|
|
Anthony J. Nocchiero(18)
|
159,847
|
|
*
|
|
Frances A. Sevilla-Sacasa(19)
|
23,473
|
|
*
|
|
James M. Trimble(20)
|
82,991
|
|
*
|
|
Steven A.Webster(21)
|
7,488,540
|
|
1.9
|
%
|
All Executive Officers and Directors as a Group (consisting of 16 persons)(22)
|
11,170,458
|
|
2.8
|
%
|
*
|
Less than 1%
|
(1)
|
The amounts shown for our directors and NEOs include, as of April 1, 2020: (a) shares of common stock held under Callon’s 401(k) Plan for the accounts of participants; (b) shares of common stock owned outright by the individual; and (c) shares of common stock that may be
|
(2)
|
BlackRock, Inc. (BlackRock), in its capacity as a parent holding company or control person for various subsidiaries (none of which individually owns more than 5% of our outstanding common stock), may be deemed to beneficially own the indicated shares. BlackRock has sole voting power over 60,306,188 shares and sole dispositive power over 61,419,994 shares. BlackRock does not have shared voting or shared dispositive power over any of the shares. BlackRock’s address is 55 East 52nd St., New York, NY 10055. This information is based on BlackRock’s most recent Statement on Schedule 13G filed on February 4, 2020.
|
(3)
|
The Vanguard Group, Inc. ("Vanguard"), in its capacity as an investment adviser, may be deemed to beneficially own the indicated shares, along with certain of its wholly-owned subsidiaries that serve as investment managers. Vanguard has sole voting power over 373,162 shares, shared voting power over 65,635 shares, sole dispositive power over 41,098,129 shares and shared dispositive power over 386,126 shares. Vanguard’s address is 100 Vanguard Blvd., Malvern, PA 19355. This information is based on Vanguard’s most recent Statement on Schedule 13G filed on February 12, 2020.
|
(4)
|
Dimensional Fund Advisors LP ("Dimensional"), in its capacity as an investment adviser, may be deemed to beneficially own the indicated shares, along with certain of its wholly-owned subsidiaries that serve as investment managers. Dimensional has sole voting power over 25,775,016 shares and sole dispositive power over 25,991,513 shares. Dimensional does not have shared voting or shared dispositive power over any shares. Dimensional's address is 6300 Bee Cave Road, Austin, TX 78746. This information is based on Dimensional's most recent Statement on Schedule 13G filed on February 12, 2020.
|
(5)
|
State Street Corp. ("State Street"), in its capacity as a parent holding company or control person for various subsidiaries (none of which individually owns more than 5% of our outstanding common stock), may be deemed to beneficially own the indicated shares, along with certain of its wholly-owned subsidiaries that serve as investment managers. State Street has shared voting power over 24,101,336 shares and shared dispositive power over 25,571,822 shares. State Street does not have sole voting or sole dispositive power over any shares. State Street's principal business address is State Street Financial Center, One Lincoln St., Boston, MA 02111. This information is based on State Street's most recent Statement on Schedule 13G filed with the SEC on February 13, 2020
|
(6)
|
Comprised of 388,224 shares held directly by Mr. Gatto, 38,150 shares held indirectly within the 401(k) Plan, and 79,591 unvested RSUs payable in stock that will vest within 60 days of the Record Date. Does not include 705,632 unvested RSUs payable in stock and 1,214,202 unvested PSUs payable in 50% stock and 50% cash.
|
(7)
|
Comprised of 64,794 shares held directly by Mr. Ulm and 574 shares held indirectly within the 401(k) Plan. Does not include 307,911 unvested RSUs payable in stock and 534,720 unvested PSUs payable in 50% stock and 50% cash.
|
(8)
|
Comprised of 21,482 shares held directly by Dr. Balmer and 133 shares held indirectly within the 401(k) Plan. Does not include 290,493 unvested RSUs payable in stock and 474,118 unvested PSUs payable in 50% stock and 50% cash.
|
(9)
|
Comprised of 34,963 shares held directly by Ms. Ecklund, 603 shares held indirectly within the 401(k) Plan, and 6,591 unvested RSUs payable in stock that will vest within 60 days of the Record Date. Does not include 197,044 unvested RSUs payable in stock and 321,166 unvested PSUs payable in 50% stock and 50% cash.
|
(10)
|
Comprised of 422,908 shares held directly by Mr. Conaway. Does not include 102,986 unvested RSUs payable in stock and 80,454 unvested PSUs payable in 50% stock and 50% cash.
|
(11)
|
Comprised of 99,176 shares held directly by Ms. Conn, 24,702 shares held indirectly within the 401(k) Plan, and 13,997 unvested RSUs payable in stock that will vest within 60 days of the Record Date. Does not include 15,039 unvested RSUs payable in stock and 40,858 unvested PSUs payable in 50% stock and 50% cash.
|
(12)
|
Comprised of 77,915 shares held directly by Mr. Bob and 24,076 unvested RSUs payable in stock that will vest within 60 days of the Record Date.
|
(13)
|
Comprised of 19,742 shares held directly by Ms. Faulkenberry and 20,370 unvested RSUs payable in stock that will vest within 60 days of the Record Date.
|
(14)
|
Comprised of 46,365 shares held directly by Mr. Finch and 24,076 unvested RSUs payable in stock that will vest within 60 days of the Record Date.
|
(15)
|
Comprised of 216,605 shares held directly by Mr. Flury and 30,000 shares held in a joint tenancy with his spouse, which includes 83,606 deferred RSUs, pursuant to Mr. Flury's election under the Deferred Compensation Plan for Outside Directors, which are payable in cash upon his separation of service as a director, and 24,076 unvested shares that will vest within 60 days of the Record Date.
|
(16)
|
Comprised of 845,518 shares held directly by Mr. Johnson and 700,000 shares held indirectly with a Family Limited Partnership, which includes 4,866 deferred RSUs, pursuant to Mr. Johnson's election under the Deferred Compensation Plan for Outside Directors, which are payable in cash upon his separation of service as a director. Mr. Johnson's deferred RSUs are all vested shares.
|
(17)
|
Comprised of 166,900 shares held directly by Mr. McVay and 24,076 unvested RSUs payable in stock that will vest within 60 days of the Record Date.
|
(18)
|
Comprised of 135,771 shares held directly by Mr. Nocchiero and 24,076 unvested RSUs payable in stock that will vest within 60 days of the Record Date.
|
(19)
|
Comprised of 23,473 shares held directly by Ms. Sevilla-Sacasa.
|
(20)
|
Comprised of 58,915 shares held directly by Mr. Trimble and 24,076 unvested RSUs payable in stock that will vest within 60 days of the Record Date.
|
(21)
|
Comprised of 5,349,790 shares held directly by Mr. Webster, 645,000 shares held indirectly with his spouse, and 1,493,750 shares held indirectly through San Felipe Resources Company, which includes 4,866 deferred RSUs, pursuant to Mr. Webster's election under the Deferred Compensation Plan for Outside Directors, which are payable in cash upon his separation of service as a director. Mr. Webster's deferred RSUs are all vested shares.
|
(22)
|
Comprised of 7,972,541 shares held directly by the Company's executive officers and directors, 30,000 shares held in a joint tenancy, 645,000 shares held indirectly by a spouse, 700,000 shares held indirectly by a Family Limited Partnership, 64,162 shares held indirectly within the Company's 401(k) Plan, 1,493,730 shares held indirectly by San Felipe Resources Company, and 265,005 unvested RSUs payable in stock that will vest within 60 days of the Record Date.
|
•
|
Sufficient biographical information to allow the Nominating and Corporate Governance Committee to evaluate the qualifications of a potential nominee in light of the director nomination procedures and criteria and any other information that would be required to be disclosed in solicitations of proxies for the election of directors;
|
•
|
An indication as to whether the proposed nominee will meet the requirements for independence under NYSE and SEC guidelines;
|
•
|
A description of all direct and indirect compensation and other material monetary agreements, arrangements, and understandings during the past three years, and any other material relationships, between or among the nominating shareholder or beneficial owner and each proposed nominee;
|
•
|
A completed and signed questionnaire, representation, and agreement, pursuant to our bylaws, with respect to each nominee for election or re-election to the Board; and
|
•
|
The proposed nominee’s written consent to serve if nominated and elected.
|
1)
|
The election of directors;
|
2)
|
Advisory approval of our executive compensation;
|
3)
|
Approval of the 2020 Plan;
|
4)
|
The ratification of the appointment of Grant Thornton LLP;
|
5)
|
Approval of the Reverse Stock Split; and
|
6)
|
Approval of the Authorized Share Reduction.
|
1. By Internet
|
You can vote via the Internet by going to the website address provided on your Notice or proxy card. You will need to use the control and request ID appearing on your proxy card to vote via the Internet. You can use the Internet to transmit your voting instructions up until 11:59 p.m. CDT on June 7, 2020. If you vote via the Internet, you do NOT need to vote by telephone or return a proxy card. Internet voting is available 24 hours a day.
|
2. By Telephone
|
You can also vote by telephone by calling the toll-free telephone number provided on your proxy card. You will need to use the control and request ID appearing on your proxy card to vote by telephone. You may transmit your voting instructions from any touch-tone telephone up until 11:59 p.m. CDT on June 7, 2020. Voting by telephone is available 24 hours a day.
|
3. By Mail
|
If you received a printed copy of the proxy card, you can vote by marking, dating and signing it, and returning it in the reply envelope provided. Please promptly mail your proxy card to ensure that we receive it prior to the closing of the polls at the Annual Meeting.
|
•
|
“FOR” the election of each of the nominees named in this Proxy Statement to the Board of Directors;
|
•
|
“FOR” the approval, on an advisory basis, of our executive compensation;
|
•
|
“FOR” the approval of the 2020 Plan;
|
•
|
“FOR” the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020;
|
•
|
“FOR” the approval of the Reverse Stock Split; and
|
•
|
“FOR” the approval of the Authorized Share Reduction.
|
By Order of the Board of Directors,
|
|
|
|
Joseph C. Gatto, Jr.
President, Chief Executive Officer and Director |
Houston, Texas
April 28, 2020 |
NON-GAAP RECONCILIATIONS
|
|
||
Adjusted EBITDA Reconciliation (in thousands):
|
2019
|
||
Net income
|
$
|
67,928
|
|
Adjustments:
|
|
||
Loss on derivatives, net
|
62,109
|
|
|
Non-cash stock-based compensation expense
|
11,364
|
|
|
Cash paid for commodity derivative settlement, net
|
(3,789
|
)
|
|
Merger-related expenses
|
74,363
|
|
|
Other operating expense
|
1,076
|
|
|
Income tax expense
|
35,301
|
|
|
Interest expense
|
2,907
|
|
|
Depreciation, depletion and amortization
|
244,991
|
|
|
Accretion expense
|
945
|
|
|
Loss on extinguishment of debt
|
4,881
|
|
|
Adjusted EBITDA
|
$
|
502,076
|
|
|
|
||
PV-10 Reconciliation (in thousands):
|
2019
|
||
Standardized measure of discounted future net cash flows
|
$
|
4,951,026
|
|
Add: present value of future income taxes discounted at 10% per annum
|
418,555
|
|
|
Total Proved Reserves - PV-10
|
5,369,581
|
|
|
Total Proved Developed Reserves - PV-10
|
3,246,802
|
|
|
Total Proved Undeveloped Reserves - PV-10
|
$
|
2,122,779
|
|
1.
|
Plan. This Callon Petroleum Company 2020 Omnibus Incentive Plan (this “Plan”), is effective as of [•], 2020 (the “Effective Date”), was adopted by the Company to reward and provide incentives to certain employees, independent contractors and directors by enabling them to acquire awards from the Company, including Awards related to shares of common stock of the Company.
|
2.
|
Definitions. As used herein, the terms set forth below shall have the following respective meanings:
|
(a)
|
Change in Ownership. A change in ownership of the Company occurs on the date that any Person, other than (1) the Company or any of its Subsidiaries, (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (3) an underwriter temporarily holding stock pursuant to an offering of such stock, or (4) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of the Company’s stock (each of (1) through (4) an “Exempt Person”), acquires ownership of the Company’s stock that, together with stock held by such Person, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the Company’s Voting Stock. However, if any Person is considered to own already more than fifty percent (50%) of the total fair market value or total voting power of the Company’s Voting Stock, the acquisition of additional stock by the same Person is not considered to be a Change in Control. In addition, if any Person has effective control of the Company through ownership of thirty percent (30%) or more of the total voting power of the Company’s Voting Stock, as discussed in paragraph (b) below, the acquisition of additional control of the Company by the same Person is not considered to cause a Change in Control pursuant to this paragraph (a); or
|
(b)
|
Change in Effective Control. Even though the Company may not have undergone a change in ownership under paragraph (a) above, a change in the effective control of the Company occurs on either of the following dates: (1) the date that any Person (other than an Exempt Person) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person) ownership of the Company’s stock possessing thirty percent (30%) or more of the total voting power of the Company’s Voting Stock. However, if any Person owns thirty percent (30%) or more of the total voting power of the Company’s Voting Stock, the acquisition of additional control of the Company by the same Person is not considered to cause a Change in Control pursuant to this subparagraph (b)(1); or (2) the date that during any period of three consecutive years, individuals who at the beginning of such period were members of the Board cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Company’s shareholders, of each new director was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of such period or whose election or nomination was previously so approved; provided, however, that any such director shall not be considered to be approved by the Board if his or her initial assumption of office occurs as a result of an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
|
(c)
|
Change in Ownership of Substantial Portion of Assets. A change in the ownership of a substantial portion of the Company’s assets occurs on the date that a Person acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person) assets of the Company that have a total gross fair market value equal to at least forty percent (40%) of the total gross fair market value of all of the Company’s assets immediately before such acquisition or acquisitions. However, there is no Change in Control when there is such a transfer to an entity that is controlled by the shareholders of the Company immediately after the transfer, through a transfer to (1) a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Common Stock; (2) an entity, at least fifty percent (50%) of the total value or voting power of the stock of which is owned, directly or indirectly, by the Company; (3) a Person that owns directly or indirectly, at least fifty percent (50%) of the total value or voting power of the Company’s outstanding Voting Stock; or (4) an entity, at least fifty percent (50%) of the total value or voting power of the stock of which is owned by a Person that owns, directly or indirectly, at least fifty percent (50%) of the total value or voting power of the Company’s outstanding Voting Stock.
|
3.
|
Eligibility. All Employees, Non-employee Directors and Independent Contractors are eligible for Awards under this Plan in the sole discretion of the Committee.
|
4.
|
Common Stock Available for Awards. Subject to the provisions of Section 15 hereof, there shall be available for Awards under this Plan granted wholly or partly in Common Stock (including rights or Options that may be exercised for or settled in Common Stock) an aggregate of 13,250,000 shares of Common Stock (“Share Reserve”), plus the shares remaining available for awards under the Prior Plans as of the Effective Date, all of which shall be available for Incentive Options. The number of shares of Common Stock that are subject to Awards under this Plan or the Prior Plans, that are forfeited or terminated, expire unexercised, are settled in cash in lieu of Common Stock, or are exchanged for Awards that do not involve Common Stock, and the number of shares of Common Stock that are subject to Awards under this Plan or Prior Plans that are withheld to satisfy withholding taxes in respect to such awards shall again immediately become available for additional Awards hereunder (subject to the following sentence). Notwithstanding the foregoing, the following shares of Common Stock may not again be made available for issuance as Awards under this Plan: (i) shares of Common Stock not issued or delivered as a result of the net
|
5.
|
Administration.
|
(a)
|
Except as otherwise provided in this Plan with respect to actions or determinations by the Board, this Plan shall be administered by the Committee. To the extent required in order for Awards to be exempt from Section 16 of the Exchange Act by virtue of the provisions of Rule 16b-3, (i) the Committee shall consist of at least two members of the Board who meet the requirements of the definition of “Non-employee Director” set forth in Rule 16b-3 (b)(3)(i) promulgated under the Exchange Act or (ii) Awards may be granted by, and this Plan may be administered by, the Board.
|
(b)
|
Subject to the provisions hereof, the Committee shall have full and exclusive power and authority to administer this Plan and to take all actions that are specifically contemplated hereby or are necessary or appropriate in connection with the administration hereof. The Committee shall also have full and exclusive power to interpret this Plan and to adopt such rules, regulations and guidelines for carrying out this Plan as it may deem necessary or proper. The Committee may, in its discretion, provide for the extension of the exercisability of an Award, accelerate the vesting or exercisability of an Award, eliminate or make less restrictive any restrictions contained in an Award, waive any restriction or other provision of this Plan or an Award or otherwise amend or modify an Award in any manner that is either (i) not adverse to the Participant to whom such Award was granted or (ii) consented to by such Participant. The Committee may make an Award to an individual who it expects to become an Employee, Non-employee Director or Independent Contractor of the Company or any of its Subsidiaries within the next six months, with such award being subject to the individual actually becoming an Employee, Non-employee Director or Independent Contractor, as applicable, within such time period, and subject to such other terms and conditions as may be established by the Committee. The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Award in the manner and to the extent the Committee deems necessary or desirable to further the purposes of this Plan. Any decision of the Committee in the interpretation and administration of this Plan shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned. The Board shall have the same powers as the Committee with respect to Awards granted to Non-employee Directors.
|
(c)
|
Notwithstanding the foregoing, except in connection with a transaction involving the Company or its capitalization (as provided in Section 15), the terms of outstanding Awards may not be amended without approval of the shareholders of the Company to (i) reduce the exercise price of outstanding Options or SARs or (ii) cancel, exchange, substitute, buyout or surrender outstanding Options or SARs in exchange for cash or other Awards when the exercise price per share of the original Options or SARs exceeds the Fair Market Value of one share of Common Stock, (iii) take any other action with respect to an Option or SAR that would be treated as a repricing under the rules and regulations of the principal national securities exchange on which the shares of Common Stock are listed or (iv) permit the grant of any Options or SARs that contains a so-called “reload” feature under which additional Options, SARs or other Awards are granted automatically to the Participant upon exercise of the original Option or SAR.
|
(d)
|
No member of the Committee or the Board or officer of the Company to whom the Committee has delegated authority in accordance with the provisions of Section 6 of this Plan shall be liable for anything done or omitted to be done by him or her, by any member of the Committee or by any officer of the Company in connection with the performance of any duties under this Plan, except for his or her own willful misconduct or as expressly provided by statute.
|
6.
|
Delegation of Authority. To the extent allowed by applicable law, the Committee may delegate to the Chief Executive Officer, to other senior officers of the Company or to other committees of the Board its duties under this Plan pursuant to such conditions or limitations as the Committee may establish, except that the Committee may not delegate to any person the authority to grant Awards to, or take other action with respect to, Participants who are subject to Section 16 of the Exchange Act.
|
7.
|
Employee and Independent Contractor Awards. The Committee shall determine the type or types of Awards to be made under this Plan and shall designate from time to time the Employees and Independent Contractors who are to be the recipients of such Awards. Each Award may be embodied in an Award Agreement, which shall contain such terms, conditions and limitations as shall be determined by the Committee in its sole discretion, including any treatment upon a Change in Control, and shall be accepted by the Participant to whom the Award is made. Awards may consist of those listed in this Section 7 and may be granted singly, in combination or in tandem. Awards may also be made in combination or in tandem with, in replacement of, or as alternatives to, grants or rights under this Plan or any other employee plan of the Company or any of its Subsidiaries, including the plan of any acquired entity. All or part of an Award may be subject to conditions established by the Committee, which may
|
(a)
|
Stock Option. An Award may be in the form of an Option. An Option awarded pursuant to this Plan may consist of an Incentive Option or a Nonqualified Option. The price at which a share of Common Stock may be purchased upon the exercise of an Option shall be not less than the Fair Market Value of the Common Stock on the date of grant. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any Options awarded pursuant to this Plan, including the term of any Options and the date or dates upon which they become exercisable, shall be determined by the Committee. Only Employees may be granted Incentive Options. The term of Options shall not exceed ten years from the date of grant. Any Option (i) that remains outstanding as of the last day of its term, (ii) has an exercise price per share that is less than the Fair Market Value of a share of Common Stock as of such day and (iii) whose exercise is prohibited as of such day pursuant to the operation of the Company’s insider trading policy, shall be automatically exercised (without any action on the part of the Participant holding such Option) by (A) foregoing the delivery of shares of Common Stock otherwise deliverable upon the exercise of the Option pursuant to Section 10 in an amount sufficient to pay the exercise price of the Option and (B) satisfying tax withholding obligations pursuant to Section 11 by withholding from the shares of Common Stock otherwise deliverable upon the exercise of the Option. Each Participant who receives Options pursuant to the Plan shall be deemed to have accepted this automatic exercise provision as a condition of receiving the Option.
|
(b)
|
Stock Appreciation Right. An Award may be in the form of a SAR. The per share strike price for a SAR shall be not less than the Fair Market Value of the Common Stock on the date on which the SAR is granted. The terms, conditions and limitations applicable to any SARs awarded pursuant to this Plan, including the term of any SARs, whether the SAR will be settled in cash or stock and the date or dates upon which they become exercisable, shall be determined by the Committee. The term of SARs shall not exceed ten years from the date of grant. Any SAR (i) that remains outstanding as of the last day of its term, (ii) has a strike price per share that is less than the Fair Market Value of a share of Common Stock as of such day and (iii) whose exercise is prohibited as of such day pursuant to the operation of the Company’s insider trading policy, shall be automatically exercised (without any action on the part of the Participant holding such SAR) and any tax withholding obligations will be satisfied pursuant to Section 11 by withholding from the cash or shares of Common Stock otherwise deliverable upon the exercise of the SAR. Each Participant who receives SARs pursuant to the Plan shall be deemed to have accepted this automatic exercise provision as a condition of receiving the SAR.
|
(c)
|
Stock Award. An Award may be in the form of a Stock Award. The terms, conditions and limitations applicable to any Stock Awards granted pursuant to this Plan shall be determined by the Committee.
|
(d)
|
Cash Award. An Award may be in the form of a Cash Award. The terms, conditions and limitations applicable to any Cash Awards granted pursuant to this Plan shall be determined by the Committee.
|
(e)
|
Performance Award. Without limiting the type or number of Awards that may be made under the other provisions of this Plan, an Award may be in the form of a Performance Award. A Performance Award shall be paid, vested or otherwise deliverable solely on account of the attainment of one or more Performance Goals, either individually or in any combination, established by the Committee and specified in the award agreement.
|
8.
|
Director Awards.
|
(a)
|
The Board has the sole authority to grant Awards to Non-employee Directors from time to time in accordance with this Section 8. Such Awards may consist of the forms of Award described in Section 7, other than Incentive Options, and shall be granted subject to such terms and conditions as specified in Section 7.
|
(b)
|
No Non-employee Director may be granted during any calendar year Awards having a fair value determined on the date of grant when added to all cash compensation paid to the Non-employee Director (in his capacity as Non-employee Director) during the same calendar year in excess of $1,000,000.
|
9.
|
Payment of Awards.
|
(a)
|
General. Payment of Awards may be made in the form of cash or Common Stock, or a combination thereof, and may include such restrictions as the Committee shall determine, including, in the case of Common Stock, restrictions on transfer and forfeiture provisions. If payment of an Award is made in the form of Restricted Stock, the right to receive such shares shall be evidenced by book entry registration or in such other manner as the Committee may determine. Any statement of ownership evidencing such Restricted Stock shall contain appropriate legends and restrictions that describe the terms and conditions of the restrictions applicable thereto.
|
(b)
|
Dividends and Interest. In the discretion of the Committee, rights to dividends or Dividend Equivalents may be extended to and made part of any Stock Award or Performance Award, but such dividends or Dividend Equivalents shall be accrued and held by the Company and paid, without interest, within 10 days following the lapse of the restrictions on the Stock Award or Performance Award. For the avoidance of doubt, dividends and Dividend Equivalents will not, in any event, be payable until the restrictions on the underlying Stock Award or Performance Award have lapsed. In the event the Stock
|
10.
|
Stock Option Exercise. The price at which shares of Common Stock may be purchased under an Option shall be paid in full at the time of exercise in cash or, if elected by the optionee, the optionee may purchase such shares by means of tendering Common Stock valued at Fair Market Value on the date of exercise, or any combination thereof. The Committee shall determine acceptable methods for Participants to tender Common Stock. The Committee may provide for procedures to permit the exercise or purchase of such Awards by foregoing the delivery of shares of Common Stock otherwise deliverable upon the exercise of the Option or by use of the proceeds to be received from the sale of Common Stock issuable pursuant to an Award.
|
11.
|
Taxes. The Company shall have the right to deduct applicable taxes from any Award payment and withhold, at the time of delivery or vesting of cash or shares of Common Stock under this Plan, an appropriate amount of cash or number of shares of Common Stock or a combination thereof for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes. The Committee may also permit withholding to be satisfied by (i) the transfer to the Company of shares of Common Stock theretofore owned by the holder of the Award or (ii) withholding from the shares otherwise deliverable under the Award, in either case with respect to which withholding is required, up to the maximum tax rate applicable to the Participant, as determined by the Committee. If shares of Common Stock are used to satisfy tax withholding, such shares shall be valued based on the Fair Market Value when the tax withholding is required to be made.
|
12.
|
Amendment, Modification, Suspension or Termination. The Board may amend, modify, suspend or terminate this Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that (i) no amendment or alteration that would adversely affect the rights of any Participant under any Award previously granted to such Participant shall be made without the consent of such Participant and (ii) no amendment or alteration shall be effective prior to its approval by the shareholders of the Company to the extent such approval is then required pursuant to Rule 16b-3 in order to preserve the applicability of any exemption provided by such rule to any Award then outstanding (unless the holder of such Award consents) or to the extent shareholder approval is otherwise required by applicable legal requirements.
|
13.
|
Minimum Vesting. Notwithstanding anything to the contrary in the Plan, each Award Agreement will require that an Award be subject to a minimum vesting period of at least one (1) year commencing from the date of grant or, for any Participant who is a “Non-Employee Director”, a vesting period of less than one year from the date of grant, but not less than 50 weeks, so long as such Awards are granted in connection with a regular annual meeting of shareholders and vest at the next annual meeting of the shareholders following the grant; provided that (a) up to five percent (5%) of the maximum number of shares available for issuance pursuant to the Plan may be granted without being subject to the foregoing restrictions and (b) any dividends or Dividend Equivalents issued in connection with any Award granted at any time under the Plan shall not be subject to or counted for either such restrictions or such five percent (5%) share issuance limit. The foregoing five percent (5%) share issuance limit shall be subject to adjustment consistent with the adjustment provisions of Section 15 and the share usage rules of Section 4. For the purpose of clarity, this Section 13 will not prevent the Committee from accelerating the vesting of any Award in accordance with any of the provisions set forth in the Plan upon the occurrence of a specific event, such as a termination of a Participant's employment or service or a Change in Control or other corporate transaction.
|
14.
|
Assignability. Unless otherwise determined by the Committee and provided in the Award Agreement, no Award or any other benefit under this Plan constituting a derivative security within the meaning of Rule 16a-1(c) under the Exchange Act shall be assignable or otherwise transferable except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order in a form acceptable to the Committee. The Committee may prescribe and include in applicable Award Agreements other restrictions on transfer. Any attempted assignment of an Award or any other benefit under this Plan in violation of this Section 14 shall be null and void.
|
15.
|
Adjustments.
|
(a)
|
The existence of outstanding Awards shall not affect in any manner the right or power of the Company or its shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the capital stock of the Company or its business or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock (whether or not such issue is prior to, on a parity with or junior to the Common Stock) or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding of any kind, whether or not of a character similar to that of the acts or proceedings enumerated above.
|
(b)
|
In the event of any subdivision or consolidation of outstanding shares of Common Stock, declaration of a dividend payable in shares of Common Stock or other stock split, the adoption by the Company of any plan of exchange affecting the Common Stock or any distribution to holders of Common Stock of securities or property (other than normal cash dividends or dividends payable in Common Stock), (i) the number of shares of Common Stock reserved under this Plan, (ii) the number of shares of Common Stock covered by Awards in the form of Common Stock or units denominated in Common Stock, (iii) the exercise or other price in respect of such Awards, and (iv) the appropriate Fair Market Value and other price determinations for such Awards shall each be proportionately adjusted by the Board to reflect such event; provided that such adjustments shall only be such as are necessary to maintain the proportionate interest of the holders of the Awards and preserve, without exceeding, the value of such Awards.
|
(c)
|
In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board may make such adjustments to outstanding Awards or other provisions for the disposition of outstanding Awards as it deems equitable, and shall be authorized, in its discretion, (i) to provide for the substitution of a new Award or other arrangement (which, if applicable, may be exercisable for such property or stock as the Board determines) for an outstanding Award or the assumption of an outstanding Award, regardless of whether in a transaction to which Section 424(a) of the Code applies, (ii) to provide, prior to the transaction, for the acceleration of the vesting and exercisability of, or lapse of restrictions with respect to, the outstanding Award and, if the transaction is a cash merger, to provide for the termination of any portion of the Award that remains unexercised at the time of such transaction or (iii) to provide for the acceleration of the vesting and exercisability of an outstanding Award and the cancellation thereof in exchange for such payment of such cash or property as shall be determined by the Board in its sole discretion, which for the avoidance of doubt in the case of Options or SARs (whether stock- or cash-settled) shall be the excess, if any, of the Fair Market Value of the shares of Common Stock subject to the Option or SAR on such date over the aggregate exercise price of such Award; provided, however, that no such adjustment shall increase the aggregate value of any outstanding Award. No adjustment or substitution pursuant to this Section 15 shall be made in a manner that results in noncompliance with Section 409A of the Code, to the extent applicable.
|
16.
|
Restrictions. No Common Stock or other form of payment shall be issued with respect to any Award unless the Company shall be satisfied based on the advice of its counsel that such issuance will be in compliance with applicable federal and state securities laws. It is the intent of the Company that grants of Awards under this Plan comply with Rule 16b-3 with respect to persons subject to Section 16 of the Exchange Act unless otherwise provided herein or in an Award Agreement and that any ambiguities or inconsistencies in the construction of such an Award or this Plan be interpreted to give effect to such intention. Certificates evidencing shares of Common Stock delivered under this Plan (to the extent that such shares are so evidenced) may be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or transaction reporting system upon which the Common Stock is then listed or to which it is admitted for quotation and any applicable federal or state securities law. The Committee may cause a legend or legends to be placed upon such certificates (if any) to make appropriate reference to such restrictions. The Committee may also impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by a Participant, other subsequent transfers by the Participant of any shares of Common Stock issued as a result of or under an Award, or the exercise of Options and SARs, including without limitation, restrictions under an insider trading policy.
|
17.
|
Unfunded Plan. Insofar as it provides for Awards of cash, Common Stock or rights thereto, this Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants who are entitled to cash, Common Stock or rights thereto under this Plan, any such accounts shall be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets that may at any time be represented by cash, Common Stock or rights thereto, nor shall this Plan be construed as providing for such segregation, nor shall the Company, the Board or the Committee be deemed to be a trustee of any cash, Common Stock or rights thereto to be granted under this Plan. Any liability or obligation of the Company to any Participant with respect to an Award of cash, Common Stock or rights thereto under this Plan shall be based solely upon any contractual obligations that may be created by this Plan and any Award Agreement, and no such liability or obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the Company. Neither the Company nor the Board nor the Committee shall be required to give any security or bond for the performance of any obligation that may be created by this Plan.
|
18.
|
Section 409A of the Code. All Awards under this Plan are intended either to be exempt from, or to comply with the requirements of Section 409A, and this Plan and all Awards shall be interpreted and operated in a manner consistent with that intention. Notwithstanding anything in this Plan to the contrary, if any Plan provision or Award under this Plan would result in the imposition of an applicable tax under Section 409A, that Plan provision or Award shall be reformed to avoid imposition of the applicable tax and no such action shall be deemed to adversely affect the Participant’s rights to an Award.
|
19.
|
Governing Law. This Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Code or the securities laws of the United States, shall be governed by and construed in accordance with the laws of the State of Delaware.
|
20.
|
Clawback. To the extent required by applicable law or any applicable securities exchange listing standards, or as otherwise determined by the Committee, Awards and amounts paid or payable pursuant to or with respect to Awards shall be subject to the provisions of any clawback policy implemented by the Company, which clawback policy may provide for forfeiture, repurchase or recoupment of Awards and amounts paid or payable pursuant to or with respect to Awards. Notwithstanding any provision of this Plan or any Award Agreement to the contrary, the Company reserves the right, without the consent of any Participant, to adopt any such clawback policies and procedures.
|
21.
|
No Right to Employment or Continued Service. Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company or a Subsidiary to terminate any Participant’s employment or other service relationship at any time, nor confer upon any Participant any right to continue in the capacity in which he or she is employed or otherwise serves the Company or any Subsidiary. Further, nothing in this Plan or an Award Agreement constitutes any assurance or obligation of the Board to nominate any Non-employee Director for re-election by the Company’s shareholders.
|
22.
|
Successors. All obligations of the Company under this Plan with respect to Awards granted hereunder shall be binding on any successor to the Company by merger, consolidation or otherwise.
|
23.
|
Effectiveness. This Plan, as approved by the Board on April 17, 2020, shall be effective as of the Effective Date, the date on which it was approved by the shareholders of the Company. This Plan shall continue in effect for a term of ten years after the Effective Date, unless sooner terminated by action of the Board. Notwithstanding the foregoing, the adoption of this Plan is expressly conditioned upon the approval by the holders of a majority of shares of Common Stock present, or represented, and entitled to vote at a meeting of the Company’s shareholders at the Company’s 2020 annual shareholders meeting to be held on June 8, 2020, or any adjournment or postponement thereof. If the shareholders of the Company should fail to so approve this Plan on such date, this Plan shall not be of any force or effect and the Prior Plan shall continue in force and effect.
|
CALLON PETROLEUM COMPANY
|
|
|
|
By:
|
|
|
|
Title:
|
|
CALLON PETROLEUM COMPANY
|
|
|
|
By:
|
|
|
Michol L. Ecklund, Corporate Secretary
|
CALLON PETROLEUM COMPANY
|
||||||
ANNUAL MEETING OF SHAREHOLDERS
|
||||||
JUNE 8, 2020 AT 9:00 A.M. CDT
|
||||||
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|
|
|
|
|
|
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CALLON PETROLEUM COMPANY
|
||||||
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The undersigned hereby appoints Michol L. Ecklund, as proxy with full power of substitution and re-substitution, to vote all shares of Common Stock of Callon Petroleum Company that the undersigned is entitled to vote at the Annual Meeting of Shareholders thereof to be held at the La Scala Meeting Room of The Moran Hotel, 800 Sorella Court, Houston, Texas 77024 on June 8, 2020, or at any adjournment or postponement thereof, as follows:
ALL SHARES WILL BE VOTED AS DIRECTED HEREIN AND, UNLESS OTHERWISE DIRECTED, WILL BE VOTED “FOR” PROPOSAL 1 (ALL NOMINEES), “FOR” PROPOSAL 2, “FOR” PROPOSAL 3, “FOR” PROPOSAL 4, “FOR” PROPOSAL 5, AND “FOR” PROPOSAL 6, AND IN ACCORDANCE WITH THE DISCRETION OF THE PERSON VOTING THE PROXY WITH RESPECT TO ANY OTHER BUSINESS PROPERLY BROUGHT BEFORE THE MEETING OR AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF. The undersigned shareholder further hereby ratifies all that the said proxy may do by virtue hereof. If any nominee named on the reverse side is unable to serve or for good cause will not serve as a director, the person named as proxy shall have the authority to vote for any other person who may be nominated at the instruction and discretion of the Board of Directors or an authorized committee thereof.
The undersigned shareholder hereby revokes any other proxy heretofore executed by the undersigned for the Annual Meeting and acknowledges receipt of the Notice of the 2020 Annual Meeting of Shareholders and Proxy Statement dated April 28, 2020 and the Annual Report to Shareholders furnished in connection therewith.
You are encouraged to specify your choice by marking the appropriate box (SEE REVERSE SIDE), but you need not mark any box if you wish to vote in favor.
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(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
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PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED.
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 8, 2020.
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THE PROXY STATEMENT IS AVAILABLE AT:
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HTTP://WWW.VIEWPROXY.COM/CALLONPETROLEUM/2020
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INTERNET
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TELEPHONE
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MAIL
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Vote Your Proxy on the Internet:
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Vote Your Proxy by Phone:
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Vote Your Proxy by Mail:
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Go to www.AALVote.com/CPE
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Call 1 (866) 804-9616
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Have your proxy card available when you access the above website. Follow the prompts to vote your shares.
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Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares.
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Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided.
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