Washington, D.C. 20549
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| | | Dear Shareholders, You are invited to participate in the 2023 Annual Meeting of Shareholders (the “Annual Meeting”) of Callon Petroleum Company (“Callon,” the “Company,” “us,” “we,” “our” or like terms), a Delaware corporation. |
When April 26, 2023, at 9:00 a.m. Eastern Daylight Time (“EDT") Where The Ritz-Carlton New York, Nomad The Boardroom 25 West 28th Street New York, NY 10001 We continue to monitor 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. | |
| Voting Matters | Board
Recommendation |
| Proposal 1:
To elect three Class IIIII directors to serve on our Board of Directors (the “Board”), each for three years;years. | | FOR each of the Class II directors |
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2. | Proposal 2:
To approve, on a non-binding advisory basis, the compensation of our named executive officers (“NEOs”);. | | FOR |
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3. | To approveProposal 3:
Advisory vote on the Company’s 2018 Omnibus Incentive Plan (the “2018 Plan”);frequency of future advisory votes on the compensation of our NEOs. | | ONE YEAR |
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4. | Proposal 4:
To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018; and2023. | | FOR |
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5. | To | | We will also transact such other business asthat may properly come before the Annual Meeting. This Notice of Annual Meeting of Shareholders and the Proxy Statement 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 March 2, 2023, 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. We thank you for your continued support and look forward to seeing you at the Annual Meeting. By Order of the Board of Directors, 
Michol L. Ecklund
Senior Vice President, General Counsel
and Corporate Secretary
Houston, Texas
March 13, 2023 |
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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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YOUR VOTE IS IMPORTANT! Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders. This Proxy Statement and our 2022 Annual Report on Form 10-K are available at: www.viewproxy.com/ CallonPetroleum/2023. If you have any adjournment(s) thereof.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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This Notice of Annual Meeting of Stockholders 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 March 16, 2018 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.
TABLE OF CONTENTS
Beginning on or about March 23, 2018,13, 2023, 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. A list of stockholders entitled to vote at the Annual Meeting will be available at our office at 200 North Canal Street, Natchez, MS 39120 during normal business hours for a period of ten days prior to the meeting and will also be available for inspection at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, please vote electronically via the Internet or by telephone, or please complete, sign, date and return the accompanying proxy card as soon as possible. See “Annual Meeting Information” towards the end of this Proxy Statement for more details.
We thank you for your continued support and look forward to seeing you at the Annual Meeting.
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| | Premium Assets and Disciplined Execution Drive Free Cash Flow |
Callon Petroleum is an independent oil and natural gas company focused on the acquisition, exploration, and development of high-quality assets in leading Texas oil plays located in the Permian and the Eagle Ford. We employ a “Life of Field” co-development model that balances today’s high-returns with future development economics, providing a more consistent capital efficiency profile over time. The combination of our returns driven strategy and our capital discipline allowed us to profitably grow production in 2022 while spending less than 60% of our operating cash flow on capital expenditures. We remain focused on rapid debt reduction and strengthening our balance sheet. During the year, we paid down $462 million in debt and reduced our leverage ratio by 1.0x. | |
| ~480 MMBoe | >1,500 |
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| Total proved reserves | Risked drilling locations |
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| <60% | 62% |
| FY22 reinvestment rate(1) | Total oil production(2) |
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| 2022 Performance Highlights |
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Natchez, Mississippi | | By Order of the Board of Directors |
March 23, 2018 | | |
| |  | $623 million |
| Year-over-year increase in adjusted EBITDA(3) | B.F. Weatherly |
| | Corporate Secretary |
Adjusted free cash flow(3)
YOUR VOTE IS IMPORTANT!
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on
May 10, 2018, at 9:00 a.m., Central Daylight Time:
This Proxy Statement and our 2017 Annual Report on Form 10-K are available at:
https://www.viewproxy.com/CallonPetroleum/2018 and www.callon.com
If you have any questions or need assistance voting your shares, please call our proxy solicitor:
Alliance Advisors
200 Broadacres Drive, 3rd Fl.
Bloomfield, NJ 07003
Banks and Brokerage Firms, please call: (973) 873-7700
Stockholders, please call toll free: (833) 786-5511
This summary is included to provide an introduction and overview of the information contained in this Proxy Statement. This is a summary only and highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider and is not a form for voting. You should read the entire Proxy Statement carefully before voting. Additional information regarding our 2017 performance can be found in our Annual Report on Form 10-K.
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Annual Meeting of Stockholders | ~$1.7 billion | $462 million |
| Adjusted EBITDA(3) | Year-over-year absolute
debt reduction |
Date and Time | | May 10, 2018, at 9:00 a.m., Central Daylight Time |
Location | 9% | Natchez Grand Hotel, 111 Broadway Street, Natchez, Mississippi 39120 1.0x |
Record Date | Year-over-year production growth | March 16, 2018Leverage ratio reduction(4) |
Proxy Voting | | Shareholders as of the close of business on the record date are entitled to vote. Each share of common stock is entitled to one vote by proxy or at the annual meeting |
(1)The Company defines “reinvestment rate” as operational capital expenditures divided by cash flow from operating activities.
(2)Sixty-two percent of the 104.3 MBoe/d produced by Callon in 2022 was oil. (3)Adjusted free cash flow is defined as adjusted EBITDA minus the sum of operational capital, capitalized interest, capitalized general and administrative expense and interest expense. Adjusted EBITDA and Adjusted free cash flow are non-GAAP financial measures. See Appendix A for additional information regarding non-GAAP financial measures, including a reconciliation of non-GAAP financial measures to the nearest comparable GAAP measures.
(4)Leverage ratio is calculated as the sum of total long-term debt less unrestricted cash and cash equivalents divided by EBITDA, as defined by the Company’s credit facility, inclusive of the pro forma effects of Material Acquisitions or Divestitures, as defined by the Company’s credit facility, as if they occurred on the first day of the trailing twelve-month period. See Appendix A for a reconciliation of non-GAAP financial measures.
SUSTAINABILITY
Our focus on integrating sustainable business practices and achieving long-term results drives our business decisions. In alignment with these goals, our Board oversees the Company’s approach to ESG through our safety and environmental policies and performance, development of a positive corporate culture and an effective corporate governance program. The Board recognizes that ESG risks are interconnected with other business risks and opportunities, and thus regularly reviews salient ESG-related issues alongside other operational, financial, and strategic matters.
Our commitment to ESG is outlined in our third annual Sustainability Report, which we hope you will access on the Company’s website at www.callon.com/sustainability. The report highlights ESG performance in alignment with the frameworks set forth by the Sustainability Accounting Standards Board, the Task Force on Climate-Related Financial Disclosures, the American Production and Exploration Council and the United Nations Sustainable Development Goals.
ENVIRONMENTAL INITIATIVES
In early 2022, we announced the acceleration and adoption of meaningful medium-term emission reduction goals to reduce flaring and GHG emissions in our operations. These goals have been linked to our executive compensation programs as described in the Compensation Discussion and Analysis beginning on page 39. | | | | | | | | | | | | | | | | | | | | | | | |
| Emissions Reduction Targets | |
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Items to be Voted on at the Annual Meeting | | |
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Proposals | | Board Recommendations |
1. | | Election of directors | | FOR each nominee |
2. | | Advisory vote to approve NEO compensation | | FOR |
3. | | Approval of the 2018 Plan
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4. | | Ratification of the appointment of independent registered public accounting firm | | FOR |
2017 Performance Highlights
2017 was a year of transition, growth and solid results for Callon. In May 2017, we unexpectedly lost our long-time Board Chairman and Chief Executive Officer (“CEO”), Fred Callon, which led to several changes on our leadership team. Even with these transitions, the company achieved strong results as we continued to grow production, reserves, and cash margins against the backdrop of an improving, but tenuous commodity environment. Importantly, we successfully integrated over 40,000 net acres in the Midland and Delaware Basins that were acquired over the last two years, ensuring that these investments had a near-term impact on stockholder value in 2017. Other key accomplishments included the following:
Increased daily production approximately 50% year over year to 22,940 barrels of oil equivalent per day (“Boepd”), with a sustained oil content of nearly 80%;
Achieved three-year compounded annual production growth rate of 60%;
Increased estimated net proved reserves nearly 50% year over year to 137 million barrels of oil equivalent (“MMBoe”), with 51% classified as proved developed producing;
Replaced 2017 production by 642%;
Increased corporate cash margins by 34% to $25.05 per barrels of oil equivalent (“Boe”) despite an inflationary service cost environment and substantial growth in employee count to execute our growth strategy;
Decreased lease operating expense (“LOE”) per Boe by 13% and general and administrative expense (“G&A”) per Boe by 32% year over year;
Improved our “drill bit” finding and development (“F&D”) costs to $8.21 per Boe despite an inflationary service cost environment;
EBITDA margins continued to be amongst highest within our Permian peer group;
Closed on our acquisition of over 16,000 net acres in the Delaware Basin, establishing our new Spur operating area as a beachhead for future growth;
Subsequently acquired 2,488 contiguous net acres within our footprint during the year;
Achieved a 65% decrease in water spills and 50% decrease in oil spills per MMBO vs 2016;
Nearly doubled participation in our proactive safety observation card program (Callon and contractors) compared to 2016, with ~4,500 cards submitted;
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• | Reduced our Debt/Last Three Quarters Annualized (“LTQA”) EBITDA ratio(i) | Reduce Callon-controlled flaring to 2.2x (1.8x on a Debt/Last Quarter Annualized (“LQA”) basis(i));<1% by 2024 | | 50% reduction in GHG intensity by 2024(1) | |
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| | | | Reduce methane emissions to <0.2% by 2024(2) | | |
| (1)Relative to 2019 baseline (2)Methane emissions calculated as percent of gas produced | |
Issued Senior Notes at an effective yieldIn 2022 we made significant investments to advance our GHG and methane reduction initiatives, and we remain on track to achieve our 2024 goals as described above. In 2022, we:
•Exceeded our 2022 target for replacement of 5.2%, contributingnatural gas operated pneumatic control devices, and remain on track to a improved costcomplete the replacement of capital;natural gas operated pneumatics in 2023;
Increased liquidity by increasing•Expanded field electrification across most of the borrowing baseremaining Eagle Ford asset to $700 millionreduce usage of diesel fuel and also added four lending institutions to our bank group.natural gas generators;
•Replaced select natural gas driven compressors with dual drive electric compressor engines in the Eagle Ford; and
•Released natural gas compressor engines through artificial lift conversions. |
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(i)See Appendix B for a reconciliation of Non-GAAP financial measures.SCOPE 1 GHG INTENSITY
Since 2019 |
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SAFETY
Executive Compensation Highlights
Our compensation policiesProtecting our employees, contractors, and practices promotecommunities is a performance-based culturecore value at Callon and align our executives’ interests with thosewe are committed to making sure everyone goes home safe at the end of every day. As part of our stockholders through a strong emphasiseffort to continuously improve our safety performance, we are focused on at-riskengaging leadership, managing contractors and safety risks, and safety training. In addition, safety performance is incorporated in our executive compensation tied to the achievement of performance objectives and the creation of stockholder value. In this Proxy Statement, you will find a discussion of our pay-for-performance compensation program structured to align executive pay with Company performance, stockholder expectations and prevailing market practices. Key actions in 2017 included the following:
With the sudden passing of our long-time CEO and Chairman of the Board Fred L. Callon in May 2017, the Board approved the promotion of Joseph C. Gatto, Jr., previously President and Chief Financial Officer (“CFO”), to CEO, and the Compensation Committee increased salaries and granted restricted stock unit (“RSUs”) awards for Mr. Gatto and Chief Operating Officer (“COO”) Gary Newberry commensurate with their expanded responsibilities;
As a result of the achievements detailed above andprograms as described in the Compensation Discussion and Analysis
(“CD&A”) section,beginning on page 39. In 2022, our focused efforts resulted in a safety performance record that achieved Callon’s lowest recorded incident rate as an onshore operator. | | |
TOTAL REPORTABLE INCIDENT RATE Since 2020 |
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CLIMATE RISK
At Callon, we share our stakeholders’ concerns about the Compensationrisks and effects of climate change. We also recognize the potential impacts to our industry, including the evolving preferences of consumers and investors as well as increasing regulatory obligations. As concerned citizens and responsible operators, we are committed to diligently minimizing and mitigating our environmental impact while we work to responsibly meet the demand for affordable energy in the United States and beyond.
Our Board oversees our assessment of and response to climate risks, and each of our Board committees has a role in our climate-related risk strategies. The Nominating & ESG Committee awarded bonuses above targethas responsibility for our NEOs for 2017 performance;
overseeing and guiding policies and performance relating to ESG matters, including the assessment and monitoring of stakeholder concerns and emerging issues such as climate-related risks and opportunities. The Operations & Reserves Committee oversees operational performance relative to established environmental goals, and the Audit Committee oversees risk-related disclosures in compliance with regulatory requirements. The Compensation Committee granted long-term incentivesis responsible for aligning executive compensation with our strategic priorities, including environmental performance.
HUMAN CAPITAL
At Callon, we recognize the importance of creating a culture in which our team members feel valued. We foster an entrepreneurial environment where we empower employees and engage team members in decision-making at every level. Our experienced leadership team provides an excellent learning environment, with development opportunities to accelerate professional growth.
In 2022, we advanced several initiatives to further opportunities for our NEOs, 60%employees:
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| | Development and Training | | | | Well-being | |
| •Implemented a formal leadership development program, providing all leaders with the opportunity to build their personal leadership skills, expand cross functional relationships, gain exposure to executives, and provide input on company culture and business initiatives •Enhanced our formal performance feedback program •Developed high potential employees through rotations, project assignments, and exposure to other areas of the organization •Conducted unconscious bias training •Made key hires specifically dedicated to the talent development function at Callon | | | •Continued the Callon Wellness Program, aimed at encouraging employees to complete a wellness check-up by bringing mobile clinics and flu shots onsite •Provided additional education around our benefits and 401(k) program to increase utilization •Organized numerous volunteer opportunities that supported team building and local community engagement •Increased participation in our charitable match program | |
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| EMBRACING DIVERSE BACKGROUNDS AND PERSPECTIVES | | RACIAL/ETHNIC DIVERSE EMPLOYEES IN 2022 |
| At Callon, we value the diversity of our employees and their contributions. We are firmly committed to fostering an inclusive environment and providing equal opportunity to all qualified persons. As of December 31, 2022, approximately 41% of our permanent, full-time employees identified as a racial or ethnic minority and 22% were female. Within our non-field workforce, 32% of our employees were female. In addition, we are constantly seeking to expand diversity in our workforce as we grow our team. In 2022, 50% of our newly hired employees identified as a racial or ethnic minority and 36% were female. |
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COMMUNITY SUPPORT
Our focus on our stakeholders extends beyond our operations into the communities where we live and work. Through our community engagement program, our charitable giving is directed towards our core philanthropy pillars of which were tiededucation, community services, and the environment to uplift our Total Stockholder Return (“TSR”); and
The Compensation Committee certified the results of the 2015 grants of performance-based stock units (“PSUs”), which measured our TSR against certaincommunities. We are especially proud of our peers forcontinued collaborative partnership with Comp-U-Dopt that has allowed us to invest in the 2015 to 2017 time period, ranking third out of 13 peers, resulting in 183% of the targeted number of PSUs vesting.
Approximately 96% of the shares voted at our 2017 Annual Meeting approved our 2016 executive compensationnext generation by supporting our “say-on-pay” proposal.
Key Elements of Our Executive Compensation
“Pay-for-Performance” philosophy linking incentive compensation directly to performance, with a significant portion of total annual compensation placed “at risk”
Competitive base salary
Annual cash bonus incentive tiedbringing much-needed computer equipment and STEM-focused technology programs to the achievementremote areas of Company performance objectivesour operations that are under-resourced.
Long-term equity-based incentive awards, including time-based RSUsCORPORATE GOVERNANCE
Our belief in the importance of diversity starts with the Board and a PSU program based on relative TSRis demonstrated by the continuous process of thoughtful board refreshment and leading corporate governance practices that ensures diversity of thought in the pursuit of sustainable value for all our stakeholders. Please see page 10 for more information about our recent board refreshment activities. Carefully considered performance metrics that do not encourage excessive risk-taking
Balanced consideration of internal pay parity, external competitiveness and performance results
Competitive benefit plans and programs in line with our overall employee population, including retirement and health benefits, and change in control severance protection, but no significant perquisites.
Governance Highlights
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| Diversity | Refreshment | Independence |
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One ethnically diverse and three female directors(1) | Five or fewer years' tenure
for over half of the directors(1) | Eight directors are independent and a non-executive director serves as chair of the Board(1) |
(1) As of March 2, 2023 |
We are also committed to high ethical standards and effective and sustainable corporate governance, which wegovernance. We believe strengthens Board and management accountability,this commitment promotes the long-term interests of our stockholders andshareholders, helps build public trust in our Company.Callon and strengthens Board and management accountability. We continually assess our core values and governance principles to ensure that we operateare operating our business responsibly, ethically and in a manner aligned with the interests of our stockholders. Highlightsshareholders.
As a demonstration of our commitment to strongresponsible corporate governance, include the following:
Board: Six meetingsour Compensation Committee has taken proactive steps in 2017
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▪ | Compensation: Five meetings |
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▪ | Nominating and Corporate Governance: Six meetings |
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▪ | Strategic Planning and Reserves: Three meetings |
All seven of the current directors are independent, and if the nominated directors are elected, then seven out of eight directors will be independent
All committees are comprised entirely of independent directors
Appointed an independent, non-executive director as Chairman of the Board
Paced refreshment of the Board; following the 2018 Annual Meeting, if the nominated directors are elected, five of the eight directors will have joined within the last fiverecent years
Board includes a balance of experience, tenure and qualifications in areas important to refresh our business
Overboarding policy in place for directors
Regular executive sessions of independent directors
Updated all governance documents, including all committee charters, the Code of Business Conduct and Ethics, and the Corporate Governance Guidelines, which increased focus on the composition of the Board and the director selection process, including emphasis on diversity, as reflected in the nominees for this Annual Meeting
Conduct annual Board and committee self-evaluations
Annual Say-On-Pay voting
Majority vote standard for uncontested director elections
Significant director and executive officer stock ownership guidelines
Regular succession planning
Independent executive compensation consultant reportingprograms to thealign with investor priorities for our industry and to formally incorporate ESG performance into management incentives. Our Compensation Committee
No employment agreements with NEOs
No excise or other tax gross-ups in our compensation plans
Double-trigger change-in-control provisions in our severance agreementsDiscussion and equity awards
No Poison Pill (Stockholder Rights Plan)
Stringent insider trading, anti-hedging and anti-pledging policies
Active stockholder engagementAnalysis (“CD&A”), beginning on page 39, provides additional information on governance practices
for executive compensation.
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PROPOSAL 1 - ELECTION OF DIRECTORS |
The Board currently consists of seven directors, and our Certificate of Incorporation provides for a classified Board. The current Board is divided into three classes designated as Class I, Class II and Class III, with staggered, three-year terms. The following table provides information with respect to all current directors and the nominees for Class III terms who have been nominated for election at the 2018 Annual Meeting.
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| | | | | | | Position (Committee Memberships) |
| Name | | Age | | Director Since | | Audit | | Compensation | | Nominating and Corporate Governance | | Strategic Planning and Reserves |
Class I Directors (a) | | | | | | | | | | | | |
| Michael L. Finch | | 62 | | 2015 | | ü | | | | ü | | ü |
| Larry D. McVay | | 70 | | 2007 | | ü | | | | ü | | Chair |
John C. Wallace (b) | | 79 | | 1994 | | Chair | | ü | | | | ü |
Class II Directors (c) | | | | | | | | | | | | |
| Matthew R. Bob | | 60 | | 2014 | | | | Chair | | ü | | ü |
| Anthony J. Nocchiero | | 66 | | 2011 | | ü | | ü | | Chair | | ü |
| James M. Trimble | | 69 | | 2014 | | | | ü | | ü | | ü |
Class III Directors (d) | | | | | | | | | | | | |
Barbara J. Faulkenberry (e) | | 58 | | | | | | | | | | |
L. Richard Flury (e)(f) | | 70 | | 2004 | | ü | | ü | | | | ü |
Joseph C. Gatto, Jr. (e) | | 47 | | | | | | | | | | |
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(d) | If elected, term will expire in 2021. |
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(f) | Chairman of the Board. |
Based on the recommendations from the Nominating and Corporate Governance Committee, our Board has nominated one continuing Class III Director, L. Richard Flury, to stand for re-election, and two new nominees, Barbara J. Faulkenberry, a retired two-star Air Force General, and Joseph C. Gatto, Jr., the Company’s President and CEO, to stand for election to the Board for a three-year term expiring at our 2021 Annual Meeting, or, in each case, until the election and qualification of their respective successors or until their earlier death, retirement, resignation or removal. Mr. Wallace has informed the Board of his intent to retire upon the close of 2018 Annual Meeting. Following this retirement, Class I will be made up of two directors.
Director Nominees
The following biographies reflect the particular experience, qualifications, attributes and skills that led the Board to conclude that each nominee should serve on the Board:
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Barbara J. FaulkenberryProposal 1 Election of Class II Directors | | The Board recommends a vote FOR each of the Class III Director NomineeII 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 14. |
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Major General (Ret.) Faulkenberry
Board of Directors - Background for Nominations
Board Composition & Succession Planning
Callon’s Board of Directors is committed to thoughtful and responsible refreshment of the composition of the Board to ensure the Company is led by a first-time nomineewell-rounded and diverse governing body that is positioned to provide strategic guidance and oversight to the Company. Through its intentional succession planning and refreshment initiatives, the Board seeks to assemble a broad range of skills and experience sets among its members in a collegial culture that promotes a constructive exchange of ideas and effective decision making.
In recognition of several forthcoming retirements pursuant to the Board retirement policy that was introduced in 2021, the Board has undertaken a multi-year succession planning process with the support of an outside firm to ensure the Board has the leadership and expertise needed to support sustainable value creation in today’s complex energy industry.
Following these multi-year succession planning efforts, in February 2023, Mr. Flury announced his retirement from the Board effective as of the date of the upcoming Annual Meeting. Upon Mr. Flury's announcement, the Board named Matthew R. Bob as Chair-elect. The Board anticipates naming Mr. Bob as Chair of the Board at the conclusion of the Annual Meeting. Mr. Bob is an experienced energy executive with nine years of experience on our Board. His biography can be found on page 14. In addition, in accordance with the Board retirement policy, James M. Trimble has not been nominated for re-election and will retire from the Board effective as of the date of the Annual Meeting.
In light of the impending retirements of Mr. Flury and Mr. Trimble, who have contributed meaningful industry expertise to the Company, the Board made the decision to nominate an additional seasoned oil and gas executive to the Board. General Faulkenberry retired fromFollowing a thorough review and interview process, the U.S. Air ForceBoard is nominating James E. Craddock in 2014 asthis Proxy Statement for election to a Major General (2-stars) afterfull three-year term by the shareholders, and his biography can be found on page 15.
Effective Board Development
Board Refreshment. Over time, the Board refreshes its membership through a 32-year career, finishingcombination of adding or replacing directors to achieve the appropriate balance between maintaining longer-term directors with deep institutional knowledge of the Company and adding directors who bring a diversity of perspectives and experience. As a reflection of this philosophy:
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| 5/9 directors have tenures of five or fewer years(1) | | | 8/9 directors are independent(1) |
(1)As of March 2, 2023 |
Board Evaluations. The Nominating and ESG Committee (the “N&ESG Committee”), in consultation with the Chair of the Board, annually conducts a performance review of the Board and its committees. This annual evaluation process seeks to obtain each director’s assessment of the effectiveness of the Board, the committees and their leadership, Board and committee composition, and Board and management interactions. In addition, these regular evaluations inform the Board’s decisions on the re-nomination of existing directors for additional terms of service on the Board. The evaluation process includes individual feedback for each Board member. On a regular basis, including twice in the top 150 leaderspast four years, the Board engages a third-party facilitator to conduct a full board evaluation and review relative to best practices in support of its continuous improvement objectives.
Director Orientation & Education. Callon sponsors an ongoing director education program that assists Board members in fulfilling their responsibilities. Training commences with an orientation program when a 320,000-person global organization. Her last assignment was as Vice Commander (COO) and interim Commander (CEO) of a 37,000-person organization conductingnew director joins the Board. New directors are provided with comprehensive in-person briefings on all global Department of Defense air cargo, passenger, and medical patient movements with 1,100 military aircraft plus contracted commercial aircraft. General 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 chairaspects of the Technology CommitteeCompany and as a memberare invited to meet with representatives from each organizational discipline. For any directors who are new to the energy industry, we also host an introductory field tour and provide tuition for an energy industry overview course offered by well-regarded third-party experts.
Ongoing education is provided through written materials, presentations in Board meetings, and training outside the boardroom. We regularly invite outside speakers to present to our Board on matters of strategic importance including developments in the Nominatingenergy industry, macroeconomic trends, and Corporate Governance Committee. She is acorporate governance best practices. In addition, members of our management team provide regular updates to the Board on industry trends, pertinent legal and regulatory developments, financial markets, and evolving risks to our business. All Callon directors are members of the National Association of Corporate Directors (“NACD”)and are provided an annual training allowance to pursue relevant director education programs.
Retirement Policy. The Board Leadership Fellowbelieves that, regardless of age, experienced individuals may make a substantial contribution to the Company. However, the Board has adopted a retirement policy for independent directors. Under the policy, an independent director must retire in conjunction with the annual meeting of shareholders prior to his or her 75th birthday, except in special circumstances upon the request of a majority of the Board (not including the subject director). In accordance with the retirement policy, James M. Trimble has not been nominated for re-election and is highly involved with their director-focused education in cyber securitywill retire from the Board effective as of the date of the Annual Meeting.
Process for Selecting Directors
Director Identification and Selection
Criteria. The N&ESG Committee has established guidelines for considering nominations to complement her militarythe Board. The N&ESG Committee evaluates nominees based on the potential contributions of such nominee’s background and skills to corporate strategy, governance and creating sustainable value for shareholders as well as towards achieving the goal of a well-rounded, diverse Board that functions collegially as a unit. While not an exhaustive list, key criteria include:
•Relevant industry knowledge and experience;
•Complementary mix of backgrounds and experience in cyber defenses, bothareas including business operations, finance, accounting, ESG, technology, human capital, and strategy;
•Personal qualities of which contributeleadership, character, judgment and personal and professional integrity and high ethical standards;
•Ability to best practicesexercise independent and informed business judgment;
•Whether the candidate is free of conflicts and has the time required for preparation, participation, and attendance at meetings;
•Diversity, including differences in corporate governanceexpertise, viewpoints, background, education, gender, race or ethnicity, age, and cyber security. She received a BS degree fromother individual qualifications and attributes;
•The ability to work with other members of the Air Force Academy in 1982, an MBA from Georgia College in 1986,Board, the Chief Executive Officer (the "CEO"), and a Mastersenior officers of National Security from the National Defense University in 1999. She’s also attended strategic-level leadership courses at Harvard, Cambridge, and Syracuse Universities. General Faulkenberry brings to the Company senior leadership experience in a constructive and collaborative fashion to achieve the areasCompany’s goals and implement its strategy; and
•In the case of logistics, strategic planning, risk management, technology, cyber security,an incumbent director, such director’s past performance on the Board.
The N&ESG Committee and leadership development, which wethe Board may also consider other qualifications and attributes that they believe qualifies herare appropriate in evaluating the ability of an individual to serve as a member of the Board. The N&ESG Committee’s goal is to assemble a Board that brings to us a variety of perspectives and skills derived from high quality business and professional experience to perform its strategy and oversight roles satisfactorily for our Board.
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L. Richard Flury | | Class III Director Nominee, Chairman of the Board |
Mr. Flury was appointed toshareholders. In making its determinations, the BoardN&ESG Committee evaluates each individual in 2004. In May 2017, with the passing of our then Chairmancontext of the Board Fred L. Callon, Mr. Flury was selected as a whole, with the Chairmanobjective of assembling a group that can best represent shareholder interests through the Board. Mr. Flury has been retired since 2001. Prior to 2001, he spent over 30 years with Amoco Corporation,active, objective, and later, BP p.l.c., most recently as Chief Executive, Gas and Power and Renewables. Prior to Amoco’s merger with BPconstructive participation in 1998, he served in various executive positions, including Chief Executive for Worldwide Exploration and Production and Executive Vice President of Amoco Corporation. Mr. Flury was a member of the Board of QEP Resources, Inc., a publicly traded oil and gas exploration company, from 2010 until 2015, and is also a directormeetings and the non-executive Chairman of Chicago Bridge and Iron Company, N.V., a publicly-traded engineering, procurement and construction company. He is a graduate of the University of Victoria (Canada). Mr. Flury has many years of prior experience with a major oil and gas company, as well as continued involvement in the industry through his other directorship positions. Mr. Flury’s vast experience and extensive knowledge of the oil and gas exploration and production (“E&P”) industry and service on other boards of directors, together with his executive-level perspective and strategy-making abilities, strengthen the Board’s collective qualifications, skills and experience, and will continue to prove very beneficial to us.strategic decision-making processes.
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Joseph C. Gatto, Jr. | | Class III Director Nominee, President and CEO |
Mr. Gatto joined the Company in April 2012 as Senior Vice President, Corporate Finance, with responsibility for our capital markets and strategic planning functions, in addition to investor relations activities. Effective March 31, 2014, Mr. Gatto was appointed Chief Financial Officer and Treasurer of the Company and in August, 2016 was promoted to President, while retaining the roles of Chief Financial Officer and Treasurer. In May, 2017 he was promoted to Chief Executive Officer and retained the role as President. Prior to joining Callon, Mr. Gatto was a Managing Director in the energy investment banking groups of Merrill Lynch & Co. and Barclays Capital from July 1997 until February 2009, with involvement in all phases of M&A and capital raising transactions for his clients. In February 2009, he founded MarchWire Capital, LLC, a financial advisory and strategic consulting firm, and subsequently served as Head of Structuring and Execution with Merrill Lynch Commodities, Inc. from January 2010 until November 2011. Mr. Gatto graduated from Cornell University with a BS degree in 1992 and The Wharton School of the University of Pennsylvania with an MBA in 1997. Mr. Gatto’s experience advising energy companies on strategic and financial matters and leading transactions, as well as his tenure with the Company and knowledge and insight of Callon’s assets, operations, and people, will provide valuable contributions to the Board.
Majority Vote Standard
Diversity.Our Corporate Governance Guidelines provideset forth our policy with respect to Board diversity. We are committed to building a diverse Board comprised of individuals from different backgrounds, including differences in expertise, viewpoints, education, gender, race or ethnicity, age, and other individual qualifications and attributes. To accomplish this, the N&ESG Committee requires that search firms engaged by the Company seek to present a robust selection of women and racially or ethnically diverse candidates in all prospective director candidate pools.
Nominating Process. In making its nominations, the N&ESG Committee identifies nominees by first evaluating the current members of the Board willing to continue their service and any potential need to expand the Board to include additional
expertise and prepare for succession. Current members with a majority voting policyrecord of quality contribution to the Board whose experience contributes to a complementary mix of backgrounds that enhance the Board are renominated. When vacancies become available, the N&ESG Committee may seek input from industry experts or engage third-party search firms to help source particular areas of expertise or backgrounds.
Voting Standard
Directors will be elected by a plurality of the votes cast by the shares entitled to vote in the election of directors. This standard means the nominees for available directorships who receive the highest number of affirmative votes of the shares present, in person or by proxy, and entitled to vote, are elected. However, as described below, Callon has an additional requirement in uncontested director elections. The Company believesWe believe that this majority vote standardrequirement ensures accountability and the opportunity for a positive mandate from the Company’s stockholders. At any stockholder meeting for the election of directors at which a quorum is present,shareholders.
Our Corporate Governance Guidelines provide that any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” suchin an uncontested election (“Majority Withheld Vote”) shall(i.e., an election in which the number of nominees for election does not exceed the number of directors to be elected) is required to promptly tender his or her resignation for consideration by the NominatingN&ESG Committee and Corporate Governance Committee following certification of the stockholder vote, unless the number of nominees exceeds the number of directors to be elected as of the Record Date for such meeting, in which event the directors shall be elected by a plurality of the votes cast.Board. Such resignation will only be effective upon Board acceptance of such resignation after receiving the recommendation of the Nominating and Corporate GovernanceN&ESG Committee.
If a director nominee receives a Majority Withheld Vote, then, promptly following certification of the election results, the Nominating and Corporate Governance The N&ESG Committee will consider any factors it deems relevant to the best interests of the Company and our stockholdersshareholders in determining whether to accept the director’s resignation and recommend to theresignation. The Board the action to be taken with respect to the tendered resignation. Within 120 days following certification of the stockholder vote, the Board shallwill consider the recommendation, and make a determination as to whether to accept or reject such director’s resignation, and shall notify the director concerned of its decision. We will also promptlydecision as well as publicly disclose the Board’sBoard's decision and processwithin 120 days following certification of the shareholder vote. Full details of this policy are set forth in a periodic or current report filed with or furnished to the SEC.
our Corporate Governance Guidelines.
If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum but will have no effect upon the outcome of the vote.vote on this proposal. All shares of common stock represented by the proxies will be voted “FOR” the election of the above director nominees, except where authority to vote in the election of directors has been withheld. Should the nominees become unable or unwilling to serve as a director at the time of the 2018 Annual Meeting, the person or persons exercising the proxies will vote for the election of substitute nominees designated by the Board, or the Board may choose to reduce the number of members of the Board to be elected at the 2018 Annual Meeting in order to eliminate the vacancy. Your proxy cannot be otherwise voted for a person who is not named in this Proxy Statement as a candidate for director or for a greater number of persons than the number of director nominees named. The Board has no reason to believe that the nominees will be unable or unwilling to serve if elected.
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The Board recommends that youa vote “FOR”FOR each of the three nominees.Class II director nominees. |
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Composition of the Proposed Board
The following table provides information with respect to the skills and experience of the proposed Board of Directors, assuming the election of the three Class II director nominees who are standing for election at the Annual Meeting.
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| Name | Frances Aldrich Sevilla-Sacasa | Matthew R. Bob | James E. Craddock | Barbara J. Faulkenberry | Joseph C. Gatto, Jr. | Anthony J. Nocchiero | Mary Shafer-Malicki | Steven A. Webster |
| Age (on March 2, 2023) | 67 | 65 | 64 | 62 | 52 | 71 | 62 | 71 |
| Tenure (on March 2, 2023) | 4 | 9 | N/A | 5 | 5 | 12 | 2 | 4 |
| Gender Diversity | ● | | | ● | | | ● | |
| Racial/Ethnic Diversity | ● | | | | | | | |
| CEO/President Experience | ● | ● | ● | | ● | | ● | ● |
| Senior Executive Leadership | ● | ● | ● | ● | ● | ● | ● | ● |
| Outside Public Boards (current) | ● | | ● | ● | | | | ● |
| Outside Public Boards (prior) | ● | | ● | | | ● | ● | ● |
| E&P Industry Experience | | ● | ● | | ● | ● | ● | ● |
| Energy (Other than E&P) Industry Experience | | ● | | | ● | ● | ● | ● |
| Financial Expert(1) | ● | | | | | ● | | |
| Financial Literacy(1) | ● | ● | ● | ● | ● | ● | ● | ● |
| Financial Oversight/Accounting | ● | | | ● | ● | ● | | ● |
| Petroleum and Other Engineering | | | ● | | | ● | ● | |
| Geologist or Geophysicist | | ● | | | | | | |
| Government/Public Policy/Regulatory | | | | ● | | | | |
| HES Experience/Environmental | | | | ● | | | ● | |
| Strategic Advising | ● | ● | ● | ● | ● | ● | ● | ● |
| Investment Banking | ● | | | | ● | | | |
| Supply Chain | | | | ● | | | ● | |
| Technology/IT/Cybersecurity | | | | ● | | ● | | |
(1)As such term is used in the NYSE Listed Company Manual.
Directors Nominated for Election
The Board currently consists of nine directors. Consistent with our certificate of incorporation, the current Board is divided into three classes designated as Class I, Class II, and Class III, each with staggered, three-year terms. Based on the recommendations from the N&ESG Committee, the Board has nominated three Class II Directors, Matthew R. Bob, James E. Craddock, and Anthony J. Nocchiero, to stand for election or, in each case, until the election and qualification of their respective successors or until their earlier death, retirement, resignation or removal.
The following biographies reflect the particular experience, qualifications, attributes, and skills that led the Board to conclude that each nominee should stand for election to serve on the Board:
Class II Directors
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| Experience •Founder and managing member (1994 – present), MB Exploration, LLC, a privately held company that provides advisory services for exploration, development, and minerals •President (2014 – 2022), Eagle Oil & Gas Co., a privately held, independent oil and gas E&P company •President, Hall Phoenix Energy LLC, a privately held, independent oil and gas exploration company •Chief Geophysicist, Pitts Oil Company, an independent oil and gas E&P company •Began his career at Union Oil Company of California where he held various geological positions |
Matthew R. Bob Chair-elect of the Board Age: 65 Independent Director since 2014 Committees: •Compensation (Chair) •Operations & Reserves |
Other Boards •Former Independent Director, Southcross Energy Partners LLC, a natural gas processing and transportation company with operations in South Texas (2020 – 2022) |
Qualifications and Expertise Provided to our Board •Extensive executive and operational experience with U.S. onshore oil and gas companies, including oversight of E&P operations in Texas •Deep knowledge and demonstrated subsurface technical expertise applicable to the E&P industry •Experience as an organizational leader that has prepared him well for his role as Chair elect •Service on the board of another company that has provided him exposure to different segments of the energy industry as well as governance insights •Registered Geoscientist •National Association of Corporate Directors Board Certified |
| Education & Professional Affiliations •B.A. in Geology, St. Louis University •M.S. in Geology, Memphis University •Completed the Executive Management Program at Harvard University •Member of the American Association of Petroleum Geologists, the Society of Exploration Geophysicists, and the Dallas Petroleum Club |
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| Experience •Chairman, CEO and President, Rosetta Resources Inc., an independent oil and gas company •Senior Vice President – Drilling & Production Operations, Rosetta Resources Inc., an independent oil and gas company •Chief Operating Officer, BPI Energy, Inc., an E&P start-up company focused on coal bed methane development •Various technical, operational, and strategic roles, including Chief Engineer, at Burlington Resources, Inc. and its predecessor companies |
Other Boards •Independent Director, Crescent Point Energy Corp., a publicly traded oil and gas company (2019 – present) •Independent Director, Amplify Energy Corp., a publicly traded oil and natural gas company (2023 – present) •Former Independent Director, Civitas Resources, Inc., a publicly traded oil and gas exploration company (2021 – 2021) •Former Independent Director, Templar Energy LLC, an independent upstream oil and gas company (2017 – 2019) •Former Independent Director, Noble Energy Inc., a publicly traded oil and gas E&P company (2015 – 2020) •Former Director, Rosetta Resources Inc., an independent oil and gas company, until its merger with Noble Energy Inc. |
James E. Craddock Age: 64 |
| Qualifications and Expertise Provided to our Board •Seasoned upstream executive and director who possesses broad-based technical and operational knowledge of U.S. onshore operations with over 30 years of experience •Wide-ranging experience in corporate strategy and oversight as a board member and executive of multiple E&P companies •Service on the boards of other publicly traded companies that has provided him with exposure to oversight, risk assessment, and corporate governance that will bring diverse experience to the Board |
| Education •B.S. in Mechanical Engineering, Texas A&M University |
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| Experience •Senior Vice President and Chief Financial Officer, CF Industries, Inc., a publicly traded manufacturer in global agricultural and industrial markets •Vice President and Chief Financial Officer, Merisant Worldwide Inc., a privately held company specializing in the selling and distribution of food additives •Chief Financial Officer, BP Chemicals, a global chemical business •Various financial and management positions at Amoco Corporation, including service as Amoco’s Vice President and Controller |
Other Boards •Former Director, Terra Nitrogen LP, a manufacturer in agricultural and industrial markets •Former Director, Keytrade AG, a global fertilizer trading organization •Former Director, Vysis Corporation, a provider of genomic disease management products and related customer and technical services •Former Director, Chicagoland Chamber of Commerce, a non-profit organization •Member, National Council of the McKelvey School of Engineering advising the Dean of Engineering at Washington University in St. Louis |
Anthony J. Nocchiero Age: 71 Independent Director since 2011 Committees: •Audit •N&ESG |
| Qualifications and Expertise Provided to our Board •Broad knowledge of the finance, energy, and commodities industries and extensive experience with finance and M&A related transactions •Status as a “financial expert” and knowledge of public company financial reporting regulations, compliance requirements, audit functions and internal controls contribute valuable expertise to the Board and Audit Committee •Professional experience in risk identification and mitigation that are additive to the Board’s risk assessment capabilities •Service on the boards of other companies has provided him exposure to different industries and approaches to governance that further enhances the Board's oversight function |
| Education •B.S. in Chemical Engineering, Washington University in St. Louis •M.B.A. in Finance, Northwestern University |
Directors Continuing in Office
Biographical information, including age as of the Record Date, for our other directors continuing in office is as follows:set forth below. These individuals' terms are ongoing so they are not standing for re-election at this time:
Class I Directors
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| Experience •Chief Executive Officer, BP Angola, a subsidiary of BP focused on offshore E&P activities •Chief Operating Officer, BP Angola, a subsidiary of BP focused on offshore E&P activities • Director General, BP Vietnam, a subsidiary of BP focused on offshore E&P activities and onshore processing and power generation • Various operational, engineering, and management positions at BP and Amoco Corporation |
Other Boards •Former Independent Director and Board Chair, QEP Resources, Inc., publicly traded oil and gas E&P company (2017 – 2021) •Former Independent Director, Wood Plc, a Scotland-based engineering, operations and maintenance services provider for the oil & gas, infrastructure and power generation markets (2012 – 2021) •Former Independent Director, McDermott International Inc., publicly traded EPC company, including when it filed voluntary petitions for reorganization in the United States Bankruptcy Court for the Southern District of Texas in January 2020 (2011– 2020) •Director and Chair, University of Wyoming Foundation, a foundation with the mission of securing resources and delivering stewardship of funding for the university (2016 – present) •Member, Industry Advisory Board for Chemical Engineering Department at the University of Wyoming (2010 – present) •Member, Strategic Advisory Counsel to the Dean of Engineering at Oklahoma State University (2021 – present) •Former Independent Director, Ausenco Limited, an Australian-based engineering services company |
Mary Shafer-Malicki Age: 62 Independent Director since 2022 Committees: •Operations & Reserves (Chair) •Audit |
| Qualifications and Expertise Provided to our Board •Over 25 years of operations, engineering, and management experience across the energy value chain positions her to advise on complex issues of strategy and execution •Deep technical expertise developed through her professional career and academic engagements make her well-suited for oversight of the Company’s reserves process •Service on the boards of other publicly traded companies, including in leadership roles, has provided her exposure to a wide range of strategic decision making and approaches to corporate governance that enhances the Board’s deliberations •Experience with safety, environmental and regulatory matters contributes to the Board’s oversight function |
| Education •B.S. in Chemical Engineering, Oklahoma State University •Completed the Executive Education Program at University of Cambridge •Completed the New Global Business Environment Executive Program at Harvard University |
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| Experience •Managing Partner (2005 – present), of AEC Partners and its predecessor Avista Capital Partners, which are private equity firms engaged in venture capital and investment activities in energy and other industries •Co-founder (1993 – 2019), Carrizo Oil & Gas, Inc., a publicly traded oil and gas company that merged with Callon Petroleum Company in 2019 •Chair, Global Energy Partners, an affiliate of DLJ Merchant Banking and CSFB Private Equity •CEO and President, R&B Falcon Corporation, an offshore drilling contractor and successor to Falcon Drilling Company, a drilling company that he founded •Founder or seed investor in numerous other private and public companies, including Grey Wolf, Inc. (a land drilling rig contractor), Hercules Offshore, Inc. (an offshore drilling rig contractor), and Crown Resources Corporation (a precious metals exploration company) |
Steven A. Webster Age: 71 Independent Director since 2019 Committees: •N&ESG •Operations & Reserves |
Other Boards •Independent Director, Camden Property Trust, a publicly traded real estate investment trust (2011 – present) •Independent Director, Oceaneering International, Inc., a subsea engineering and applied technology company (2015 – present) •Former Independent Director and Board Chair, Carrizo Oil & Gas, Inc., a publicly traded oil and gas company that merged with Callon Petroleum Company in 2019 (1993 – 2019) •Former Independent Director, Era Group Inc., a global manufacturing company (2013– 2020) •Former Independent Director and Board Chair, Basic Energy Services, Inc., a privately held well services contractor •Former Independent Director and Board Chair, Solitario Zinc Corp., a gold, silver, platinum-palladium, and base metal exploration company •Former Independent Director, Brigham Exploration Company, an oil and gas company |
| Qualifications and Expertise Provided to our Board •Distinctive investment experience in energy and other industries that brings valuable insight to the Company’s investment decisions and financial strategies •Over 30 years of board, executive, and investor experience with a large number of publicly and privately held companies in energy and energy-related fields •Extensive entrepreneurial and executive leadership experience in founding and managing multiple companies brings a unique perspective to the Board in strategic, value-based decision making, oversight and risk assessment •Exceptionally deep board experience, including board chair of multiple companies has provided him exposure to strategic decision making and approaches to governance that brings diversity of experience to the Board |
| Education •B.S. in Industrial Management, Purdue University •M.B.A., Harvard University (Baker Scholar) •Honorary Doctorate in Management, Purdue University |
Class III Directors
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| Experience •Chief Executive Officer, Banco Itaú International, a global bank •Executive Advisor to the Dean, School of Business, University of Miami, a private university •Interim Dean, School of Business, University of Miami, a private university •President, US Trust Company, Bank of America Private Wealth Management, a trust company focusing on investment management, wealth structuring, and credit and lending services •President and CEO, US Trust Company, a trust company focusing on investment management, wealth structuring, and credit and lending services •Various operational and management positions at Citigroup’s private banking business, including President of Latin America Private Banking, President of Europe Private Banking, and Head of International Trust Business |
Frances Aldrich Sevilla-Sacasa Age: 67 Independent Director since 2019 Committees: •Audit (Chair) •Compensation |
Other Boards •Independent Director, Camden Property Trust, a publicly traded real estate investment trust (2011 – present) •Independent Director, Delaware Funds by Macquarie, a full service asset manager (2011– present) •Former Independent Director, New Senior Investment Group, a publicly traded real estate investment trust (2021 – 2021) •Former Independent Director and Board Chair, Carrizo Oil and Gas, Inc., a publicly traded oil and gas company that merged with Callon Petroleum Company in 2019 (2018 – 2019) •Member, Florida chapter of National Association of Corporate Directors (2022 – present) |
| Qualifications and Expertise Provided to our Board •Deep investment management company and private banking experience brings strong financial acumen to the Board’s financial and investment decisions and supports alignment with the priorities of Company shareholders •Her designation as a “financial expert” and knowledge of public company reporting requirements make her well-suited to lead the Company’s Audit Committee •Experience in C-suite and other senior executive roles brings valuable strategic and leadership insights to the Board •Considerable service on the boards of other companies, including in multiple committee leadership roles, has provided her with meaningful corporate governance experience •Board Leadership Fellow of National Association of Corporate Directors |
| Education •B.A., University of Miami •M.B.A., Thunderbird School of Global Management |
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| Experience •Major General (2-stars), United States Air Force (1986 - 2018), the air service branch of the United States Armed Forces •Progressive posts and rankings over a 32-year career with the U.S. Air Force, which culminated in her being 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 |
Other Boards •Independent Director, Target Hospitality Corp., a national provider of vertically integrated modular accommodations and hospitality services (2021 - present) •Former Independent Director, USA Truck Inc., a publicly traded provider of trucking services (2016 - 2022) •Advisory Director, Momentum Aerospace Group (2014 – 2018), an aerial intelligence, surveillance, and reconnaissance company |
Barbara J. Faulkenberry Age: 62 Independent Director since 2018 Committees: •Compensation •N&ESG |
Qualifications and Expertise Provided to our Board •Specialized substantive knowledge in cybersecurity deployment and management, including earning the Carnegie Mellon/NACD CERT Certificate in Cybersecurity Oversight, which are areas of increasing focus for the Company and the Board •Broad leadership experience and uniquely valuable global perspective gained during her U.S. Air Force career, which supports and aligns with the Board’s strategic planning role and risk oversight function •Deep supply chain management and logistics knowledge stemming from commanding global mobilization and logistics efforts •Career experience in leadership development and succession planning •Service on the boards of other publicly traded companies, including leadership roles, has provided her exposure to different industries and approaches to governance that further enhances the Board •National Association of Corporate Directors Board Certified |
Education •B.S. in Operations Research, United States Air Force Academy •M.B.A., Georgia College & State University •Master of National Security, National Defense University •Completed strategic leadership courses at Harvard University, University of Cambridge, and Syracuse University |
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| Experience •President and Chief Executive Officer (2017 - present), Callon Petroleum Company •President and Chief Financial Officer, Callon Petroleum Company •Chief Financial Officer and Treasurer, Callon Petroleum Company •Senior Vice President, Corporate Finance, Callon Petroleum Company •Managing Director, Head of Structuring and Execution, Merrill Lynch Commodities, focusing on energy investment banking •Founder, MarchWire Capital, LLC, a financial advisory and strategic consulting firm •Managing Director, Barclays Investment Bank, focusing on natural resources investment banking •Managing Director, Merrill Lynch & Co., focusing on energy investment banking |
Joseph C. Gatto, Jr. President and Chief Executive Officer Age: 52 Director since 2018 |
Qualifications and Expertise Provided to our Board •With over two decades of experience as an energy executive and investment banker, Mr. Gatto brings valuable insights to the Board for setting and executing Company strategy in a dynamic industry •Knowledge and experience with the key operational and commercial drivers of the upstream industry provide the Board with invaluable insights to guide their direction of the business and affairs of our Company •His financial and investment expertise, as well as ongoing engagement with industry leaders and investors, contribute to the Board’s evaluation of strategies and decisions that will attract capital and align with investor priorities •Widely recognized as industry leader, his engagement in U.S. energy policy matters brings valuable insights to Board discussions on strategic planning and execution |
| Education •B.S. in Finance/Real Estate, Cornell University •M.B.A. in Strategy/Finance, The Wharton School of the University of Pennsylvania |
Retiring Directors
Biographical information, including age as of the Record Date, for Messrs. L. Richard Flury and James M. Trimble, who are retiring from the Board effective as of the date of the Annual Meeting. Callon is grateful for Messrs. Flury and Trimble and their many contributions to the strategy, culture, and success of the Company. The entire Callon team wishes them well in their future endeavors.
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| Experience •Chief Executive Officer, Gas, Power and Renewables, BP plc, a global producer of oil and gas •Executive Vice President, Amoco Corporation, a global producer of oil and gas, prior to its merger with BP • Various operational and management positions at Amoco Corporation, including Chief Executive for Worldwide Exploration and Production |
Other Boards •Former Independent Director, McDermott International Inc., 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 (2018 - 2020) •Former Independent Director and Non-executive Board Chair, Chicago Bridge and Iron Company, N.V., a publicly traded engineering, procurement and construction company, until it merged into McDermott International in 2018 (2003 - 2018) •Former Independent Director, QEP Resources, an independent oil and gas E&P company, and spin-off of Questar •Former Independent Director, Questar Corporation, an independent oil and gas E&P company |
L. Richard Flury Chair of the Board Age: 75 Independent Director since 2004 Committees: •Audit (non-voting member) •Compensation (non-voting member) •N&ESG (non-voting member) •Operations & Reserves (non-voting member) |
Qualifications and Expertise Provided to our Board •Over 30 years of operations and management experience in in all aspects of the energy value chain, both domestically and internationally •Comprehensive executive, strategic, and operational experience in the energy industry, with perspective and insight from numerous disciplines within the industry •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 the Company and Board •Service on the boards of other publicly traded companies has provided him exposure to different industries and approaches to governance that further enhances the Board |
| Education •B.S. in Honors Physics, University of Victoria |
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Matthew R. Bob | | Class II Director |
Mr. Bob was elected to the Board at the 2014 Annual Meeting. Mr. Bob has been the founder and Managing Member of MB Exploration and affiliated companies since 1994. MB Exploration is engaged in the oil and gas exploration, development and consulting business. Mr. Bob currently serves as President of Eagle Oil and Gas. Mr. Bob also served as President of Hall Phoenix Energy LLC, a privately held oil and gas company, from 2009 to 2011. Prior to forming MB Exploration in 1994, 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. 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. He holds a B.A. in Geology from St. Louis University, an M.S. in Geology from Memphis University, and is a graduate of Harvard University’s Executive Management Program. Mr. Bob’s extensive knowledge of the oil and gas exploration and production business and technical expertise are an asset to the Board and qualify him as a director.
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Michael L. Finch | | Class"It has been a great honor to serve Callon during a period of extraordinary growth and change for our Company and our industry. I Directoram confident that now is the right time to transition the role of Chair as Callon is well positioned with a strong board and management team to continue pursuing strategies to drive shareholder value." |
Mr. Finch was elected to the Board at the 2015 Annual Meeting. He served as CFO and a member of the Board of Directors of Stone Energy Corporation (“Stone”) from its initial public offering in 1993 until his resignation in 1999. He was affiliated with Stone in a variety of capacities for nineteen years. Prior to his service with Stone, he was employed by Arthur Andersen & Co. in New Orleans, Louisiana from 1976 to 1980. Mr. Finch has been a private investor and a financial consultant in the energy industry since 1999. He was licensed as a Certified Public Accountant in 1978 (inactive status at present), and received a Bachelor of Science in Accounting from the University of South Alabama in 1976. Mr. Finch was an independent director of Petroquest Energy, Inc. from 2003 to 2016, where he served as chairman of the Audit Committee, as a member of the Compensation Committee, and as a member of the Nominating and Corporate Governance Committee. Mr. Finch has extensive financial, accounting and operating experience within our industry, and his background, prior experiences, professional credentials and expertise qualify him as a director and “financial expert.”
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Larry D. McVayL. Richard Flury | | Class I Director |
Mr. McVay was appointed to the Board in October 2007. Mr. McVay has been a Managing Director of Edgewater Energy, LLC, a privately held oil and gas investment company, since 2007. From 2003 until 2006, he served as COO of TNK-BP Holding, one of the largest oil producing companies in Russia. From 2000 to 2003, he served as Technology Vice President and Vice President of Health, Safety and Environment for BP. He also led the global E&P Operations Excellence effort for improving the operating efficiency of BP’s upstream operations. Mr. McVay earned a mechanical engineering degree from Texas Tech University, where he was recognized as a Distinguished Engineer in 1995. In January 2008, Mr. McVay became a member of the Board of Directors of Praxair, Inc., an industrial gases company in North and South America, where he serves on the Audit Committee, the Technology, Safety and Sustainability Committee and is chairman of the Finance & Pension Committee. Mr. McVay is also a member of the Board of Directors of Chicago Bridge and Iron, N.V., a publicly traded engineering, procurement, and construction company, where he serves on the Audit Committee, the Strategic Initiatives Committee and is the chairman of the Corporate Governance Committee. 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 E&P industry, particularly in the Permian Basin, as well as service on other boards of directors, provides invaluable insight in the development of our long-term strategies, qualifying him for service on our Board.
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Anthony J. Nocchiero | Experience •Chief Executive Officer and President, Interim (2017 - 2018), Stone Energy Corporation, an independent oil and natural gas E&P company •Chief Executive Officer and President , PDC Energy, Inc., an independent oil and natural gas E&P company, including 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 in July 2016 •Managing Director, Grand Gulf Energy Limited, an Australian listed company focusing on pure-play helium exploration •Chief Executive Officer and President, Grand Gulf Energy Company LLC., the U.S. subsidiary of Grand Gulf Energy Limited •Chief Executive Officer, TexCal Energy LLC, a global oil and gas exploration company and successor to Tri-Union Development •Chief Executive Officer, Elysium Energy, a privately held oil and gas exploration company •Senior Vice President of Exploration and Production, Cabot Oil and Gas, a publicly traded oil and gas exploration company |
James M. Trimble Age: 74 Independent Director since 2014 Committees: •N&ESG (Chair) •Operations & Reserves |
Other Boards •Independent Director, Civitas Resources, Inc., a publicly traded oil and gas exploration company and successor to Crestone Peak Resources (2021 - present) •Independent Director, Eagle Energy Resources, LLC, a privately held oil and gas company (2021 - present) •Former Independent Director and Board Chair, Crestone Peak Resources, LLC, a privately held oil and gas exploration company (2016 - 2021) •Former Independent Director, Talos Energy Inc., an independent oil and gas E&P company and successor to Stone Energy Corporation (2018 – 2021) •Former Independent Director, Stone Energy Corporation, an independent oil and natural gas E&P company (2017 - 2018) •Former Independent Director, C&J Energy Services, Inc., a hydraulic fracturing company, including when it filed for bankruptcy in the court of the Southern District of Texas, Houston Division in July 2016 •Former Independent Director, PDC Energy, Inc., an independent oil and natural gas E&P company, including 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 in July 2016 •Former Independent Director, Seisgen Exploration LLC, a privately held geophysical oil services company •Former Independent Director, Grand Gulf Energy Ltd., an Australian listed company focusing on pure-play helium exploration •Former Independent Director, Blue Dolphin Energy Company, a publicly traded petroleum refining and marketing company |
| Class II DirectorQualifications and Expertise Provided to our Board •Over 45 years of comprehensive executive, strategic, and operational experience in the energy industry, with perspective and insight from numerous levels of the industry structure •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 the Company and Board •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 •Registered Professional Engineer in the State of Texas |
| Education •B.S. in Petroleum Engineering, Mississippi State University |
Mr. Nocchiero was first elected to the Board in March 2011. Since 2010, Mr. Nocchiero has been retired. From April 2007 until September 2010, Mr. Nocchiero held the position of senior vice president and Chief Financial Officer for CF Industries, Inc. From July 2005 until March 2007, he was the Vice President and CFO for Merisant Worldwide, Inc. From January 2002 to July 2005, Mr. Nocchiero was self-employed as an advisor and private consultant. From January 1999 until December 2001, Mr. Nocchiero served as Vice President and CFO of BP Chemicals, the global petrochemical business of BP p.l.c. Prior to that, he spent twenty-four years with Amoco Corporation in various financial and management positions, including service as Amoco’s Vice President and controller from April 1998 to January 1999. Mr. Nocchiero holds
Director Independence
To minimize potential conflicts, it is 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. Mr. Nocchiero has previous experience serving as a memberpolicy of the Board that a majority of Directors of various public and privatethe Board be independent. In accordance with the standards for companies including Terra Nitrogen LP, Keytrade AG, Vysis Corporationlisted on the New York Stock Exchange (the "NYSE") and the Chicago Chamberrules and regulations promulgated by the Securities and Exchange Commission (the "SEC"), as well as our Corporate Governance Guidelines, the Board considers a director to be independent if it has affirmatively determined that the director has no material relationship with the Company that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. The Board revisits the independence of Commerce. Mr. Nocchiero brings to Calloneach director on an annual basis and makes independence determinations when a broad knowledgenewly appointed director joins the Board between annual meetings. The Board reviewed the independence of its directors and nominees in accordance with the standards described above and affirmatively determined that each of the oildirectors (other than Mr. Gatto) and gas industry, extensive experiencenominees is independent.
Corporate Governance Principles & Transparency
The Board believes that sound corporate governance practices and policies provide an important framework to assist in fulfilling its duty to shareholders. The framework for our corporate governance can be found in our governance documents, which include:
•Corporate Governance Guidelines;
•Code of Business Conduct and Ethics;
•Charters for the Audit, Compensation, N&ESG, and Operations & Reserves Committees; and
•Human Rights Policy.
In keeping with financesound corporate governance practices, each of these documents is reviewed annually and M&A transactions, and accounting and financial management background that qualify him asis available on our website www.callon.com under the “About Callon - Governance” menu. Shareholders may obtain a “financial expert,” all which make himprinted copy, free of charge, by sending a meaningful contributorwritten request to our Board.Corporate Secretary at our principal executive office located at 2000 W. Sam Houston Parkway S., Suite 2000, Houston, Texas 77042. Any amendments to these documents are promptly posted on our website.
Code of Business Conduct and Ethics
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James M. Trimble | | Class II Director |
Mr. Trimble was elected to our Board atOur Code of Business Conduct and Ethics (the “Code”) sets forth the 2014 Annual Meeting. Mr. Trimble was appointed to the Board of Directors of Stone Energy Corporation (NYSE: SGY) in March 2017policies and then appointed interim Chief Executive Officerexpectations for Callon’s officers, employees and President effective April 28, 2017. Mr. Trimble serveddirectors as CEOwell as consultants, representatives, agents, and President of PDC Energy, Inc. from 2011 until his retirement effective January 1, 2015. Mr. Trimble was an officer of PDC in September 2013 when twelve partnerships for which PDC was the managing general partner each filed for bankruptcy in the federal bankruptcy court, Northern District of Texas, Dallas Division. From 2005 until 2010, Mr. Trimble was Managing Director of Grand Gulf Energy, Limited, a public company tradedcontractors while acting 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 2000 through 2002, Mr. Trimble was CEO of Elysium Energy, a privately held oil and gas company. Prior to this, he was Senior Vice President of Exploration and Production for Cabot Oil and Gas, a publicly traded independent energy company. Mr. Trimble was hired in July 2002 as CEO of TexCal (formerly Tri-Union Development) to manage a distressed oil and gas company through bankruptcy, and that company filed for Chapter 11 reorganization within 45 days after the date that Mr. Trimble accepted such employment. He successfully managed the company through its exit from bankruptcy in 2004. Mr. Trimble currently serves on the Board of Directors of Crestone Peak Resources LLC (a private company operation in the DJ Basin of Colorado) since December 2016. Mr. Trimble previously served on the boards of PDC Energy from 2009 until June 2016, C&J Energy Services LTD from March of 2016 to January 2017 to assist with it Chapter 11 process, Seisgen Exploration LLC, a small private exploration and production company operating in southern Texas, from 2008 to 2015, Grand Gulf Energy LTD from 2009 to 2012, and Blue Dolphin Energy, an independent oil and gas company with operations in the Gulf of Mexico from November 2002 until May 2006. Mr. Trimble is a Registered Professional Engineer who provides the Board a valuable source of engineering, drilling and oil and gas operations management expertise, and his experience as a CEO and board member enhances the Board’s knowledge of current developments and best practices in the industry.
Retiring Director
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John C. Wallace | | Class I Director |
Mr. Wallace has been a member of our Board since 1994. He is a Chartered Accountant having qualified with PricewaterhouseCoopers in Canada in 1963, after which he joined Baring Brothers & Co., Limited in London, England. Prior to his retirement in December 2010, Mr. Wallace served for over twenty-five years as Chairman of Fred. Olsen Ltd., a London-based corporation that he joined in 1968 and which specializes in the business of shipping, renewable energy and property development. He received his B. Comm degree majoring in Accounting and Economics from McGill University in 1959. In November 2004, he successfully completed the International Uniform Certified Public Accountant Qualification Examination and has received a CPA Certificate from the State of Illinois. Mr. Wallace is also retired from the Board of Directors of Bonheur ASA, Oslo, a publicly-traded shipping company, with interests in offshore energy services and renewable energy. In May 2012, Mr. Wallace was appointed as a non-executive director to the Board of Directors of Siem Offshore Inc., a publicly traded shipping company in Norway with a fleet of vessels active in the offshore energy sector, and for which he is a member of the Audit Committee. As a result of his association with Fred Olsen, Ltd. and various associated or related companies, Mr. Wallace has extensive financial and accounting experience in not only the oil and gas industry, but inCallon’s behalf. The Code addresses a number of other related industries, qualifying him as “financial expert.”topics including conflicts of interest, compliance with laws, insider trading, prohibitions on discrimination and harassment, workplace safety and protection of the environment, and fair disclosure. In addition, the Code explicitly prohibits directors, officers and employees from engaging in hedging transactions in Callon stock. It also states that no corporate funds may be used for political contributions.
The Code meets the NYSE’s requirements for a code of business conduct and ethics and also includes a code of ethics applicable to our senior financial officers consistent with the requirements of the SEC. We intend to satisfy the disclosure requirements regarding any amendment to, or any waiver of, a provision of the Code by promptly posting such information on our website. Concerns about potential violations of the Code can be anonymously reported to our ethics helpline by calling 1-844-471-7637 or accessing the following website: callon.ethicspoint.com.
AllEnvironmental, Social and Governance
Callon’s mission is to build trust, create value and drive sustainable growth responsibly for our investors, our employees and the communities in which we operate. Consistent with this mission, the Board oversees the Company’s ESG programs with a focus on long-term, sustainable investments in our operations, team member development, and protecting the environment in the best interests of all of our directors are United States citizens, except Mr. Wallace, whostakeholders. The Board regularly addresses the Company’s efforts to continuously improve outcomes regarding workplace safety, environmental impact, team member diversity and workforce development. The Board is a citizenalso committed to effective and sustainable corporate governance, which we believe strengthens Board and management accountability, promotes the long-term interests of Canada,our shareholders, and Mr. Flury, who holds both U.S. and Canadian citizenship.
helps build public trust in the Company.
Communication with Directors
Shareholders or other interested parties who wish to communicate with the full Board, independent directors as a group, or individual directors, may do so by sending a letter in care of the Corporate Secretary to our principal executive office located at 2000 West Sam Houston Parkway South, Suite 2000, Houston, Texas 77042. Our Corporate Secretary has the authority to discard any solicitations, job inquiries, advertisements, surveys or other inappropriate communications, but will forward any other mail to the named director or group of directors. Our Corporate Secretary will forward approved mail addressed to the full Board to the Chair of the Board who, if appropriate, will share the item with the full Board.
Board Structure and Responsibilities
Governance Highlights
We are committed to effective and sustainable corporate governance, which we believe strengthens Board and management accountability, promotes the long-term interests of our shareholders, and helps build public trust in the Company. We adhere to our core values and governance principles to ensure that we operate our business responsibly, ethically, and in a manner aligned with the interests of our shareholders. Highlights of our commitment to strong corporate governance include the following:
•Eight of our nine directors are independent. Joseph C. Gatto, Jr., our President and CEO, is the only non‑independent member of the Board;
•All Board committees are comprised entirely of independent directors;
•An independent, non-executive director serves as the Company’s Chair of the Board;
•The Company encourages a paced refreshment of the Board. Five of the nine directors have joined within the last five years;
•The Board includes a balance of experience, tenure, and qualifications in areas important to our business;
•We have an over-boarding policy in place for directors;
•The Board conducts regular executive sessions with our independent directors;
•We regularly refresh our governance documents;
•The Board and its committees conduct annual self-evaluations;
•We have adopted stringent insider trading, anti-hedging, and anti-pledging policies;
•We engage in active shareholder engagement practices;
•The Board oversees environmental, social and governance practices;
•The Board oversees succession planning for the CEO and other executive officer positions;
•We engage an independent executive compensation consultant that reports directly to the Compensation Committee;
•The Company adopted annual say-on-pay voting;
•The Compensation Committee has implemented significant director and executive officer stock ownership guidelines;
•We do not have employment agreements with any executive officers;
•We have double-trigger change in control provisions in our severance agreements and equity awards;
•We do not have a poison pill (shareholder rights plan); and
•We promote annual director education and are an NACD Corporate Board member.
General informationInformation
OurThe Board is responsible for determining the ultimate direction of our business determining the principles ofstrategy, overseeing our business strategygovernance policies and policies,culture and promoting the long-term interests of the Company. The Board possesses and exercises oversight authority over our business but, subject to our governing documents and applicable law, delegates day-to-day management of the Company to our CEO and our executivesenior management. The Board generally fulfills its responsibilities through regular meetings to review significant developments affecting usthe Company and to act on matters requiring Board approval. Between regularly scheduled meetings, the Board may also hold special meetings, execute unanimous written consents, and participate in telephonevideo or telephonic conference calls when an important matter requires Board action. During 2017, our2022, the Board met formally six times and transacted business on nine occasions during the year by unanimous written consent.times. All of our directors attended eachat least 75% of the Board and committee meetings either in person or by telephone.virtually during the time he or she served on the Board or committees. In addition, to promote open discussion, the non-employee directors meet in executive session without management following each quarterly board meeting.regularly. L. Richard Flury, initially the Chairman of the Compensation Committee and then appointed as ChairmanChair of the Board, was selected to preside over all executive sessions during 2017. 2022.
It is theCallon's policy of the Board that, to the extent possible, all directors attend our Annual Meetings of Shareholders. Each then-current member of the annual meeting. All then current directorsBoard attended the 2017 annual meeting.
Callon's 2022 Annual Meeting of Shareholders.
The Board, in consultation with the Nominating and GovernanceN&ESG Committee, has determined that a classified board structure continues to be appropriate for us, particularly in an industry where a long-term strategic planning outlook is critical for the successful exploration, development and production of oil and natural gas resources.resources through commodity price cycles. Our future success depends in significant part on the in-depth knowledge of our business and operations by our directors. We believe that a classified board, with responsible refreshment, promotes stability, continuity and experience among our directors, which is essential to developing and implementing long-term strategies, while resisting the pressure to focus on short-term results at the expense of enhancing long-term value and success.
Director independence
To minimize potential conflicts, it is a policy of the Board that a majority of the non-employee members of the Board be independent. In accordance with the standards for companies listed on the NYSE and the rules and regulations promulgated by the SEC, as well as our Corporate Governance Guidelines, the Board considers a director to be independent if it has affirmatively determined that the director has no material relationship with the Company that could compromise his ability to exercise independent judgment in carrying out his responsibilities. The Board makes independence determinations when it approves director nominees for election at the annual meeting and also whenever a new director joins the Board between annual meetings. The Board reviewed the independence of its directors and nominees in accordance with the standards described above and affirmatively determined that each of its directors and nominees (other than Mr. Gatto) is independent. The Board will evaluate the independence of each non-employee director on an ongoing basis.
Board leadership structure
Leadership Structure
One of the Board’s key responsibilities is determining the appropriate leadership structure for the Board, which helps ensure its effective and independent oversight of management on behalf of our stockholders. Ourshareholders. The Board believes that there is no one generally accepted approach to providing board leadership and that given the dynamic and competitive environment in which we operate, the optimal board leadership structure may vary as circumstances warrant. Accordingly, the Board has no policy mandating the separation or combination of the roles of ChairmanChair of the Board and CEO, but periodically discusses and considers the structure as circumstances change. As such, the Board believes that it is in the best position to evaluate the needs of the Company and to determine how best to organize the Company’s leadership structure to meet those needs.
Mr. Fred L. Callon served as both Chairman(1)As of March 2, 2023
Currently, the Board and CEO until his sudden passing in May 2017. Prior to this event, because of Mr. Callon’s tenure and experience with the Company, the Board believed that the most effective leadership structure for the Company was for Mr. Callon serve as both Chairman of the Board and CEO. After Mr. Callon’s passing, the Nominating and Corporate Governance Committee recommended separatinghas separated the roles of CEO and Chairman, andChair of the Board approved the appointment ofand appointed independent director Mr. Flury as ChairmanChair of the Board and Mr. Gatto as CEO. In light of Mr. Flury’s impending retirement, the Board has named independent director Matthew Bob as Chair-elect.
Areas of Board is currently comprised of seven directors, all of which are independent. Independent directors and management generally have different perspectives and roles in strategy development. OurOversight
Board Risk Oversight
As an independent directors have backgrounds in the oil and gas industry or other relevant experiences which complementcompany, we face a number of risks. The Board, as a whole and through its committees, generally oversees risk management and our long-term strategic direction, ensuring that risks undertaken by the CEO’s comprehensive, company-specific perspective. AsCompany are consistent with the officer having primary responsibility for managingBoard’s risk tolerance. The Board leadership structure and our daily operationspractice of a high degree of interaction between our directors and identifying strategic priorities, the CEO is best positioned to leadmembers of senior management facilitate this oversight function. Our executive officers regularly attend the Board through reviews of key businessmeetings and strategy decisions. The Board therefore believes that it is prudentare available to have the CEO onaddress any questions or concerns raised by the Board related to risk management and thus
has included and recommended the nomination of Mr. Gatto as a director in this year’s proxy. This dynamic effectively promotes the opportunity for a successful blendany other matters. Other members of our independent directors’ perspectives and oversight responsibilities and facilitatesmanagement team periodically attend Board meetings or are otherwise available to confer with the Board to the extent their expertise is required to address risk management matters. The information flow and communication throughout the year between the Board and senior management regarding long-term strategic planning and short-term operational reporting includes matters of material risk inherent in our business of developing oil and natural gas assets. The Board realizes, however, that it is not possible or prudent to eliminate all risk and that appropriate risk-taking is essential in order to achieve our near and longer-term objectives.
While the Board is ultimately responsible for risk oversight, the Board exercises additional risk oversight responsibilities through its committees, which are both essential to effective governance. The Board’s structure does not currently provide for a lead independent director. The Board has four standing committees, each of which is comprised entirelysolely of independent directors. Accordingly,Each such committee has primary risk oversight responsibility with respect to matters within the Compensation Committee maintainsscope of its independence to both objectivelyduties as contemplated by its charter and subjectively evaluate Mr. Gatto’s performance when reviewing or modifying his compensation.
The role of our Chairman is to oversee and ensure Board effectiveness, and in his capacity as Chairman, Mr. Flury has the following responsibilities:described below.
schedules all meetings of the Board;
establishes Board meeting agendas and ensures critical issues are included;
chairs meetings of the Board and the Annual Meeting of Stockholders;
ensures that the flow of information provided to the Board is timely, complete, and accurate;
communicates with all directors on key issues and concerns outside of Board meetings;
represents us to and interacts with external stockholders; and
assists the Board and executive officers in assuring compliance with and implementation of our governance principles.
Standing Committees of the Board of Directors
In order to facilitate the various functions of theThe Board the Board currently has four standing committees, each of which is comprised solelyentirely of independent directors, including the:
Audit Committee;
Compensation Committee;
Nominating and Corporate Governance Committee; and
Strategic Planning and Reserves Committee.
directors. Each committee, discussed below in greater detail, has a written charter that was recently updatedestablishes the responsibilities and adopted by the Board in November 2017, which sets forth guidance on the role of the chairman of such committee and the roles and responsibilitiesscope of the committee and its Chair. Each committee charter was reviewed in 2022 and revised as a whole.deemed necessary by the Board.
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| BOARD OF DIRECTORS | |
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The Audit Committee, among other duties, is charged with overseeing financial reporting, accounting integrity, and material risk exposures. | | | The N&ESG Committeefocuses on issues relating to corporate governance, ESG matters, and Board and Committee composition. This Committee also assists the Board in fulfilling its oversight responsibilities with respect to succession planning for our directors and executive officers. |
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The Compensation Committeeoversees 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. | | | The Operations & Reserves Committeeoversees the operations of the Company and the integrity of our reserve estimation reporting process. |
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Audit Committee functions and responsibilities
Purpose. The principal functionCommittees of the Audit Committee is to assistBoard
The following table provides the composition of the Committees of the Board in overseeingas of March 2, 2023.
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| | Callon Committees |
| Name and Independence | Audit | Compensation | N&ESG | Operations &
Reserves |
| Class I Directors (term expires in 2025) |
| Mary Shafer-Malicki Independent | ○ | | | ● |
| Steven A. Webster Independent | | | ○ | ○ |
| Class II Directors (term expires in 2023) |
| Matthew R. Bob Independent | | ● | | ○ |
| Anthony J. Nocchiero Independent | ○ | | ○ | |
| James M. Trimble(a) Independent | | | ● | ○ |
| Class III Directors (term expires in 2024) |
| Frances Aldrich Sevilla-Sacasa Independent | ● | ○ | | |
| Barbara J. Faulkenberry Independent | | ○ | ○ | |
| L. Richard Flury(a) Independent Chair of the Board | ☐ | ☐ | ☐ | ☐ |
| Joseph C. Gatto, Jr. President and Chief Executive Officer | | | | |
● Chair ○Member ☐Non-Voting Member |
(a) Messrs. Flury and Trimble are retiring from the areas of financial reporting and accounting integrity.
Members. The Audit Committee is currently comprisedBoard effective as of the following independent directors, with three directors deemed by the Board to be financial experts, as defined and required by the NYSE rules and the Exchange Act (“Financial Expert”):
John C. Wallace (Chairman and Financial Expert)
Michael L. Finch (Financial Expert)
L. Richard Flury
Larry D. McVay
Anthony J. Nocchiero (Financial Expert)
The Board has determined that all members meet the independence requirementsdate of the SEC and NYSE rules and the financial literacy requirements of the NYSE. Members of the Audit Committee may not simultaneously serve on the audit committee of more than two other public companies.Annual Meeting.
Meetings. The committee met five times during 2017. All members of the Audit Committee attended each meeting.PROPOSAL 1
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Audit Committee Frances Aldrich Sevilla-Sacasa (Chair and Financial Expert)
Anthony J. Nocchiero (Financial Expert)
Mary Shafer-Malicki
L. Richard Flury (non-voting member) | 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 2022 Seven meetings; all members attended at least 75% of Audit Committee meetings during the time he or she served on the Audit Committee. |
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Responsibilities. RESPONSIBILITIES
Pursuant to its charter, our Audit Committee functions in an oversight role and has the following purposes:
overseeing•Overseeing the quality, integrity and reliability of the financial statements and other financial information we provide to any governmental body or the public;
overseeing•Overseeing our compliance with legal and regulatory requirements;
selecting•Selecting and hiring (subject to ratification by our stockholders)shareholders) the independent public accounting firm;
overseeing•Overseeing the qualifications, independence and performance of the independent auditor;
overseeing•Overseeing the effectiveness and performance of our internal audit function;
overseeing ourfunction, internal accounting controls, disclosure controls and procedures, internal control function regarding finance, accounting, legal complianceover financial reporting and ethics;the internal auditors;
establishing•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;
assess•Assessing matters related to risk, risk controls and compliance, including reviewoversight of Callon's hedging policy;
•Producing the Audit Committee Report for inclusion in our annual proxy statement;
•Reviewing and approval of hedging practicesapproving related party transactions; and policies and
•Performing such other functions the Board may assign to the Audit Committee from time to time, which currently includes overseeing matters related to cybersecurity and the security of information technology systems;
producingsystems, including management’s plans, programs and policies designed to mitigate cybersecurity risks and third party reports on the Audit Committee Report for inclusion in our annual proxy statement; and
performing such other functions our Board may assign to the Audit Committee from time to time.
information technology control environment.
The Audit Committee oversees our accounting and auditing procedures and financial reporting practices and is responsible for the engagement of and oversight of all audit work conducted by our independent registered public accounting firm. The Audit Committee conducts an annual evaluation of the firm’s independence and performance based on factors such as technical aptitude, responsiveness, and value for service, and provides feedback to firm leadership. The Audit Committee also oversees the periodic rotation of the lead audit partner from our independent registered public accounting firm, as required by SEC rules, and is directly involved in the selection of such partner.
The Audit Committee meets periodically, generallyat least quarterly with our executive and financial management teams, internal auditor and our independent registered public accounting firm to review our financial information and systems of internal controls.controls systems. The independent registered public accounting firm reports directly to the Audit Committee and, if requested, meets with the Audit Committee in executive session without management representatives present. The Audit Committee has the authority to investigate any matters brought to its attention and to retain outside legal, accounting or other consultants if deemed necessary.
The Audit Committee oversees the fee structure of the independent registered public accounting firm and is required to pre-approve all audit, audit-related and non-audittax services provided by the independent registered public accounting firm exceeding $25,000. These services may include audit services, audit-related services, tax services and other services.$50,000. The Audit Committee approved all of the fees described in Proposal 4.
Relationship with independent registered public accounting firm
Independent Registered Public Accounting Firm
Management is responsible for establishing and maintaining internal controls over financial reporting and for assessing the effectiveness of those controls. The independent registered public accounting firm is responsible for performing independent audits of our consolidated financial statements and internal controls over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”) (United States) and issuing reports thereon. The Audit Committee’s responsibility is to monitor and oversee these processes. Grant Thornton LLP an independent registered public accounting firm, has served as our independent registered public accounting firm since 2016.
INDEPENDENCE
Compensation Committee functions and responsibilities
Purpose.The purpose ofBoard has determined that all members meet the Compensation Committee is to establish our compensation policies and oversee the administration of our compensation program.
Members. Consistent with the listingindependence requirements of the SEC and NYSE rules and the Compensation Committee is composed entirely of independent members of our Board, as each member meets the independencefinancial literacy requirements set by the NYSE and applicable federal securities laws. Mr. Flury was initially appointed as Chairman of the Compensation Committee, but upon the passing of Mr. Callon, then ChairmanNYSE. Members of the Board, Mr. Flury was appointed ChairmanAudit Committee may not simultaneously serve on the audit committee of the Board and Mr. Bob was appointed Chairman of the Compensation Committee. The Compensation Committee is currently comprised of the following independent directors:more than two other public companies.
Matthew R. Bob (Chairman)PROPOSAL 1
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Compensation Committee Matthew R. Bob (Chair)
Frances Aldrich Sevilla-Sacasa
Barbara J. Faulkenberry
L. Richard Flury (non-voting member) | 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 2022 Six meetings; all members attended at least 75% of Compensation Committee meetings. |
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Anthony J. NocchieroRESPONSIBILITIES
James M. Trimble
John C. Wallace
Meetings. The Compensation Committee met five times during 2017. All members of the Compensation Committee attended each meeting.
Responsibilities.Pursuant to its charter, ourthe Compensation Committee’s duties include the responsibility to:to assist the Board in:
evaluate•Evaluating the performance of and establishestablishing the compensation of the CEO;
establish,•Establishing, with input from the CEO, the compensation for our other executive officers;
establish•Establishing and reviewreviewing our overall executive compensation philosophy and approveapproving changes to our compensation program;
review•Reviewing incentive compensation arrangements to confirm that executive compensation does not encourage unnecessary risk taking;
review matters relating to management succession;
administer•Administering our long-term incentive plans;
review•Reviewing and approveapproving the CD&A for inclusion in theour annual proxy statement;
review•Reviewing and recommendrecommending to the Board compensation for non-employee directors;
retain•Retaining and overseeoverseeing compensation consultants, including the independence of the consultants;
review•Reviewing and approveapproving performance criteria and results for bonus and performance-based equitycompensation awards for senior executive officers and approveapproving awards to those officers; and
perform•Performing such other functions as ourthe Board may assign to the Compensation Committee from time to time.
The Compensation Committee retainedretains the services of Meridian Compensation Partners LLC, an independent compensation consulting firm,consultant to assist in the annual review of market and industry data to assess our competitive position with respect to each element of total compensation and to ensureassist with the attraction and retention of, and appropriate reward to, our CEO and other executive officers.
Pursuant to applicable SEC and NYSE rules, the Compensation Committee interlocks and insider participationhas determined that no conflicts of interest exist or have existed related to the Compensation Committee’s engagement of FW Cook.
INDEPENDENCE
NoneConsistent with the listing requirements of the NYSE, the Compensation Committee is composed entirely of independent members of the Board, as each member meets the independence requirements set by the NYSE and applicable federal securities laws.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Frances Aldrich Sevilla-Sacasa, Matthew R. Bob, Barbara J. Faulkenberry, Anthony J. Nocchiero and James M. Trimble served on the Company’s Compensation Committee at various times during fiscal year 2022, with L. Richard Flury attending meetings as a non-voting member. No member of our Compensation Committee is presently or has been an officer or employee of Callon.the Company. In addition, during the last fiscal year, none of ourno executive officersofficer served as a member of the board or the compensation committee (or other board committee performing similar functions or, in the absence of any such committee, the entire board) of any entity in which a Callon Board or Compensation Committee member is an executive officer.
Nominating and Corporate Governance Committee functions and responsibilities | | | | | |
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Nominating & ESG Committee James M. Trimble (Chair)
Barbara J. Faulkenberry
Anthony J. Nocchiero
Steven A. Webster
L. Richard Flury (non-voting member) | PURPOSE The purpose of the N&ESG Committee is to oversee ESG matters; identify and recommend qualified candidates to the Board; assess director, Board and committee effectiveness; develop and implement our Corporate Governance Guidelines; oversee succession planning for the Board and executive officers; and otherwise take a leadership role in shaping the corporate governance of the Company. MEETINGS IN 2022 Seven meetings; all members attended at least 75% of N&ESG Committee meetings. |
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RESPONSIBILITIES
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; and otherwise take a leadership role in shaping the corporate governance of our Company.
Members. Each member of the Committee meets the independence requirements of the NYSE and applicable federal securities laws. The Nominating and Corporate Governance Committee is currently comprised of the following independent directors:
Anthony J. Nocchiero (Chairman)
Matthew R. Bob
Michael L. Finch
Larry D. McVay
James M. Trimble
Meetings. The Nominating and Corporate Governance Committee met six times during 2017. All members of the Committee attended each meeting.
Responsibilities.Pursuant to its charter, the Nominating and Corporate GovernanceN&ESG Committee’s duties include the responsibility to assist the Board in:
•Overseeing ESG policies, performance and disclosure, as well as developing recommendations for the Board on emerging issues related to our industry;
evaluating a set of specific•Evaluating criteria for Board membership and identifying individuals qualified to become Board members, recommending nominees for election at the next annual meeting of stockholders,shareholders, reviewing the suitability for continued service as a director of each Board member, or otherwise fillingand leading the search for qualified candidates to fill any Board vacancies;
assessing•Assessing the size and composition of the Board and its committees and recommending to the Board the members and chair for each Board committee;
advising•Overseeing the development of succession and plans for the Board including overall Board and Committee composition and leadership;
•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;
overseeing•Overseeing the annual self-evaluation of the performance of the Board and its committees;
overseeing•Overseeing and approving plans for management continuity and succession;
recommending•Recommending to the Board a successor to the CEO when a vacancy occurs;
review•Reviewing directorships in other public companies held by or offered to our directors or executive officers of the Company;officers;
oversee•Overseeing continuing education for the Board; and
performing•Performing other such functions as the Board may assign to the Nominating and Corporate GovernanceN&ESG Committee from time to time.
INDEPENDENCE
Director identification and selection
The Nominating and Corporate Governance Committee has established criteria it considers as guidelines in considering nominations to our Board and evaluates potential nominees based on the contribution such nominee’s background and skills could have upon achieving the goal of a well-rounded, diverse Board that functions collegially as a unit. While not an exhaustive list, key criteria include:
relevant oil and gas exploration and production industry knowledge and experience;
diversity of background and experience in areas including business, finance, accounting, technology, marketing, and government;
personal qualities of leadership, character, judgment and personal and professional integrity and high ethical standards;
the candidate’s ability to exercise independent and informed business judgment;
whether the candidate is free of conflicts and has the time required for preparation, participation and attendance at meetings;
diversity, including differences in viewpoints, background, education, gender, race or ethnicity, age, and other individual qualifications and attributes;
the ability to work with other members of the Board, 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
in the case of an incumbent director, such director’s past performance on the Board.
The Nominating and Corporate Governance Committee and the Board may also consider other qualifications and attributes that they believe are appropriate in evaluating the ability of an individual to serve as aEach member of the Board. The Nominating and Corporate Governance Committee’s goal is to assemble a Board that brings to us a variety of perspectives and skills derived from high quality business and professional experience, while also havingN&ESG Committee meets the requisite business and relevant oil and gas industry experience to perform its oversight role satisfactorily for our stockholders. In making its determinations, the Committee evaluates each individual in the contextindependence requirements of the Board as a whole, with the objective of assembling a group that can best represent stockholder interests through the active, objective and constructive participation in meetings and the strategic decision-making processes. The Board believes that diversity with respect to viewpoint, skills and experience should be considered as part of the overall assessment of the Board’s functioning and needs.
Our Corporate Governance Guidelines set forth our policy with respect to Board diversity. We are committed to building a diverse Board comprising individuals from different backgrounds, including differences in viewpoints, experience, education, gender, race or ethnicity, age and other individual qualifications and attributes. To accomplish this, the Nominating and Corporate Governance Committee will continue to require that search firms engaged by Callon seek to present a robust selection of women and ethnically diverse candidates in all prospective director candidate pools.
In accordance with our Certificate of Incorporation, any stockholder may nominate a person for election to the Board upon delivery of written notice to us of such nomination. Such notice must be sent as provided in our Certificate on or before the deadline set forth in our Certificate, and must otherwise comply with the procedures set forth in our Certificate of Incorporation. For nominations at the 2018 Annual Meeting, the Board will consider individuals identified by stockholders on the same basis as nominees identified from other sources. A submission recommending a nominee should include:
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;applicable federal securities laws.
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 stockholder or beneficial owner and each proposed nominee;
a completed and signed questionnaire, representation and agreement, pursuant to the Company’s Bylaws, with respect to each nominee for election or re-election to the Board; andPROPOSAL 1
the proposed nominee’s written consent to serve if nominated and elected. | | | | | |
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Operations & Reserves Committee Mary Shafer-Malicki (Chair)
Matthew R. Bob
James M. Trimble
Steven A. Webster
L. Richard Flury (non-voting member) | PURPOSE The purpose of the Operations & Reserves Committee is to assist the Board in its oversight of the Company's operations and its oversight of the integrity of the determination of our oil and natural gas reserve estimates. MEETINGS IN 2022 Five meetings; all members attended at least 75% of Operations & Reserves Committee meetings during the time he or she served on the Operations & Reserves Committee. |
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In making its nominations, the Nominating and Corporate Governance Committee identifies nominees by first evaluating the current members of the Board willing to continue their service and any potential need to expand the Board to include additional expertise. Current members with proven service and a record of quality contribution to the Board and the qualifications and skills that are consistent with the Committee’s criteria for Board service are re-nominated. As to vacancies, the Committee will generally poll the Board members and members of management for recommendations. The Committee may also review the composition and qualification of the Boards of Directors of our competitors, and may seek input from industry experts or analysts. The Committee may also choose to engage third-party search firms in situations where particular qualifications are desired for membership in the Board.
Over time, the Board refreshes its membership through a combination of adding or replacing directors to achieve the appropriate balance between maintaining longer-term directors with deep institutional knowledge of the Company and adding directors who bring a diversity
of perspectives and experience. As a reflection of this philosophy, if all of the nominees are elected to the Board, following the Annual Meeting:
Five out of eight directors will have tenures of less than five years.
Seven of the eight directors will be independent.
Composition of Board committees will continue to be refreshed.RESPONSIBILITIES
The new directors, including the current nominees, will bolster the Board’s diversity, experience and knowledge in the areas of strategic planning, risk management, oil and gas exploration and production, accounting and financial expertise, and best practices in the industry.
Strategic Planning and Reserves Committee functions and responsibilities
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 assist management and the Board with its oversight of the integrity of the determination of our oil and natural gas reserve estimates.
Members. The Strategic Planning and Reserves Committee shall consist of no fewer than three members of the Board, and is currently comprised of the following independent directors:
Larry D. McVay (Chairman)
Matthew R. Bob
Michael L. Finch
L. Richard Flury
Anthony J. Nocchiero
James M. Trimble
John C. Wallace
Meetings. The Strategic Planning and Reserves Committee met three times during 2017. All members of the Committee attended each meeting during 2017. This Committee meets periodically during the year, generally prior to the scheduled quarterly Board meetings, to review the progress of our capital expenditure budget and to evaluate recent trends in the independent oil and gas industry that may have an impact on our current business strategy for the remainder of the year.
Responsibilities. The Strategic Planning andOperations & Reserves Committee was created to oversee the responsibilities of the Board relating to strategic planning,operations and reserves, including:
organizing and overseeing•Overseeing the Board’s participation in the review of Callon's performance related to production and development of a strategic plan,operations, including but not limited to, the risk assessmentsafety and environmental performance;
•Supporting our management process;in driving continuous operational improvement and excellence;
•Reviewing and monitoring the progress of the implementation of the strategic plan,long-term resource development strategy and advising the Board if additional Board action appears to be needed;associated activity plans;
assuring that management is addressing the personnel requirements for the successful implementation of the strategic plan;
assisting management and the Board with its oversight of matters regarding•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, and (iii) the performance of our independent reserve engineering firm,firm; and (iv) our compliance with certain legal and regulatory requirements relating to reserve reporting; and
performing•Performing other such functions as the Board may assign to the Strategic Planning andOperations & Reserves Committee from time to time.
INDEPENDENCE
Each member of the Operations & Reserves Committee meets the independence requirements of the NYSE and applicable federal securities laws. Corporate Governance Matters
Corporate governance principles
Director Compensation
The compensation of our non-employee directors is reviewed by the Compensation Committee and is approved by the Board. We use a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on the Board. In determining director compensation, we consider the responsibilities of our directors, the significant amount of time the directors spend fulfilling their duties, and the competitive market for skilled directors.
Annually, the Compensation Committee directly engages an independent compensation consultant to conduct an analysis of director compensation and recommend any adjustments to the total annual compensation of the non-employee directors. The consultant evaluates competitive market data, utilizing the same industry peer group used for executive compensation market data (see page 50).
For 2022, the Compensation Committee, with input from its compensation consultant FW Cook, recommended an increase to the RSU grant value to return the total director compensation package to pre-COVID levels and align with the industry peer group. The Compensation Committee also recommended that all other aspects of the non-employee director compensation remain consistent with 2021, including chair fees.
Upon recommendation from the Compensation Committee, for 2022, the Board believes that sound corporate governanceapproved an increase to the RSU grant value while retaining all other components of the director compensation packages consistent with 2021 amounts:
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| Fee Type | 2021
Compensation | 2022
Compensation |
| Board Member Cash Retainer | | $ | 95,000 | | | | $ | 95,000 | | |
| Restricted Stock Unit ("RSU") Grant Value | | $ | 120,000 | | | | $ | 150,000 | | |
| Total Director Compensation | | $ | 215,000 | | | | $ | 245,000 | | |
| Chairmen Fees | | | | | | |
| Non-Executive Chair | | $ | 120,000 | | | | $ | 120,000 | | |
| Audit Committee Chair | | $ | 20,000 | | | | $ | 20,000 | | |
| Compensation Committee Chair | | $ | 20,000 | | | | $ | 20,000 | | |
| N&ESG Committee Chair | | $ | 20,000 | | | | $ | 20,000 | | |
| Operations & Reserves Committee Chair | | $ | 20,000 | | | | $ | 20,000 | | |
Our director compensation program generally consists of cash retainers and an annual grant of RSUs awarded under the 2020 Omnibus Incentive Plan (the "2020 Plan"). The RSU grants are awarded to match competitive practices and policies provideencourage long-term alignment with shareholders. Grants are made using the 20-day average closing stock price of Callon’s stock. The RSUs vest on the first anniversary following the grant date, or on the date of the Company’s subsequent Annual Meeting, whichever occurs first.
Each non-employee director is reimbursed for reasonable out-of-pocket costs incurred to attend Board and committee meetings and for director education. If a member of the Board is an important frameworkofficer or other employee of the Company, he or she does not receive compensation for his or her service as a director.
Non-employee directors have the opportunity to assist itmake an annual election to defer some or all of their cash retainer or annual stock award pursuant to the terms of a deferred compensation plan for non-employee directors (the "Deferred Compensation Plan") until separation from service as a director. All deferrals under the plan are credited as phantom stock units of Callon common stock.
Callon's non-employee directors are subject to stock ownership guidelines of five times the annual cash retainer of $95,000. As of December 31, 2022, all non-employee directors were in fulfilling its dutycompliance with the stock ownership policy, either through meeting the ownership requirement or by being within the transition period. For more information on the stock ownership guidelines, see page 51.
The table below indicates the total compensation earned during 2022 for each non-employee director. In addition to stockholders. The frameworkhis role as a director, Mr. Gatto also serves as the Company's President and CEO. His compensation is disclosed in the Summary Compensation Table.
NON-EMPLOYEE DIRECTOR COMPENSATION FOR 2022
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| Director | Fees Earned or Paid in Cash(a) | | Stock Awards(b) | | All Other
Compensation | | Total |
| Frances Aldrich Sevilla-Sacasa | | $ | 115,000 | (f) | $ | 157,485 | (d) | | $ | — | | $ | 272,485 |
| Matthew R. Bob | | $ | 115,000 | (e) | $ | 157,485 |
| | $ | — | | $ | 272,485 |
| Barbara J. Faulkenberry | | $ | 95,000 | (c) | $ | 157,485 | | | $ | — | | $ | 252,485 |
Michael L. Finch(g) | | $ | 115,000 | (f) | $ | 157,485 | | | $ | — | | $ | 272,485 |
| L. Richard Flury | | $ | 215,000 | (h) | $ | 157,485 | | | $ | — | | $ | 372,485 |
Larry D. McVay(i) | | $ | — | | $ | — | | | $ | — | | $ | — |
| Anthony J. Nocchiero | | $ | 95,000 | (c) | $ | 157,485 | | | $ | — | | $ | 252,485 |
| Mary Shafer-Malicki | | $ | 162,500 | (j) | $ | 215,272 | (k) | | $ | — | | $ | 377,772 |
| James M. Trimble | | $ | 115,000 | (l) | $ | 157,485 | | | $ | — | | $ | 272,485 |
| Steven A. Webster | | $ | 95,000 | (c) | $ | 157,485 | | | $ | — | | $ | 252,485 |
(a)Does not include reimbursement of expenses associated with attending Board and committee meetings and for our corporate governance can be found in our governance documents, which include:board education.
Corporate Governance Guidelines;
(b)Amounts calculated utilizing the provisions of FASB ASC Topic 718. These amounts utilize a Codegrant date fair value of Business Conduct and Ethics; and
Charters$51.55 per share for the awards. With the exception of Mr. Finch as discussed in FN(g) below, the aggregate number of RSU awards outstanding as of December 31, 2022 for each director is 3,055, which RSUs are scheduled to vest on the earlier of either (i) May 25, 2023, or (ii) the date of the Company's 2023 Annual Meeting of Shareholders.
(c)Represents annual retainer of $95,000.
(d)Ms. Aldrich Sevilla-Sacasa elected to have her equity award deferred pursuant to the terms of the Deferred Compensation Plan.
(e)Represents annual retainer of $95,000 and an additional $20,000 for acting as Chair of the Compensation Committee.
(f)Represents annual retainer of $95,000 and an additional $20,000 for acting as Chair of the Audit Committee.
(g)Mr. Finch resigned from the Board effective as of November 3, 2022, and his outstanding RSUs vested immediately thereafter.
(h)Represents annual retainer of $95,000 and an additional $120,000 for acting as the non-executive Chair of the Board.
(i)Mr. McVay retired from the Board effective as of the date of the 2022 Annual Meeting. Mr. McVay previously elected to have certain historical equity award deferred pursuant to the terms of the Deferred Compensation Nominating and Corporate Governance, and Strategic Planning and Reserves Committees.Plan. Upon Mr. McVay's retirement such deferred awards were paid in cash.
In keeping with sound corporate governance practices, each of these documents are reviewed annually. Based on that review, they were each updated and adopted by(j)Represents a partial year retainer issued upon Ms. Shafer-Malicki's appointment to the Board in November 2017January 2022 of $47,500, an annual retainer of $95,000, and are available on our website www.callon.com, under the “About Callon
- Governance” menu. Stockholders may obtain a printed copy, free of charge, by sending a written request to our Corporate Secretary at our principal executive office in Natchez, Mississippi. We also promptly post on our website any amendments to these documents and any waivers from the Code of Business Conduct and Ethicsan additional $20,000 for our directors and principal executive, financial and accounting officers.
Ethics
Our Code of Business Conduct and Ethics (the “Code”) sets forth the policies and expectations applicable to every director, officer and employee,acting as well as the Company’s contractors, agents and representatives, including consultants. Callon operates in accordance with the highest ethical standards and relevant laws. The Company places the highest value on the integrity of each of its employees and representatives. The Company’s culture demands not only legal compliance, but also responsible and ethical behavior. Callon is committed to being a responsible corporate citizen. The Code addresses a number of topics, including conflicts of interest, relationships with others, corporate payments, disclosure policy, compliance with laws, corporate opportunities, insider trading, discrimination or harassment of any kind, workplace safety and a healthy work environment, protectionChair of the environment, andOperations & Reserves Committee.
(k)Ms. Shafer-Malicki elected to have her equity award deferred pursuant to the protection and proper use of our assets. The Code meets the NYSE’s requirements for a code of business conduct and ethics, as well as the SEC’s definition of a code of ethics applicable to our senior officers. Neither the Board nor any Board committee has ever granted a waiverterms of the Code.
Board risk oversight
As an independent E&P company, we face a number of risks. Assessing and managing material risk is the responsibility of our management team, while our Board, as a whole and through its committees, generally oversees risk management and our long-term strategic direction, ensuring that risks undertaken by the Company are consistent with the Board’s risk tolerance. Our Board leadership structure and our practice of a high degree of interaction between our directors and members of senior management facilitate this oversight function. Our executive officers regularly attend the Board meetings and are available to address any questions or concerns raised by the Board on risk management-related and any other matters. Other members of our management team periodically attend the Board meetings or are otherwise available to confer with the BoardDeferred Compensation Plan. In addition to the extent their expertise is requiredshares referenced in FN(b) above, this amount also represents a pro-rata award of 1,223 RSUs granted to address risk management matters. The information flow and communication throughout the year between our Board and senior management regarding long-term strategic planning and short-term operational reporting includes matters of material risk inherent in our business of exploring for and producing oil and natural gas. The Board realizes, however, that it is not possible or prudentMs. Shafer-Malicki upon her appointment to eliminate all risk and that appropriate risk-taking is essential in order to achieve our near and longer-term objectives.
While the Board is ultimately responsible for risk oversight, the Board exercises additional risk oversight responsibilities through its committees, which are comprised solely of independent directors. Each such committee has primary risk oversight responsibility with respect to all matters within the scope of its duties as contemplated by its charter and as described below.
The Audit Committee, among other duties, is charged with overseeing material financial risk exposures in the areas of financial reporting, internal controls, compliance with legal and regulatory requirements, hedging oversight and cybersecurity risk management. This Committee also oversees responses to any alleged violations of our policies made by whistleblowers.
The Compensation Committee reviews and attempts to mitigate associated risks that may result from our compensation policies in order that they do not encourage unnecessary or excessive risk taking by management.
The Nominating and Corporate Governance Committee focuses on issues relating to Board and Board committee composition and assists the Board in fulfilling its oversight responsibilities with respect toJanuary 2022, utilizing a grant date fair value of $47.25 per share for the managementaward.
(l)Represents annual retainer of risks associated with board organization, membership, independence$95,000 and structure, succession planningan additional $20,000 for our directors and executive officers, and our corporate governance principles.
The Strategic Planning and Reserves Committee organizes and oversees the Board’s participation in the risk assessment and management processacting as it relates to the development and implementation of our strategic plan and the integrity of our reserve estimation reporting process and related disclosures.
Communication with directors
Stockholders or other interested parties may communicate with the full Board, independent directors as a group, or individual directors, by sending a letter in careChair of the Corporate Secretary at our principal executive office, P.O. Box 1287, Natchez, MS 39121. Our Corporate Secretary has the authority to discard any solicitations, job inquiries, advertisements, surveys or other inappropriate communications, but will forward any other mail to the named director or group of directors. Our Corporate Secretary will forward approved mail addressed to the full Board to the Chairman of the Board who, if appropriate, will share the item with the full Board.N&ESG Committee.
EXECUTIVE OFFICERS
Executive Officers
The following table sets forth the names, ages and positions of our current executive officers, followed by brief descriptions of the background and principal occupation of each:
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Name | | Age | | Positions Held |
| Joseph C. Gatto, Jr. | | 47 | | Current President and CEO; Former CFO |
James P. Ulm II | President, Chief Executive Officer and Director Joseph C. Gatto, Jr. has served the Company as Chief Executive Officer since May 2017 and as a Director since May 2018. Mr. Gatto joined the Company in April 2012 as Senior Vice President, Corporate Finance, with responsibility for our capital markets and strategic planning functions, in addition to investor relations activities. Effective March 31, 2014, Mr. Gatto was appointed Chief Financial Officer and Treasurer of the Company and in August 2016 was promoted to President while retaining the roles of Chief Financial Officer and Treasurer. In May 2017, he was promoted to Chief Executive Officer while retaining the role as President. Mr. Gatto was elected as a member of the Board of Directors in May 2018. Prior to joining Callon, Mr. Gatto was a Managing Director in the energy investment banking groups of Merrill Lynch & Co. and Barclays Capital from July 1997 until February 2009, with involvement in all phases of M&A and capital raising transactions for his clients. In February 2009, he founded MarchWire Capital, LLC, a financial advisory and strategic consulting firm, and subsequently served as Head of Structuring and Execution with Merrill Lynch Commodities, Inc. from January 2010 until November 2011. Mr. Gatto currently serves on the board of directors for the American Production & Exploration Council and the Independent Petroleum Association of America and as a member of the Contemporary Arts Museum Houston Board of Trustees. 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. |
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| 55 | | | | |
| Kevin Haggard |
| Senior Vice President and CFO |
Gary A. Newberry | | 63 | | Chief Financial Officer Kevin Haggard has served the Company as Senior Vice President and COOChief Financial Officer since May 2021. Prior to joining Callon, Mr. Haggard was Vice President and Treasurer of Noble Energy, Inc., an independent oil and natural gas E&P company, from 2016 to 2020, where he directed the company's global corporate finance and treasury operations. Before joining Noble Energy, Mr. Haggard served as Vice President, Finance and Treasurer of Trinity River Energy and held the same position at HighMount Exploration & Production. Prior to those roles, he served as Chief Financial Officer of SunCap Financial and as an investment banker with Credit Suisse. Mr. Haggard has more than 20 years of leadership experience across energy and finance. He currently serves on the Board of Kids Meals, Inc. Mr. Haggard holds a Master of Management from the Kellogg School of Management at Northwestern University and a Bachelor of Science in Business Administration from Georgetown University. |
Jerry A. Weant |
| | 59 | | | |
| Jeffrey S. Balmer |
| Senior Vice President Landand Chief Operating Officer Dr. Jeffrey S. Balmer has served the Company as Senior Vice President and Chief Operating Officer since November 2018. Dr. Balmer has over 30 years of operations and subsurface leadership experience in the energy industry. Prior to joining Callon in November 2018, his most recent role was Vice President and General Manager, Southern Operating Area, for Encana Corporation, with responsibility for all of Encana’s upstream operations in the Permian Basin from 2015 to 2018. After joining Encana in 2008, he held various leadership roles including Vice President and General Manager, Western Operating Area, managing operations in the Eagle Ford, DJ, San Juan, Piceance and Wind River Basins, and Vice President, Emerging Plays. Prior to joining Encana, Dr. Balmer served in a variety of technical and operations leadership roles, including positions with ConocoPhillips, Burlington Resources and ExxonMobil Corporation. Dr. Balmer is a member of the board of directors of the Permian Basin Petroleum Association. He holds B.S. and Ph.D. degrees in Petroleum Engineering, in addition to an M.S. in Environmental and Planning Engineering, from Missouri University of Science and Technology (formerly University of Missouri – Rolla). |
Mitzi P. Conn |
| | 49 | | | |
| Michol L. Ecklund |
| Senior Vice President, General Counsel and Corporate Secretary Michol L. Ecklund has served the Company as Senior Vice President, General Counsel and Corporate Secretary since February 2019 and as Vice President, General Counsel and Corporate Secretary from November 2017 to February 2019. She has responsibility for legal, human resources, sustainability and other administrative functions for the Company. Prior to joining Callon, Ms. Ecklund was Deputy General Counsel for Operations & Commercial Law at Marathon Oil Company, an independent E&P company, where she oversaw the legal team for global operations and acquisitions and divestitures as well as corporate communications. During her 15 years at Marathon Oil, Ms. Ecklund served in progressive positions within and outside the Law Organization including compliance, litigation, human resources, investor relations, corporate communications and tax. Prior to Marathon Oil, she practiced law at Baker Botts LLP in Houston. Ms. Ecklund currently serves as a member of the Rice University Board of Trustees and as a director for YES Prep Public Schools and Houston’s Collaborative for Children. Ms. Ecklund received a B.A. degree from Rice University and a J.D. degree from Harvard Law School. |
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| Gregory F. Conaway |
| Vice President and Chief Accounting Officer Gregory F. Conaway has served the Company as Vice President and Chief Accounting Officer (“CAO”) |
Michol L. Ecklund | | 43 | | since he joined Callon in December 2019 when Carrizo merged with the Company. Prior to joining Callon, Mr. Conaway served as Vice President and General CounselChief Accounting Officer of Carrizo from 2014 to December 2019, as Controller of Financial Reporting from 2012 to 2014 and Assistant Controller from 2011 to 2012. Prior to that, Mr. Conaway worked for Ernst & Young, holding positions of increasing responsibility, including senior manager. Mr. Conaway began his career with Arthur Andersen in 1998. Mr. Conaway is a member of the American Institute of CPAs and the Texas Society of CPAs, and is treasurer of Faith West Academy Athletic Booster Club. Mr. Conaway is a CPA and holds an M.B.A. and a B.B.A. in Accounting from Angelo State University. |
Correne S. Loeffler | | 41 | | Treasurer and Former Interim CFO |
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Joseph C. Gatto, Jr.Proposal 2 Approve, on an Advisory Basis,
the Compensation
of the Company’s NEOs | | PresidentThe Board recommends a vote FOR the compensation paid to the Company’s named executive officers, as disclosed in this Proxy Statement. • Provides performance-based and CEO |
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.Please see “Proposal 1 - Election of directors” above for the biography of Mr. Gatto.
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James P. Ulm II | | Senior Vice President and CFO |
Mr. Ulm joined us in December 2017 as the Senior Vice President and Chief Financial Officer. Mr. Ulm has more than 30 years of experience in the energy industry with responsibilities including finance, accounting, strategic planning, M&A, business development and risk management. His most recent position has been as founder and managing partner of New Vista Energy Partners, a private E&P company focused on emerging resource plays in the Permian and Anadarko Basins, from 2015 to 2017. Previously, he served as Senior Vice President and Chief Financial Officer for three private companies from 2008 to 2015 where he was responsible for financial and accounting management, capital formation, and corporate strategy. Prior to these roles, Mr. Ulm served from 1999-2008 as Senior Vice President and Chief Financial Officer for Pogo Producing Company, a publicly-traded oil and gas company which had meaningful operations in the Permian Basin. From 1995-1999, he was the Treasurer for Newfield Exploration Company. Earlier in his career, he held finance and accounting leadership roles with American Exploration Company and Tenneco Oil Company. Mr. Ulm holds an M.B.A. and an undergraduate degree in Accounting, both from the University of Texas.
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Gary A. Newberry | | Senior Vice President and COO |
Mr. Newberry joined us in April 2010 as Vice President - Production and Development. In September 2010, Mr. Newberry was promoted to Senior Vice President - Operations, and in August 2016 he was promoted to COO. After graduation, he joined Marathon Oil Company as a Production and Drilling Engineer working in Alaska, the Gulf of Mexico, and the Rockies. He held various supervisory and management roles of increasing responsibility over production and drilling operations in the Mid-Continent, Alaska and the Permian Basin. As a Business Unit Leader, Mr. Newberry was responsible for all upstream business activity in Oklahoma, Alaska, and the Rockies and served as Marathon’s Worldwide Operations Manager. Mr. Newberry retired from Marathon Oil Company after 33 years of service. Mr. Newberry graduated from Marietta College in 1977 with a B.S. degree in Petroleum Engineering.
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Jerry A. Weant | | Vice President, Land |
Mr. Weant joined us in September 2013 as Vice President, Land. Mr. Weant joined Callon from Pioneer Natural Resources, an independent oil and gas company, where he was focused on Midland Basin operations, acting as a liaison with Permian Basin asset teams and coordinating internal efforts for the assessment of horizontal drilling programs. Mr. Weant spent the first 27 years of his career working as a landman in Midland, Texas, including working for Texaco, Inc. Pogo Producing, Inc., as well as other independents. He holds a Bachelor of Business Administration/Petroleum Land Management from the University of Texas and is a Certified Professional Landman and a member of the American Association of Professional Landmen and the Permian Basin Landman’s Association.
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Mitzi P. Conn | | Vice President and CAO |
Ms. Conn joined us in June 1993 and has been our Corporate Controller since May 2007. Effective March 31, 2014, the Board also appointed Ms. Conn as our Principal Accounting Officer, and in August 2016 she was promoted to Vice President and CAO. Prior to May 2007, she served as Assistant Controller since May 2004 and has held various other positions in our finance and accounting departments. Prior thereto, she was a general accountant for Graham Resources, Inc. Ms. Conn received her B.S. degree in accounting from Southeastern Louisiana University in 1990 and is a member of the American Institute of Certified Public Accountants and the Mississippi Society of Certified Public Accountants.
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Michol L. Ecklund | | Vice President and General Counsel |
Ms. Ecklund joined us in November 2017 as Vice President and General Counsel for the Company. Prior to joining Callon in November 2017, Ms. Ecklund was Deputy General Counsel for Operations & Commercial Law at Marathon Oil Company where she was responsible for global operations, acquisitions and dispositions, and government relations. Ms. Ecklund spent 15 years at Marathon Oil where she held progressive positions within and outside the Law Organization. Prior to Marathon Oil, she practiced law at Baker Botts LLP in Houston. Ms. Ecklund received a B.A. degree from Rice University and J.D. from Harvard Law School.
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Correne S. Loeffler | | Treasurer and Former Interim CFO |
Ms. Loeffler joined us in April 2017 as the Treasurer. In May 2017 she was appointed as the Interim Chief Financial Officer, where she served until December 2017. Prior to joining she served as an Executive Director with JPMorgan Securities, LLC where she spent ten years in the Corporate Client Banking Group. During her time at JPMorgan, she served as Callon’s Relationship Manager beginning in 2013. Ms. Loeffler graduated with a B.A. degree from Indiana University and received her M.B.A. from The University of Texas.
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PROPOSAL 2 - APPROVE, ON AN ADVISORY BASIS, THE COMPENSATION OF THE COMPANY’S NEOS |
In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the related rules of the SEC, we are including in this Proxy Statement a separate proposal, which gives our stockholdersshareholders the opportunity to approve or not approve the compensation of our NEOs by voting “FOR” or “AGAINST” the resolution below (commonly referred to as “Say-on-Pay”). on an annual basis. While ourthe Board and the Compensation Committee intend to carefully consider the stockholdershareholder vote resulting from the proposal, the final vote will not be binding on us and is advisory in nature.
The Board recognizes that executive compensation is an important matter for our stockholders.shareholders. The Compensation Committee is tasked with the implementation of our executive compensation philosophy and, as described in detail in the CD&A below, the design of our executive compensation programs. Our executive compensation program is designed to attract, motivate and retain a highly qualified executive management team and to appropriately reward our executive officers for their contributioncontributions to the achievement of our short-term and long-term business goals and the creation and enhancement of stockholdershareholder value.
As described in the CD&A, we believe our compensation program is effective, appropriate and strongly aligned with the long-term interests of our stockholdersshareholders and that the total compensation package provided to the NEOs is reasonable and not excessive. As you consider this Proposal 2, we urge you to read the CD&A for additional details ona full description of our leading-edge executive compensation.compensation program. Further, in determining whether to approve this proposal, we believe that stockholdersshareholders should also consider the following:
Independent compensation committee. Executive compensation is reviewed and established by a Compensation Committee of the Board consisting solely of independent directors. The Compensation Committee meets in executive session, without executive officers present, in determining annual•Performance-based compensation. The Compensation Committee receives data, analysis and input from a compensation consultant that is independent of management and free of conflicts of interest with us.
Performance-based incentive compensation. Our executive compensation program is designed to attract, motivate and retain individuals with the skills required to formulate and drive our strategic direction and achieve the annual and long-term performance necessary to create stockholder value. The program also seeks to align executive compensation with stockholdershareholder 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% of compensation opportunity for our CEO. Please review the CD&A for more information on how our 2022 compensation was linked to Company performance.No tax gross-ups. Executive officers are not eligible for a tax related gross-up on any element•Pay practices reflect individual and market factors. The Compensation Committee considers the skills, experience and performance of currenteach of our NEOs as well as competitive market data in setting annual compensation opportunities and future compensation.
directs our independent compensation consultant to provide peer group market data which serves as one of the considerations of compensation decisions.•“Double trigger”Double-trigger” severance agreements with fixed term. term.Change in control severance compensation agreements ("CIC Agreements") with our executive officers require an actual or constructive termination of employment before benefits are paid following any change in control.
Long-term incentive plans. Our long-term incentive plans generally include three-year minimum vesting periods for time-based awards, and prohibit repricing or exchange of outstanding option awards.
•Stock ownership guidelines.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 requirementsrequirement is to further our goal of increasing stockholdershareholder value by further aligning the interests of our NEOs with the intereststhose of our stockholders. We believelong-term shareholders.
•Clawback policy. The Compensation Committee maintains a comprehensive clawback policy (the "Clawback Policy") that this “tone atestablishes conditions under which the top” guides ourCommittee may recoup previously-paid compensation in event of error, misconduct, or certain other officers and management personnel to obtain and maintain meaningful ownership stakes in Callon.
circumstances.•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 on an exchange orand from engaging in any other organized market as well as short sales of our securities. These types of transactions can hedge against decreases in our stock price and encourage risky behavior. 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.
In light of the above and as more fully described in the CD&A, we believe that the compensation of our NEOs for 20172022 was appropriate and reasonable and that our compensation programs and practices are sound and in the best interests of usthe Company and our stockholders.shareholders. We therefore respectfully request that stockholdersshareholders vote on the following resolution:
“RESOLVED, that the compensation paid to Callon’s NEOs, as disclosed in Callon’s 20182023 Proxy Statement (including the Compensation Discussion and Analysis, the compensation tables and related footnotes and narrative disclosures), is hereby approved.”
The vote on this resolution is not intended to address any specific element of compensation, but rather the overall compensation of our NEOs and our compensation-related policies and practices as described in this Proxy Statement. As noted above, the vote solicited by this proposal is advisory in nature and its outcome will not be binding on the Company, the Board or the Compensation Committee, nor will the outcome of the vote require the Board or the Compensation Committee to take any action. Moreover, theThe outcome of the vote will not be construed as overruling any decision of the Board or the Compensation Committee or creating or implying any additional fiduciary duty of the Board or the Compensation Committee. However, the Board and the Compensation Committee will carefully consider the outcome of the vote when considering future executive compensation arrangements. For a review of the results of the previous years’
year's vote, which reflects overwhelming validation from our stockholdersshareholders of our pay philosophy and approach, please see the Role“Role of StockholderAnnual Say-on-Pay Advisory Vote summary in the CD&A section.
Vote” on page 42.
Notwithstanding the advisory nature of this vote, the foregoing resolution will be deemed approved on an advisory basis, with the affirmative vote of the holders of a majority of the votesstock having voting power present and entitled to vote on the proposalin person or represented by proxy at the Annual Meeting. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions will have the effect as a vote cast against the proposal. Broker non-votes will not be counted as shares present and entitled to vote, and so will have no effect upon the outcome of the vote.
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The Board recommends that you vote “FOR” approval of this resolution.
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PROPOSAL 3 - APPROVAL OF THE CALLON PETROLEUM COMPANY 2018 OMNIBUS INCENTIVE PLAN |
The Board has unanimously approved the 2018 Plan to replace the Callon Petroleum Company 2011 Omnibus Incentive Plan (the “Prior Incentive Plan”), subject to stockholder approval at the Annual Meeting, and recommends that the Company’s stockholders approve and adopt the 2018 Plan. We intend to reserve 9,400,000 shares for issuance pursuant to awards under the 2018 Plan, which is in addition to approximately 1,300,000 shares (as of February 28, 2018) which remain available for grant pursuant to the Prior Incentive Plan. If our stockholders approve the 2018 Plan, these remaining shares from the Prior Incentive Plan, plus any shares that would otherwise become available for issuance under the Prior Incentive Plan as a result of forfeitures, expiration or cancellation of previously made awards, will become available for issuance under the 2018 Plan, and no additional grants will be made pursuant to the Prior Incentive Plan.
The 2018 Plan is intended to replace the Prior Incentive Plan and is needed to continue our equity compensation program. The successful growth of the Company’s asset base and operations activity in recent years has resulted in a commensurate increase in the number of employees. Our equity compensation program is an important element to remain competitive in our industry in attracting and retaining experienced talent.
In considering the appropriate number of shares to request under the 2018 Plan, Callon has carefully considered its anticipated equity needs in light of the recent growth in our employee population, which reflects growth in asset base and operations as described in more detail below. In light of this significant growth, Callon does not believe that historical “burn rates” under the Prior Incentive Plan are indicative of the future needs of the company to continue to attract and retain top talent in the competitive onshore U.S. oil and gas industry, particularly in the Permian Basin.
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Recent Callon Growth Trends - 2015 to Current |
Reserves | l | Three-year compounded annual growth rate of 59% |
| l | Estimated net proved reserves as of December 31, 2017: 137 MMBoe |
Production | l | Three-year compounded annual growth rate of 55% |
| l | 2017 daily production of 22,940 Boepd |
Operations | l | Grew net acreage position by over 300% to 57,481 net acres as of December 31, 2017 |
| l | Increased net producing horizontal wells by ~240% to 172 net wells as of December 31, 2017 |
| l | Increased from a one rig program in the first quarter of 2015 to a five rig program by the first quarter of 2018 |
Employees | l | Grew employee base by approximately 75%, including the addition of three new officer positions |
While prior growth rates are not necessarily indicative of future growth, and it is difficult to project with certainty the future growth rate of our employee base and related equity “burn rates,” Callon projects that the 9,400,000 shares requested under the 2018 Plan will meet the needs of the Company for approximately five years. The actual life of the 2018 Plan will depend on numerous variables, including changes in our future share price, actual employee population growth, and changes in the size and mix of equity compensation necessary to respond to changes in the competitive landscape for our employees.
As of December 31, 2017, there were approximately 1,300,000 shares of common stock remaining available for grant under the Prior Incentive Plan. Any previously granted awards that are outstanding under the Prior Incentive Plan will remain outstanding in accordance with their terms. As of February 28, 2018, an aggregate of 1,760,284 shares are subject to unvested restricted stock, restricted stock unit, performance share or performance unit awards under the Prior Incentive Plan. See also “Compensation Discussion and Analysis- Annual Award of Long-term Incentives” for additional information concerning our equity compensation plans.
If the 2018 Plan is not approved by the stockholders, we will not be able to continue our equity- based long-term incentive program, and we may be required to increase significantly the cash component of our executive compensation program in order to remain competitive and adequately compensate our employees.
The Company considers the 2018 Plan an essential element of total compensation and believes the 2018 Plan promotes its interests and the interests of its stockholders by: (i) attracting and retaining the services of key employees, Directors and independent contractors; and (ii) encouraging the active interest of those persons in the development and financial success of the Company by granting awards designed to provide participants in the 2018 Plan with proprietary interest in the growth and performance of the Company.
Stockholder approval of the 2018 Plan will also constitute approval for purposes of satisfying the stockholder approval requirements under Section 422 of the Code so that the Compensation Committee may grant incentive stock options, or ISOs.
Best Practices
Independent oversight. The Compensation Committee of our Board (the “Committee”), composed solely of independent directors, will approve all grants made under the 2018 Plan other than grants made to directors, which shall be approved by our Board. Additionally, the Committee may delegate to any committee of the Board, to the Chief Executive Officer and to any of our other senior officers its duties under the 2018 Plan pursuant to such conditions or limitations as the Committee may establish; provided, however, that such delegation will not extend to the authority to make awards to participant who are subject to Section 16 of the Exchange Act.
No repricing of options or stock appreciation rights. The 2018 Plan prohibits repricing, replacement and regranting of stock options or stock appreciation rights (“SARs”) at lower prices, unless approved by our stockholders.
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 may not be paid or accrued on stock options or SARs.
Limited terms for options and SARs. Stock options and SARs granted under the 2018 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 (1) as full or partial payment of withholding taxes related to the exercise or settlement of options or SARs, or (2) as payment for the option exercise price, and (3) 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 2018 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 2018 Plan will be subject to any 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 2018 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 stockholders.
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 2018 Plan.
Summary of the 2018 Plan
A description of the 2018 Plan appears below. Because the description of the 2018 Plan in this Proxy Statement is a summary, it may not contain all the information that may be important to you. The summary is qualified by reference to the 2018 Plan. You should carefully read the 2018 Plan. A copy of the full text of the 2018 Plan is attached hereto as Appendix A to this Proxy Statement.
Eligibility
Persons eligible for Awards (as defined in the 2018 Plan) are (i) all employees of the Company and its subsidiaries, (ii) non-employee directors and (iii) certain independent contractors. As of February 28, 2018, approximately 174 employees and seven non-employee directors would be eligible for grants of Awards under the 2018 Plan.
Shares available for awards
The 2018 Plan provides that up to 9,400,000 shares of Common Stock, plus the shares remaining available for Awards under the Prior Incentive Plan, may be issued, all of which may be issued as incentive stock options under Section 422 of the Code. The closing price per share of our Common Stock on February 28, 2018 was $10.57.
The number of shares of Common Stock that are the subject of Awards under the 2018 Plan or the Prior Incentive Plan 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, immediately become available for additional Awards under the 2018 Plan. However, the number of shares reserved for issuance under the 2018 Plan is not increased by (i) shares of Common Stock not issued or delivered as a result of the net settlement of stock-settled SARs or stock option, (ii) shares of Common Stock used to pay the exercise price or withholding taxes related to an outstanding Option or SAR, or (iii) shares of Common Stock repurchased on the open market with the proceeds of the option exercise price.
Administration
The Committee administers the 2018 Plan with respect to Awards to employees and independent contractors and has broad power to take actions thereunder, to interpret the 2018 Plan and to adopt rules, regulations and guidelines for carrying out its purposes. The Board has the sole authority to grant Awards and administer the 2018 Plan with respect to non-employee directors. The Committee may, in its discretion, among other things, extend or accelerate the exercisability of, accelerate the vesting of or eliminate or make less restrictive any restrictions contained in any Award, waive any restrictions or other provision of the 2018 Plan or in any Award or otherwise amend or modify any Award in any manner that is either (a) not adverse to that participant holding the Award or (b) consented to by that participant.
Except in connection with a transaction involving the Company or its capitalization, the terms of outstanding Awards may not be amended without approval of the stockholders of the Company to (i) reduce the exercise price of outstanding options or SARs, (ii) cancel, exchange, substitute, buyout or surrender outstanding options or SARs in exchange for cash or other Awards, (iii) take any other action with respect to a stock 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 stock options or SARs that contain a so-called “reload” feature under which additional stock options, SARs or other Awards are granted automatically to the participant upon exercise of the original stock option or SAR.
The Compensation Committee also may delegate to the CEO, other senior officers of the Company or to other committees of the Board its duties under the 2018 Plan to the extent allowed by applicable law.
The Committee will determine the employees and independent contractors to receive Awards and the terms, conditions and limitations applicable to each such Award, which conditions may, but need not, include continuous service with the Company, achievement of specific business objectives, attainment of specified growth rates, increases in specified indices or other comparable measures of performance.
Amendment; termination
The Board may amend, modify, suspend or terminate the 2018 Plan for the purpose of addressing any changes in legal requirements or for any other lawful purpose, except that no amendment that would adversely affect the rights of any participant under any Award previously granted to such participant may be made without the consent of such participant and no amendment will be effective prior to its approval by the stockholders 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 stockholder approval is otherwise required by applicable law.
Adjustment
The Board may make certain adjustments, including changes to the shares subject to outstanding Awards and shares available for grant under the 2018 Plan, in the event of any subdivision, split or consolidation of outstanding shares of Common Stock, any declaration of a stock dividend payable in shares of Common Stock, any recapitalization or capital reorganization of the Company, any consolidation or merger of the Company with another corporation or entity, any 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).
Change in Control
The Committee (or the Board in the case of Awards to non-employee directors), in its sole discretion, will determine the treatment of Awards upon a change in control (as defined in the 2018 Plan). A “change in control” generally occurs upon the occurrence of any of the following: (i) a person other than an exempt person becomes the beneficial owner of 50% or more of the total fair market value or total voting power of the Company’s voting stock; (ii) during any 12-month period, a person other than an exempt person becomes the beneficial owner of 30% or more of the total voting power of the Company’s voting stock; (iii) during any three-year period, individuals who at the beginning of the period were members of the Board cease for any reason to constitute at least a majority of the Board unless the election 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; or (iv) a person acquires assets of the Company
that have a total gross fair market value equal to at least 40% of the total gross fair market value of all of the Company’s assets immediately before such acquisition; provided, however, that such transfer is not to an entity that is controlled by the stockholders of the Company immediately after the transfer.
Clawback
Awards under the 2018 Plan will be subject to the provisions of any clawback policy required by applicable law and implemented by the Company, which clawback policy may provide for forfeiture, repurchase and/or recoupment of Awards and amounts paid or payable pursuant to or with respect to Awards.
Awards
At the discretion of the Committee or the Board, as applicable, employees, consultants or non-employee directors may be granted Awards under the 2018 Plan in the form of stock options, SARs, restricted stock awards, restricted stock units (including phantom shares and phantom stock units), cash awards or performance awards. Such Awards may be granted singly, in combination, or in tandem.
Options
Awards may be in the form of rights to purchase a specified number of shares of Common Stock at a specified price not less than that of the fair market value of a share of Common Stock on the date of grant (“Options”). An Option may be either an incentive stock option (“ISO”) that is intended to comply, or a nonqualified stock option (“NSO”) that is not intended to comply, with the requirements of Section 422 of the Code; provided that independent contractors and directors cannot be awarded ISOs. The Committee will determine the participants to receive Options and the terms, conditions and limitations applicable to each such Option. The term of each Option may not be longer than 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 in an amount sufficient to pay the exercise price of the Option, and (B) satisfying tax withholding obligations by withholding from the shares of Common Stock otherwise deliverable upon the exercise of the Option using the minimum tax rate applicable to the participant.
Stock appreciation rights
Awards may also be in the form of SARs, which are rights to receive a payment, in cash or Common Stock, equal to the fair market value or other specified value of a number of shares of Common Stock on the rights exercise date over a specified strike price not less than the fair market value of a share of Common Stock on the date of grant. The term of each SAR may not be longer than 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 by withholding from the cash or shares of Common Stock, otherwise deliverable upon the exercise of the SAR, using the minimum tax rate applicable to the participant.
Stock awards
Awards may also be in the form of grants of Common Stock or units denominated in Common Stock, including restricted stock, restricted stock units, phantom shares and phantom stock units (“Stock Awards”). The terms, conditions and limitations applicable to any Stock Award will be determined by the Committee. At the discretion of the Committee, the terms of a Stock Award may include rights to receive dividends or dividend equivalents, which will only be paid if the underlying shares vest pursuant to the terms of the Stock Award.
Cash awards
Awards may also be in the form of grants denominated in cash. The terms, conditions and limitations applicable to any cash awards granted pursuant to the 2018 Plan will be determined by the Compensation Committee.
Performance awards
At the discretion of the Committee, any of the above-described Awards may be made 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.
A performance goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo or limiting economic losses (measured, in each case, by reference to specific business criteria). The amount of cash or shares payable or vested pursuant to Performance Awards may be adjusted upward or downward, either on a formula or discretionary basis or any combination, as the Committee determines.
Director award limits
No non-employee director may be granted during any calendar year Awards (in his or her capacity as a director) having a fair value determined on the date of grant when added to all cash compensation paid to the non-employee director during the same calendar year in excess of $1,000,000.
U.S. Federal Income Tax Consequences
The following is a summary of the general rules of current U.S. Federal income tax law relating to the tax treatment of award that may be issued under the 2018 Plan. The discussion is general in nature and does not take into account a number of considerations which may apply in light of the particular circumstances of a participant. This summary is not complete and does not attempt to describe any tax consequences arising in the context of the participant’s death or the income tax laws of any local, state or foreign country in which the participant’s income or gain may be taxable.
Stock awards
Restricted stock. A participant generally recognizes no taxable income at the time of an award of restricted stock. A participant may, however, make an election under Section 83(b) of the Code to have the grant taxed as compensation income at the date of receipt, with the result that any future appreciation or depreciation in the value of the shares of stock granted may be taxed as capital gain or loss on a subsequent sale of the shares. If the participant does not make a Section 83(b) election, the grant will be taxed as compensation income at the full fair market value on the date the restrictions imposed on the shares expire. Unless a participant makes a Section 83(b) election, any dividends paid to the participant on the shares of restricted stock will generally be compensation income to the participant and deductible by us as compensation expense. In general, we will receive a deduction for U.S. Federal income tax purposes for any compensation income taxed to the participant. To the extent a participant realizes capital gains, as described above, we will not be entitled to any deduction for federal income tax purposes.
Restricted stock units. A participant who is granted restricted stock units will recognize no income upon grant of the restricted stock units. At the time the underlying shares of common stock (or cash in lieu thereof) are delivered to a participant, the participant will recognize compensation income equal to the full fair market value of the shares received. We will generally be entitled to a deduction for U.S. Federal income tax purposes that corresponds to the compensation income recognized by the participant.
Options; stock appreciation rights
Options granted under the 2018 Plan may constitute ISOs within the meaning of Section 422 of the Code, while other options granted under the 2018 Plan may constitute NSOs. Grants of Options to non-employee directors and independent contractors are NSOs. The Code provides for tax treatment of Options qualifying as ISOs that may be more favorable to participants than the tax treatment accorded NSOs. Generally, upon the exercise of an ISO, the optionee will recognize no taxable income for U.S. Federal income tax purposes, although the difference between the exercise price of the ISO and the fair market value of the stock at the date of exercise is an addition to income in determining alternative minimum taxable income and such amount may be sufficient in amount to subject the optionee to the alternative minimum tax. On the sale of shares acquired by exercise of an ISO (assuming that the sale does not occur within two years of the grant date or within one year of the exercise date), any gain will be taxed to the optionee as long-term capital gain. Except with respect to death or disability, an optionee has three months after termination of employment in which to exercise an ISO and retain favorable tax treatment at exercise. No deduction is available to the Company upon the grant or exercise of an ISO (although a deduction may be available if the participant disposes of the shares so purchased before the applicable holding periods expire).
In contrast, upon the exercise of an NSO, the optionee recognizes ordinary taxable income on the exercise date in an amount equal to the excess of the fair market value of the shares purchased over the exercise price. Upon the sale of such shares by the optionee, any difference between the fair market value at the date of sale and the fair market value at the date of exercise will be treated generally as capital gain or loss. Subject to the limitations discussed below, upon exercise of an NSO, the Company is entitled to a tax deduction in an amount equal to the ordinary taxable income recognized by the participant.
Participants do not recognize taxable income upon the grant of a SAR. Upon the exercise of a SAR, the participant will recognize ordinary income in an amount equal to the cash or fair market value of the shares of stock received at the date of exercise of the SAR. The
participant’s tax basis in any shares of Common Stock received on the exercise of a SAR will generally equal the fair market value of such shares on the date of exercise. Subject to the limitations discussed below, the Company will be entitled to a deduction for U.S. Federal income tax purposes that corresponds as to timing and amount with the taxable income recognized by the participant under the foregoing rules.
Deductibility; excise taxes
Code section 162(m). In general, a U.S. Federal income tax deduction is allowed to the Company in an amount equal to the ordinary taxable income recognized by a participant with respect to Awards granted under the 2018 Plan, provided that such amount constitutes an ordinary and necessary business expense of the Company, that such amount is reasonable and that the Company satisfies any withholding obligations with respect to the participant’s ordinary taxable income. Following the enactment of the Tax Cuts and Jobs Act, beginning with the 2018 calendar year, the $1 million annual deduction limitation under Section 162(m) applies to compensation paid to any individual who serves as the Chief Executive Officer, Chief Financial Officer or qualifies as one of the other three most highly compensated executive officers in 2017 or any later calendar year. See also “Compensation Discussion and Analysis- Internal Revenue Service Limitations” for a more robust discussion of Section 162(m) of the Internal Revenue Code.
Change in control. The acceleration of the exercisability or the vesting of an Award upon the occurrence of a change in control may result in an “excess parachute payment” within the meaning of Section 280G of the Code. A “parachute payment” occurs when an employee receives payments contingent upon a change in control that exceed an amount equal to three times his or her “base amount.” The term “base amount” generally means the average annual compensation paid to such employee during the five calendar years preceding calendar year in which the change in control occurs. An “excess parachute payment” is the excess of all parachute payments made to the employee on account of a change in control over the employee’s base amount. If any amount received by an employee is characterized as an excess parachute payment, the employee is subject to a 20% excise tax on the amount of the excess, and the Company is denied a tax deduction with respect to such excess.
Code section 409A. Section 409A of the Code generally provides that any deferred compensation arrangement must satisfy specific requirements, both in operation and in form, regarding (i) the timing of payment, (ii) the advance election of deferrals, and (iii) restrictions on the acceleration of payment. Failure to comply with Section 409A of the Code may result in the early taxation (plus interest) to the participant of deferred compensation and the imposition of a 20% penalty on the participant on such deferred amounts included in the participant’s taxable income. The Company intends to structure Awards under the 2018 Plan in a manner that is designed to be exempt from or comply with Section 409A of the Code.
2018 Plan Future Benefits
The allocation of some of the shares that would become available for issuance under the 2018 Plan is not currently determinable, as such allocation depends on future decisions to be made by the Compensation Committee or the Board in their sole discretion, subject to applicable provisions of the 2018 Plan. No Awards have been granted that are contingent on the approval of the 2018 Plan. Therefore, it is not possible to determine the benefits that will be received in the future by participants in the 2018 Plan or the benefits that would have been received by such participants if the 2018 Plan had been in effect in the year ended December 31, 2017. Certain tables in this Proxy Statement set forth information with respect to prior awards granted to our NEOs under the Prior Incentive Plan currently in effect.
In 2018, the Company currently expects to award each non-employee director restricted stock units as described in more detail under “Director Compensation.” Because future Awards are in the discretion of the Board and Compensation Committee, the number of shares subject to future Awards could increase or decrease and the type and terms of future Awards could change as well, all without the need for future stockholder approval.
The Board believes that the approval of the 2018 Plan is in the best interest of the Company and its stockholders. The Board therefore recommends a vote for the 2018 Plan, and it is intended that the proxies not marked to the contrary will be so voted. Because approval of the 2018 Plan will increase the number of shares available for issuance to all directors and executive officers of the Company, each of the directors and executive officers of the Company has an interest and may benefit from the approval of the 2018 Plan.
Pursuant to our bylaws, approval of the 2018 Plan requires the affirmative vote of a majority of the common shares present in person or by proxy and entitled to vote on the proposal. In addition to the vote required by our bylaws, under New York Stock Exchange (“NYSE”) rules, approval of the 2018 plan requires approval of a majority of votes cast on the proposal. In both cases, abstentions will have the effect of a vote cast against the proposal. Broker non-votes will not be counted as shares present and entitled to votehaving voting power, and so will have no effect upon the outcome of the vote.
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The Board recommends that youa vote “FOR”FOR the approval ofcompensation paid to the 2018 Plan.Company’s named executive officers.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Callon Driving Sustainable Value with Strong Execution and Financial Outcomes
Creation of Long-Term Value
During 2022, the Board and management team drove new company records in profitability and cash flow as we continued to execute on Callon's strategy of sustained value creation through disciplined reinvestment in its quality, oil-weighted asset base with a “life of field” co-development model. Our success is reflected in our strong financial performance in 2022:
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PROPOSAL 4 - RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, GRANT THORNTON LLP, FOR 2018 |
The Audit Committee has appointed Grant Thornton LLP, as the independent registered public accounting firm, to audit our consolidated financial statements for the year ending December 31, 2018. We are asking stockholders to ratify this appointment. Grant Thornton LLP has served as the Company’s independent registered public accounting firm since being appointed effective as of March 3, 2016. A representative of Grant Thornton LLP will be present at the 2018 Annual Meeting and will have the opportunity to make a statement, if they desire, and to respond to appropriate questions from stockholders.
Fees
The following table sets forth the fees incurred by us for services performed by Grant Thornton LLP in the fiscal years 2016 and 2017:
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| Fee Category | | 2016 | | 2017 |
Audit (a) | | $ | 904,687 |
| | $ | 817,789 |
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Audit-related fees (b) | | — |
| | — |
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Tax (c) | | — |
| | 15,900 |
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All other fees (d) | | — |
| | — |
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| Total | | $ | 904,687 |
| | $ | 833,689 |
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(a)Adjusted Free Cash Flow (in $ millions) | 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 Adjusted EBITDA (in connection with statutory and regulatory filings or engagements.$ millions) |
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(b)Rapid Deleveraging | Audit-related fees consistPV-10 Value of Proved Reserves |
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1.Leverage ratio is calculated as net debt / LTM adjusted EBITDA as defined in our credit facility | | 1.SEC trailing twelve-month oil price used to calculate the PV-10 at year-end |
Note: See Appendix A for a reconciliation of the aggregate fees billed for assurancenon-GAAP financial measures of Adjusted Free Cash Flow, Adjusted EBITDA, 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.PV-10. |
Other Key Highlights
•Returns-Driven Strategy:Deployment of a differentiated “Life of Field” co-development model to achieve three consecutive years of free cash flow growth and increases in adjusted EBITDA per BOE.
•High-Return Asset Portfolio: Assembled more than 10 years of economic inventory at <$60/Bbl in premier oil basins in Texas.
•Rapid Debt Reduction:Over the past two years, reduced leverage by 70% and total debt by over $700 million, eliminated our second lien notes, and extended our average debt term maturity to over five years.
•Asset Integration: Successfully integrated recently-acquired Delaware South assets, achieving asset-level production growth of 11% and a reduction in LOE per BOE of 20%(1).
•Record Safety Performance: Achieved our lowest recordable incident rate on record in 2022.
•Commitment to ESG: On track to achieve our peer-leading goal to reduce GHG intensity by 50% by 2024 compared to 2019.
•Focus on Diversity and Inclusion:Steadily increased workforce racial and ethnic diversity to 41% and gender diversity to 22%, including the hiring of two female officers in 2022.
(1)Changes reflect 4Q 2022 performance over 4Q 2021 performance.
Executive Compensation Program Supports our Sustainable Business Model
Our executive pay programs reward execution of the Company’s strategy for creating a sustainable business model in the energy industry and addressing investor priorities over time. Key aspects of our executive pay program include:
•An annual bonus framework that incentivizes financial performance and ESG initiatives, and excludes traditional operational metrics;
•A long-term incentive (“LTI”) program that maintains a 60% weighting on performance-based LTI and manages equity dilution by employing cash performance units tied to free cash flow, return on capital employed (“ROCE”) performance, and GHG reduction targets;
•Incentives that are directly aligned with shareholder outcomes by granting restricted stock units (“RSUs”) and incorporating relative TSR performance in the annual bonus program; and
•Incorporating ESG performance in both the annual bonus and LTI programs.
Our program aligns with key investor priorities for the energy industry by rewarding for the delivery of strong balance sheets, free cash flow generation, returns and ESG performance. It balances near-term incentives linked to each of these investor priorities with long-term incentives to drive sustainable shareholder value creation. The balance across the mix of time horizons and incentive vehicles within the 2022 program is illustrated in the table below, and the specific incentive opportunities and metrics for each component are described in more detail in the sections that follow.
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(c) | Tax fees consist | | Annual Cash Bonus Incentive (One year performance) | | LTIP (Three year performance) | | Sustainability Implications (linkage of the aggregate fees billed for professional services rendered for tax compliance (including filing stateshort-term program to long-term goals and federal tax returns), tax advice and tax planning. Tax fees do not include fees for services rendered in connection with the audit.incentives to drive sustainability) |
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(d) | Other fees consist of the aggregate fees billedDebt Reduction | Net Debt / EBITDA(1) | | | | Financial strength for professional services other than the services reported above. |
Pre-approval policy.The Audit Committee pre-approves all audit and permissible non-audit services (including the fees and terms thereof) exceeding $25,000 to be performed for us by our independent registered public accounting firm, as required by applicable law or listing standards and subject to the terms of the audit and non-audit services pre-approval policy in accordance with the Audit Committee charter. The Committee may delegate authority to one or more of its members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of any such member to grant pre-approvals are consistent with the terms of the Pre-Approval Policy and are presented to the full Committee at its next scheduled meeting.
Audit Committee Report
Acting pursuant to its Charter, the Audit Committee reviewed and discussed our audited financial statements for the year ended December 31, 2017, with management and Grant Thornton LLP, and recommended to our Board that our audited consolidated financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2017, for filing with the SEC. This recommendation was based on:
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, our 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.
Management is responsible for the preparation, presentation and integrity of our consolidated financial statements in accordance with generally accepted accounting principles, the establishment and maintenance of our disclosure controls and procedures, and the establishment, maintenance and evaluation of the effectiveness of our internal controls over financial reporting. The independent registered
public accounting firm is responsible for performing an independent audit of our consolidated financial statements and internal control over financial reporting in accordance with the standards of the PCAOB and issuing reports thereon. The Audit Committee’s responsibilities include monitoring and overseeing these processes.
Members of the Audit Committee rely, without independent verification, on the information provided to them and on the representations made by management and our independent registered public accounting firm. The Audit Committee’s considerations and discussions referred to above do not assure that the audit of our financial statements and internal control over financial reporting have been carried out according to the standards of the PCAOB, that the financial statements are presented according to GAAP, or that Grant Thornton LLP is in fact independent.
Respectfully submitted by the Audit Committee of the Board of Directors,
John C. Wallace, Chairman
Michael L. Finch
L. Richard Flury
Larry D. McVay
Anthony J. Nocchiero
The submission of this matter for approval by stockholders is not legally required; however, the Board and Audit Committee believe that this submission is consistent with best practices in corporate governance and is an opportunity for stockholders to provide direct feedback to the Board and Audit Committee on an important issue of corporate governance. Although the results of the vote are not binding on the Audit Committee, if the appointment is not ratified the Audit Committee will consider whether it should select another independent registered public accounting firm.
This proposal will be approved if it receives the affirmative vote of a majority of shares of our common stock present and entitled to vote at the Annual Meeting. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will have the authority to vote your shares in its discretion on this proposal. Abstentions will have the effect as a vote cast against this proposal.
| durability through commodity price cycles |
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TheBoard 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, 2018.
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BENEFICIAL OWNERSHIP OF SECURITIES |
Management and Principal Stockholders
The following table sets forth, as of the Record Date, certain information with respect to the beneficial ownership of shares of common stock held by: (i) all persons known by us to be the beneficial owners of 5% or more of the outstanding common stock; (ii) each director; (iii) the nominees for director; (iv) each executive officer named in the Summary Compensation Table; and (v) all of our executive officers and directors as a group. Information set forth in the table with respect to beneficial ownership of common stock has been obtained from filings made by the named beneficial owners with the SEC as of the Record Date or, in the case of our executive officers and directors, has been provided to us by such individuals. As of March 16, 2018, the Company had 201,947,883 shares of Common Stock issued, outstanding, and eligible to vote.
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| | | Common Stock |
| Name and Address of Beneficial Owner | | Beneficial Ownership | | Notes | | % |
| Directors | | | | | | |
| Matthew R. Bob | | 58,447 |
| | (a)(b) | | <1% |
| Fred L. Callon | | — |
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| | n/a |
| Barbara J. Faulkenberry | | — |
| | (c) | | n/a |
| Michael L. Finch | | 26,897 |
| | (a)(d) | | <1% |
| L. Richard Flury | | 162,999 |
| | (a)(e) | | <1% |
| Joseph C. Gatto, Jr. | | 194,835 |
| | (a)(f) | | <1% |
| Larry D. McVay | | 147,432 |
| | (a)(g) | | <1% |
| Anthony J. Nocchiero | | 134,296 |
| | (a)(h) | | <1% |
| James M. Trimble | | 39,447 |
| | (a)(i) | | <1% |
| John C. Wallace | | — |
| | (a)(j) | | <1% |
| Executive Officers | | | | | | |
| James P. Ulm II | | — |
| | (k) | | n/a |
| Gary A. Newberry | | 328,073 |
| | (a)(l) | | <1% |
| Jerry A. Weant | | 87,454 |
| | (a)(m) | | <1% |
| Mitzi P. Conn | | 84,810 |
| | (a)(n) | | <1% |
| Michol L. Ecklund | | — |
| | (k) | | n/a |
| Correne S. Loeffler | | 8,530 |
| | (a)(o) | | <1% |
| Directors and Executive Officers (16 persons, as a group) | | 1,273,220 |
| | (p) | | <1% |
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| Certain Beneficial Owners | | | | | | |
| Wellington Management Group, LLP | | 24,322,947 |
| | (q) | | 12.05% |
| BlackRock, Inc. | | 21,602,597 |
| | (r) | | 10.70% |
| The Vanguard Group | | 17,257,289 |
| | (s) | | 8.55% |
| FMR LLC | | 11,808,551 |
| | (t) | | 5.85% |
| State Street Corp. | | 10,826,531 |
| | (u) | | 5.36% |
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(a) | Unless otherwise indicated, each of the persons listed in the table may be deemedCash Flow | Total Corporate Cash Margin | | Free Cash Flow (performance unit metric) | | Revenue and cost management to have sole votingsupport near-term cash flow; prudent capital allocation and dispositive power with respectreinvestment rate decisions to such shares. Beneficial ownership does not include the unvested portion of stock awards due to lack of voting and disposition power, unless such award will vest within sixty days of March 16, 2018. Percentage ownership of a holder or class of holders is calculated by dividing (i) the number of shares of common stock beneficially owned by such holder or class of holders plus the total number of shares of common stock underlying options exercisable or stock awards vesting within sixty days of March 16, 2018, by (ii) the total number of shares of common stock outstanding plus the total number of shares of common stock underlying options exercisable and stock awards vesting within sixty days of March 16, 2018, but not common stock underlying such securities held by any other person.drive sustainable free cash flow over time |
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(b) | Comprised of 45,640 shares held directly by Mr. Bob and 12,807 unvested RSUs that will vest within 60 days of the Record Date. Does not include 11,522 unvested RSUs payable in stock.Returns | Cash Return on Capital Invested (“CROCI”) | | ROCE (performance unit metric) | | Transition from cash-based returns excluding DD&A (CROCI) to more earnings / profitability-based metric (ROCE) over time |
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(c) | Ms. Faulkenberry is a director nominee who currently does not own any shares of the Company’s common stock.Stock
Performance | TSR vs XOP(2) peers | | Restricted Stock Units | | Imperative to compete for investor mindshare in an industry with varying capital deployment |
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(d) | Comprised of 14,090 shares held directly by Mr. FinchESG | Flaring/Safety/
GHG Emissions | | Long-term GHG emission reductions | | Our license to operate and 12,807 unvested RSUs that will vest within 60 days ofsustain investor, stakeholder and employee support in the Record Date. Does not include 11,522 unvested RSUs payable in stock.near and long-term |
(1) Net Debt to EBITDA is calculated as the sum of total long-term debt less unrestricted cash and cash equivalents divided by EBITDA, as defined by the Company’s credit facility. See Appendix A for a reconciliation of non-GAAP financial measures.
(2) Relative TSR performance will be determined relative to the companies in the S&P Oil & Gas Exploration & Production Select Industry Index (“XOP”) at the beginning of the year.
Strong Compensation Governance
We believe our compensation program incorporates many sound practices, including the following:
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(e) | Comprised of 132,999 shares held directly by Mr. Flury and 30,000 shares held in a joint tenancy with his wife. Does not include 50,969 RSUs deferred, pursuant to his election under the Deferred Compensation Plan for Outside Directors, and payable in cash upon his separation of service as a director. Mr. Flury’s deferred RSUs are comprised of 26,640 vested shares and 24,329 unvested shares of which 12,807 shares will vest within 60 days of the Record Date. |
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(f) | Comprised of 149,382 shares held directly by Mr. Gatto, 20,605 shares held indirectly within the Company’s Employee Savings and Protection Plan (the “401(k) Plan”), and 24,848 unvested RSUs payable in stock that will vest within 60 days of the Record Date. Does not include 1,500 shares of the Company’s Series A Preferred Stock, 249,906 unvested RSUs payable in stock, 10,895 unvested RSUs payable in cash, and 129,404 unvested PSUs payable in 50% stock and 50% cash.What We Do | | | What We Don’t Do |
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(g)• Substantial focus on performance-based pay • Strong alignment with shareholder priorities through significant weighting on long-term incentives • Review of peer group market data 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 | Comprised | • NOhedging or pledging of 134,625 shares held directly by Mr. McVay and 12,807 unvested RSUs that will vest within 60 days of the Record Date. Does not include 11,522 unvested RSUs payableour stock • NOemployment agreements • NOexcessive benefits or perquisites • NO single trigger change in stock and 35,014 vested RSUs deferred, pursuant to his election under the Deferred Compensation Plan for Outside Directors, and payable in cash upon his separation of service as a director.control benefits |
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Role of Annual Say-on-Pay Advisory Vote
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(h) | ComprisedWe have historically received strong support from our shareholders for our executive compensation practices. In the advisory vote held at the Company's 2022 Annual Meeting of 121,489 shares held directly by Mr. Nocchiero and 12,807 unvested RSUs that will vest within 60 daysShareholders, approximately 95% of the Record Date. Does not include 11,522 unvested RSUs payablevotes cast were in stock. |
| favor of our 2021 executive compensation programs. The Committee acknowledged the support received from our shareholders and viewed the results as an affirmation of our executive compensation policies and programs. The Committee will continue to review shareholder votes and feedback on our executive compensation programs to ensure alignment with shareholder interests. | |
(i) | Comprised of 26,640 shares held directly by Mr. Trimble and 12,807 unvested RSUs that will vest within 60 daysApproximately 95% of the Record Date. Does not include 11,522 unvested RSUs payablevotes were cast in stock. |
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(j) | Mr. Wallace transferred his equity ownership in the Company to The Wallace Family Trust in April 2008. All equity ownership in the Company acquired by him since April 2008 has also been transferred to the Wallace Family Trust. He has no voting and dispositive power over the shares owned by the Trust. From May 2011 through May 2016, Mr. Wallace was granted a combined 116,599 RSUs for which he elected to deferfavor of our 2021 executive compensation pursuant to the terms of the Deferred Compensation Plan for Outside Directors. All deferred shares will be payable in cash upon his separation of service as a director. Mr. Wallace also has 11,120 unvested RSUs payable in stock. All of Mr. Wallace’s awards, deferred or otherwise, will be settled upon his retirement from the Board on May 10, 2018. |
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(k) | Currently does not own any shares of the Company’s common stock. |
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(l) | Comprised of 245,782 shares held directly by Mr. Newberry, 56.239 shares held indirectly within the Company’s 401(k) Plan and 24,848 unvested RSUs payable in stock that will vest within 60 days of the Record Date. Does not include 268,390 unvested RSUs payable in stock, 10,895 unvested RSUs payable in cash, and 129,404 unvested PSUs payable in 50% stock and 50% cash. |
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(m) | Comprised of 70,829 shares held directly by Mr. Weant, 4,201 shares held indirectly within the Company’s 401(k) Plan and 12,424 unvested RSUs payable in stock that will vest within 60 days of the Record Date. Does not include 21,026 unvested RSUs payable in stock, 3,982 unvested RSUs payable in cash, and 34,226 unvested PSUs payable in 50% stock and 50% cash. |
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(n) | Comprised of 48,285 shares held directly by Ms. Conn, 24,101 shares held indirectly within the Company’s 401(k) Plan and 12,424 unvested RSUs payable in stock that will vest within sixty days of the Record Date. Does not include 31,026 unvested RSUs payable in stock, 3,982 unvested RSUs payable in cash, and 34,226 unvested PSUs payable in 50% stock and 50% cash. |
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(o) | Comprised of 8,453 shares held directly by Ms. Loeffler and 77 shares held indirectly within the Company’s 401(k) Plan. Does not include 30,401 unvested RSUs payable in stock and 3,030 unvested PSUs payable in cash. |
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(p) | Comprised of 998,214 shares held directly by the beneficial owners list above, 1,500 shares of the Company’s Series A Preferred Stock, 30,000 shares held in joint tenancy, 106,427 shares held indirectly within the Company’s 401(k) Plan and 138,579 unvested RSUs payable in stock that will vest within 60 days of the Record Date. |
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(q) | Information is based upon a Schedule 13G/A filed with the SEC on February 8, 2018 by Wellington Management Group, LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP and Wellington Management Company LLP (collectively “Wellington”). In this Schedule 13G/A, Wellington represents that it has shared voting power with respect to 15,417,691 shares of common stock and shared dispositive power with respect to 24,322,947 shares of common stock. The address of the principal business office of Wellington is 280 Congress St., Boston, MA 02210. |
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(r) | Information is based upon a Schedule 13G/A filed with the SEC on January 19, 2018 by BlackRock Inc. (“BlackRock”). In this Schedule 13G/A, BlackRock represents that it has sole voting power with respect to 21,141,934 shares of common stock and sole dispositive power with respect to 21,602,597 shares of common stock. The address of the principal business office of BlackRock is 55 East 52nd Street, New York, NY. |
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(s) | Information is based upon a Schedule 13G/A filed with the SEC on February 8, 2018 by The Vanguard Group - 23-1945930 (“Vanguard”). In this Schedule 13G/A, Vanguard represents that it has sole voting power with respect to 223,175 shares of common stock and sole and shared dispositive power with respect to 17,257,289 shares of common stock. The address of the principal business office of Vanguard is 100 Vanguard Blvd., Malvern, PA 19355. |
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(t) | Information is based upon a Schedule 13G/A filed with the SEC on February 13, 2018 by FMR LLC (“FMR”). In this Schedule 13G/A, FMR represents that it has sole voting power with respect to 5,290,096 shares of common stock and sole dispositive power with respect to 11,808,551 shares of common stock. The address of the principal business office of FMR is 245 Summer St., Boston, MA 02210. |
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(u) | Information is based upon a Schedule 13G filed with the SEC on February 14, 2018 by State Street Corp. (“State Street”). In this Schedule 13G, State Street represents that it has shared dispositive power with respect to 10,826,531 shares of common stock. The address of the principal business office of State Street is One Lincoln St., Boston, MA 02111. |
programs
Section 16(a) beneficial ownership reporting compliance. Our executive officers and directors are required to file reports with the SEC, disclosing the amount and nature of their beneficial ownership in our common stock, as well as changes in that ownership. To our knowledge, based solely on our review of these reports and written representations from these individuals that no other reports were required, all required reports were timely filed during 2017, except that our recently hired CFO, James P. Ulm II, filed the initial Form 3 and Form 4 that covered one transaction late.
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COMPENSATION DISCUSSION AND ANALYSIS |
Oversight of Executive Compensation ProgramPhilosophy
Our executive compensation program is designed to achieve the following objectives:
The Compensation Committee (referred•Emphasize pay for performance, in which Company and individual performance against preset goals are inherently linked to the amount realized by a NEO;
•Attract and retain a qualified and motivated management team by offering industry competitive opportunities and providing the majority of NEO compensation in this section as the “Committee”), appointed byform of long-term incentives that vest over a three-year period;
•Incentivize NEOs and appropriately reward them for their contributions to the achievement of our Board, assists the Board in performing its fiduciary responsibilities relating tokey short-term and long-term strategic objectives with variable compensation; and
•Align the compensation of our CEO and other executive officers. The following compensation discussion and analysis (“CD&A”) describesNEOs with the actions and decisionsinterests of our long-term shareholders by providing 60% of the Committee as they relate to our executive compensation decisions. The Committee, which is composed entirelyLTI mix in the form of independent directors, is primarily responsible for establishing, implementingperformance-based incentives and monitoring our executive compensation programs, including those applicable to our NEOs.40% in the form of RSUs.
Executive Pay Program and Decisions
2022 Named Executive Officers
Our NEOsnamed executive officers (“NEOs”) include the individuals who served as the Company's Chief Executive Officer andor Chief Financial Officer during 20172022, and the three other most highly compensated executive officers forwho were serving in such capacity at the calendar year. Reflecting several officer transitions during the year, our NEOs for 2017 were:
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| NEO | Age | Title |
| Joseph C. Gatto, Jr. | 52 | Current President, Chief Executive Officer and CEO; former CFODirector |
James P. Ulm IIKevin Haggard | 52 | Senior Vice President and CFOChief Financial Officer |
Gary A. NewberryJeffrey S. Balmer | 58 | Senior Vice President and COOChief Operating Officer |
Jerry A. WeantMichol L. Ecklund | 48 | Senior Vice President, LandGeneral Counsel and Corporate Secretary |
Mitzi P. ConnGregory F. Conaway | 47 | Vice President and CAO |
Fred L. Callon | | Former Chairman of the Board and CEO |
Correne S. Loeffler | | Treasurer and Former Interim CFOChief Accounting Officer |
2022 Incentive Compensation Program Supports Go-Forward Business Objectives
Our executive pay program is heavily weighted to incentive-based compensation linked to financial and ESG performance for the NEOs, including Mr. Gatto as follows:
Base Salaries
We provide our employees, including the NEOs, with an annual base salary that is reflective of individual skills, experience and expertise to compensate them for their service throughout the year. The Committee evaluates our NEOs’ salaries and other components of their compensation to ensure that the NEOs’ total compensation is competitive relative to market practices, reflective of the executive’s performance and value to the Company, and consistent with the Committee’s compensation philosophy. In early 2022, the Committee established base salaries for each of the NEOs as set forth in the table below with the input of the independent compensation consultant.
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| NEO | 2021 Base Salary | 2022 Base Salary |
| Joseph C. Gatto, Jr. | | $ | 865,000 | | | | $ | 908,250 | | |
| Kevin Haggard | | $ | 450,000 | | | | $ | 485,000 | | |
| Jeffrey S. Balmer | | $ | 510,000 | | | | $ | 535,000 | | |
| Michol L. Ecklund | | $ | 430,000 | | | | $ | 455,000 | | |
| Gregory F. Conaway | | $ | 310,000 | | | | $ | 325,000 | | |
Performance-Based Annual Cash Bonus Incentive
Each year, the Committee establishes an annual incentive bonus program that is designed to align NEO compensation with the annual business plan and strategic priorities for the year. When establishing the annual bonus program for 2022, the Committee approved the following annual incentive bonus opportunities for the NEOs. With input from the independent compensation consultant, the Committee increased Mr. Gatto’s target bonus opportunity in consideration of competitive market data and his leadership of the Company. | | | | | | | | |
| NEO | 2021 Target Bonus Opportunity
(% of Base Salary) | 2022 Target Bonus Opportunity
(% of Base Salary) |
| Joseph C. Gatto, Jr. | 115% | 125% |
| Kevin Haggard | 90% | 90% |
| Jeffrey S. Balmer | 95% | 95% |
| Michol L. Ecklund | 90% | 90% |
| Gregory F. Conaway | 75% | 75% |
Actual bonus awards under the program can range from 0 - 200% of target based on the achievement of pre-established performance metrics as described below.
2022 Annual Bonus Metrics
The Committee meets several times a yearseeks to reviewdirectly align executive compensation programs, approve compensation levels, consideropportunities with investor and Company priorities for financial and ESG performance targets, review management performanceto support long-term value creation for shareholders. To achieve these objectives, the Committee established a 2022 annual bonus program that would:
•Focus on pay-for-performance by maintaining 80% weighting on quantitative metrics;
•Prioritize financial results by tying 65% of the program to financial metrics and administerexcluding traditional operational metrics from the program;
•Align incentive payouts with the shareholder experience by including a relative TSR comparison to the companies within the XOP energy index; and
•Support our annualsustainability objectives by including a quantitative ESG category (weighted 15%) and aligning with long-term incentive (“LTI”) compensation plans. The Committee operates in accordance with its charter, as revised and approved in November 2017, which sets forthESG objectives within the committee’s authority and responsibilities.
Executive Summary and 2017 Highlights
2017 was a yearqualitative component of transition, growth and solid results for Callon. In May 2017, we unexpectedly lost our long-time Board Chairman and CEO, Fred Callon, which led to several changes on our leadership team. Even with these transitions, the Company achieved strong results as we continued to grow production, reserves, and cash margins against the backdrop of an improving but tenuous commodity environment. Importantly, we successfully integrated over 40,000 net acres in the Midland and Delaware Basins that were acquired over the last two years, ensuring that these investments had a near-term impact on shareholder value in 2017. Other key accomplishments included the following:
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Production growth | l
Objective | Increased daily production approximately 50% year over year to 22,940 Boepd, with a sustained oil content of nearly 80%;Description | Weighting |
lQuantitative Objectives - Financial
(65%) | Substantial contribution from newly established WildHorse area;Net Debt/EBITDA(i) | Measure of our ability to cover our debt, which is impacted by cash flow, and ensures focus on a strong balance sheet | 20% |
lCash Return on Capital Invested(ii) | Three-year compoundedMeasure of total corporate returns on capital | 20% |
Total Corporate Cash Margin(iii) | Measure of annual growthcash generation that captures all critical elements of revenue generation and expense control initiatives | 15% |
| TSR vs. XOP Peers | Measure of competitiveness of shareholder return relative to competing investor alternatives | 10% |
Quantitative Objectives - ESG
(15%) | Environmental - Flaring Intensity (volumes flared / gas produced) | Measure of one component of GHG emissions that represents potential lost revenue due to flaring | 5% |
Environmental - GHG Intensity (mtCO2e/MBOE) | Progress on GHG emissions intensity reduction goals a measured by year-end exit rate | 5% |
Safety(iv) | Measure of rate of 60%.occurrence and severity of injuries without our workforce | 5% |
Reserve growthQualitative Objectives (20%) | l
Other key organizational mandates | Increased estimated net proved reserves nearly 50% year over yearMeasure of our success relative to 137 million barrels of oil equivalent (“MMBoe”) at December 31, 2017, with 51% classified as proved developed producing; and |
l | Replaced 2017 production by 642%. |
Improved margins | l
| Increased corporate cash margins by 34%key objectives tied to $25.05 per Boe despite an inflationary service cost environment and substantial increase in employee count to execute our growth strategy; |
l | Decreased LOE per Boe by 13% and G&A per Boe by 32% year over year; and |
l | EBITDA margins continue to be amongst the highest within our Permian peer group. |
Operational efficiency | l
| Improved our “drill bit” findingdiversity and development costs to $8.21 per Boe despite an inflationary service cost environment;initiatives, emissions monitoring, long-term strategy and |
l
scenario planning, digital transformation, successful efforts conversion, and management of unforeseen industry events | Proactive investments in critical water handling and other infrastructure delivering both reliability and cost benefits in an increasingly active basin. |
Financial strength | l | Reduced our Debt/LTQA EBITDA ratio(i) to 2.2x (1.8x on a Debt /LQA basis(i));
|
l | Issued senior notes at an effective yield of 5.2%, contributing to a improved cost of capital; and |
l
| Increased liquidity with an increased borrowing base amount of $700 million and also added four lending institutions to our bank group. |
Accretive expansion of acreage position | l
| Closed on our acquisition of over 16,000 net acres in the Delaware Basin, establishing our new Spur operating area as a beachhead for future growth; and |
l | Subsequently acquired an additional ~2,500 contiguous net acres within our footprint during the year. |
Health, environment and safety | l | 65% decrease in water spills and 50% decrease in oil spills per MMBoe vs 2016; and |
l | Nearly doubled participation in our proactive safety observation card program (Callon and contractors) compared to 2016, with ~4,500 cards submitted.20% |
(i) Net Debt to EBITDA is calculated as the sum of total long-term debt less unrestricted cash and cash equivalents divided by EBITDA, as defined by the Company’s credit facility. See Appendix A for a reconciliation of non-GAAP financial measures.
(ii) Cash Return on Invested Capital is defined as Adjusted EBITDA / (average total debt + average shareholders’ equity). Management Changes(iii) Total Corporate Cash Margin is adjusted free cash flow plus operational capital expenditures divided by annual production.
(iv) Includes measures related to total reportable incident rates, zero level 4 or 5 severe injury incidents, potential serious incident and fatality events, and tier 1 process safety events.
For the financial elements of the program, the Committee selected metrics to align with evolving investor priorities for the energy industry including strong balance sheets, capital discipline, and positive free cash flow, all of which support a pathway to potential returns of capital. In addition, the Committee incorporated a relative total shareholder return metric that compared the Company’s stock price performance for the year to those of representative companies across the energy value chain as represented in 2017the XOP index.
To establish the threshold, target and maximum goals for each metric at the beginning of the year, the Committee sought to align the goals with publicly stated guidance for the year and then considered sensitivities for key performance variables and for commodity prices (based on probabilistic commodity price scenarios for the year based on the NYMEX options market), to arrive at a range of potential outcomes. In each instance, the Committee adopted an expanded upside range to align maximum goals with “stretch” performance.
2022 Performance Results
After the close of the 2022 calendar year, the Committee assessed the Company’s and the NEOs’ annual performance overall and relative to the frameworks established for the annual incentive compensation program. As noted above, there were significant changessummarized in the table below, 2022 results exceeded target for most of the quantitative financial and ESG metrics.
| | | | | | | | | | | | | | | | | | | | | | | |
| Quantitative Objective | Weighting | Threshold | Target | Max | Actual Results 12/31/2022 | Performance Factor | Funding Level |
Net Debt/Adjusted EBITDA(i) | 20% | 1.75x | 1.5x | 1.1x | 1.34x | 141% | 28% |
Cash Return on Cash Invested(ii) | 20% | 29% | 32% | 38% | 33.8% | 129% | 26% |
Total Corporate Cash Margin(iii) | 15% | $32.00 | $34.70 | $40.00 | $38.48 | 171% | 26% |
| TSR vs. XOP | 10% | P30 | P50 | P90 | P7 | 0% | 0% |
| ESG | | | | | | | |
| Flaring (Mcf/Bbl) | 5% | N/A | <1.55% | N/A | 1.3% | 150% | 7% |
GHG Intensity - Exit Rate
(mtCO2e/MBOE) | 5% | N/A | <15.0 | N/A | 15.0 | 100% | 5% |
Safety TRIR Zero level 4 or 5 injury incidents Potential SIFs Tier 1 process safety events | 5% | N/A |
<0.50
0
≤3
≤3 | N/A |
0.39
0
2
3 | 175% | 9% |
| Total Quantitative | 80% | | | | | 126% | 101%/80% |
(i) Net Debt to ourEBITDA is calculated as the sum of total long-term debt less unrestricted cash and cash equivalents divided by EBITDA, as defined by the Company’s credit facility. See Appendix A for a reconciliation of non-GAAP financial measures.
(ii) Cash Return on Invested Capital is defined as Adjusted EBITDA / (average total debt + average shareholders’ equity).
(iii) Total Corporate Cash Margin is adjusted free cash flow plus operational capital expenditures, presented on a per produced Boe basis.
(iv) Includes measures related to total reportable incident rates, zero level 4 or 5 severe injury incidents, potential serious incident and fatality events, and tier 1 process safety events.
When determining the weighted contribution for the qualitative component of the program for 2022, the Committee considered Callon’s and management’s performance overall and relative to the qualitative performance factors set forth in the table below. The Committee determined that the management team in 2017, which resulted in several one-timemet or exceeded expectations relative to the established qualitative goals and off-cycle compensation actions. These began with the passing of our CEO, Mr. Callon in May of 2017. Upon his passing, Mr. Gatto was promoted to CEO and Ms. Loeffler was named interim CFO. In December 2017, Mr. Ulm was hired as CFO. This series of transitions resulted in several one-time equity grants for several NEOs, as well as increases in compensation for both Mr. Gatto and Mr. Newberry as they took on additional responsibilities. The Committee’s actions and rationale are explained further below.
Key Committee Actions for 2017
The Committee took the following key actions in 2017 as a result of our management team’s performance andcommended the management transitions:team's significant progress on during the year including the achievements described on pages 39 and 40.
Assessed salaries relativeIn considering these qualitative factors and overall Company performance for 2022, the Committee elected to competitive data and each officer’s scopefund the qualitative component of responsibility, and made adjustments where appropriate.
Paid bonusesthe annual bonus program at approximately 120%26% (above the target of target to reflect the Company’s success in executing on our strategy to grow production, reserves, and cash margins.
Granted performance-based and time-based LTI awards to provide retention incentives and to further align management’s interests with shareholder value creation.
Re-evaluated our peer group used for compensation purposes prior to granting the May 2017 LTI awards due to the Company’s growth and changes in the industry.
Vested the 2015-2017 phantom unit awards at 183% of target as a result of Callon’s third place ranking in relative total stockholder return (“TSR”20%) against the peer group.
Granted promotional and retention awards of time-based RSUs to Mr. Gatto and Mr. Newberry in June 2017, as they assumed increased responsibilities following Mr. Callon’s passing.
Granted hire-on awards to Ms. Loeffler and Mr. Ulm upon their hiring in April and December of 2017, respectively.
.
|
| | | | |
| Goals | Results |
| Diversity and development initiatives | (i)See Appendix B• 2022 hiring initiatives increased racial/ethnic diversity to 41% and gender diversity to 22% including addition of two new female officers
• Successfully implemented a year-long company-wide leadership development program |
| Emissions monitoring | • Successful pilots of fence line monitoring and emissions management technology |
| Long-term strategy and scenario planning | • Enhanced long-term scenario modeling to support “Life of Field” co-development strategy and return of capital framework • Ongoing evaluation of investor priorities and industry strategic landscape |
| Digital transformation | • Adopted multiple new technology platforms to enhance process efficiencies and data integrity • Implemented company-wide technology project management process |
| Management of unforeseen industry events | • Launched new initiatives to address inflation and regulatory developments • Successfully refinanced debt in rising interest rate environment |
| Successful efforts conversion | • Well prepared for a reconciliationadoption effective as of Non-GAAP financial measures.January 1, 2023 | 32 | |
2022 Annual Incentive Compensation Payouts Based on the Committee’s assessment of 2022 performance relative to the pre-established annual bonus programs as described above, the Committee awarded annual incentive compensation payouts of 127% of target for the NEOs. Accordingly, individual bonus payouts for 2022 were as follows:
| | | | | | | | | | | | | | |
| NEO | Payout as a % of Target | 2022 Annual Bonus |
| Joseph C. Gatto, Jr. | 127% | | $ | 1,441,847 | | |
| Kevin Haggard | 127% | | $ | 554,355 | | |
| Jeffrey S. Balmer | 127% | | $ | 645,478 | | |
| Michol L. Ecklund | 127% | | $ | 520,065 | | |
| Gregory F. Conaway | 127% | | $ | 309,563 | | |
Annual Award of Long-Term Incentives
In total,the first quarter 2022, the Committee considered the design of the long-term incentive compensation awards for the upcoming year with the input of FW Cook. The Committee continued the core structure of the refreshed incentive design adopted in 2021, while evolving the program to link to ESG performance by incorporating long-term GHG reduction goals.
The Committee adopted a 2022 long-term incentive program that incorporated two elements:
| | | | | | | | |
| LTI Vehicle | Weighting | Objective |
Cash Performance Units (Three-year Cliff Vest) | 60% | • Reward for adjusted free cash flow generation • Align with long-term Return on Capital Employed results • Tie a portion of compensation to our three-year GHG reduction targets (new for 2022) |
Time-Based RSUs (Three-year Ratable Vest) | 40% | • Create direct alignment with shareholder interests • Provide direct retention incentives for our executives |
For the grant of LTI awards to executive officers, the Committee considers market analysis and the advice of its independent compensation consultant to determine the program design and target award amounts. For 2022, the Compensation Committee increased the target award value for the CEO by 10% and for the NEOs by 12% on average. Even with these increases, the 2022 target award values were lower than the 2020 target award values for most of the executives. The Committee provided larger
increases in LTI target values for Mr. Haggard in recognition of his successful first year as CFO of the Company and to Mr. Conaway based on market data and the extent of his role at Callon.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| NEO | 2020 Target Value(a) | 2021 Target Value(a) | 2022 Target Value(a) |
| Joseph C. Gatto, Jr. | | $ | 4,697,000 | | | | $ | 3,900,000 | | | | $ | 4,290,000 | | |
| Kevin Haggard | | N/A | | | $ | 1,462,500 | | | | $ | 1,800,000 | | |
| Jeffrey S. Balmer | | $ | 2,219,000 | | | | $ | 1,941,625 | | | | $ | 2,060,000 | | |
| Michol L. Ecklund | | $ | 1,398,000 | | | | $ | 1,223,250 | | | | $ | 1,350,000 | | |
| Gregory F. Conaway | | $ | 516,000 | | | | $ | 477,300 | | | | $ | 525,000 | | |
(a)Represents the intended target value of the awards, which is different from the grant date fair value computed in accordance with FASB ASC Topic 718 as reported in the Summary Compensation Table. The methodology adopted by the Committee for awarding LTI equity awards uses the 20-day average closing price of Callon stock as of the grant date to determine the number of RSUs granted.
The target LTI values were delivered to each NEO as a grant of RSUs for 40% of the target value and grant of cash performance units ("CPUs") for 60% of the target value as described in more detail below.
RSU program
In 2022, the Committee awarded NEOs with time-based RSUs that will vest annually in one-third increments beginning on April 1, 2023, provided the NEO continues to be employed on the vesting dates. The RSUs will be settled in shares of Callon's common stock.
Cash Performance Units
In 2022, the Committee continued its use of CPUs. Each CPU has a target value of $1 and will pay out in cash within the range of 0-200% of target based on Company results relative to pre-established performance targets for the 2022-2024 calendar years.
Based on feedback from investors, we modified our 2022 CPUs to include a component tied to our three-year GHG intensity goal. The 2022 CPUs are comprised of the following two components:
| | | | | | | | | | | |
| CPU | Objective | Description | Measurement |
Business Sustainability CPUs (70% of target CPU value) | Adjusted Free Cash Flow | Key investor priority providing a clear path to absolute debt reduction and cash return to shareholders over time | Three, one-year performance periods with the opportunity to earn between 0% and 200% of target |
| GHG Intensity | Performance metric aligned with the Company’s publicly stated goal to reduce GHG intensity by 50% by 2024 (relative to 2019 performance) | Modifier, which adjusts the overall payout between 0.8 and 1.2 based on achievement of our 2024 GHG intensity target |
Return CPUs (30% of target CPU value) | Return on Capital Employed | Profitability metric that allows for comparability to cost of capital and returns across sectors | Three-year average ROCE performance relative to established goals, including a threshold goal requiring three-year ROCE of at least 10% |
Vesting of 2020-2022 Performance AwardsIn 2020, the Committee granted performance share units (“PSUs”) to the then-executive officers covering a three-year performance period beginning in 2020 and ending in 2022. The Company’s relative and absolute TSR for the performance period compared to the peer companies defined by the Committee resulted in vesting of 18% of the target PSUs awarded per the terms of the PSU award agreement. Vested PSUs were paid 50% in cash and 50% in Company common stock.
The table below summarizes the PSUs earned by the NEOs for the 2020-2022 performance period:
| | | | | | | | | | | | | | | | | | | | | | | |
| NEO | Target Number
of PSUs | Percent of Target
PSUs Earned | Actual Vested PSUs
(Settled 50% Cash and 50% Shares) |
| Joseph C. Gatto, Jr. | | 73,200 | | | 18% | | 13,176 | | |
Kevin Haggard(a) | | — | | — | | — | |
| Jeffrey S. Balmer | | 34,574 | | | 18% | | 6,222 | | |
| Michol L. Ecklund | | 21,780 | | | 18% | | 3,920 | | |
| Gregory F. Conaway | | 8,046 | | | 18% | | 1,448 | | |
(a) Mr. Haggard was not employed by the Company in January 2020 when the awards were granted.
2023 Incentive Compensation Program
In the first quarter 2023, the Committee considered the design of the incentive compensation program awards for the upcoming year with the input of FW Cook. The Committee opted to continue the core structure of the refreshed incentive design adopted in 2021, while continuing to evolve the program to incorporate the metrics that are most meaningful to our shareholders.
For the 2023 annual bonus program, the Committee adopted the same relative financial and ESG weightings as set forth on page 44 but replaced Corporate Cash Margin with Operating Cash Margin and Cash Return on Cash Invested with Capital Efficiency (calculated as Adjusted Free Cash Flow/EBITDAX) to reflect evolving investor priorities and our focus on cash flow generation and capital efficiency.
Within the long-term incentive program for 2023, the Committee continued its practice of delivering target LTI values 40% in RSUs and 60% in CPUs. The 2023 CPUs remain comprised of two components and will pay out based on results relative to pre-established performance targets for the 2023-2025 calendar years:
•“Business Sustainability” CPUs: 70% of target CPU value. Payouts will be determined by (i) our adjusted free cash flow performance over three, one-year performance periods relative to annual goals established by the Committee and (ii) an ESG modifier ranging from 0.8 to 1.2 and tied to achievement of our 2025 “base” and “stretch” goals for GHG intensity.
•“Returns” CPUs: 30% of target CPU value. Payouts will be determined by our three-year average ROCE performance relative to established goals, including a threshold goal requiring three-year ROCE of at least 10 percent.
Other Compensation
Perquisites and Other Benefits
Benefits represent a relatively small part of our overall compensation package; however, these benefits help attract and retain senior level executives. We provide benefits commonly offered in the E&P industry to all of our employees, including our NEOs, and review these benefits annually to ensure that they are competitive with industry norms. These benefits consist of:
•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").
We pay the full costs of these benefits, including the 401(k) plan administration, for all employees.
Under our 401(k) plan, all eligible employees may elect to defer a portion of their compensation up to the statutorily prescribed limit. In 2022, the Company provided a matching contribution of up to 6% and a profit sharing contribution of up to 2% of the employee’s IRS eligible salary for qualified employees, including our NEOs.
Our NEOs are entitled to certain benefits that are not otherwise available to all of our employees. We provide our executive officers with use of a Company vehicle. We purchase or lease the vehicle and pay for all maintenance, repairs, insurance and fuel. The NEO is required to recognize taxable income using the IRS’s annual lease value method for personal use of the vehicle. We also reimburse our executive officers for their out-of-pocket cost of an executive physical, up to $2,500. The costs associated with these benefits for the NEOs are reported as “Other Compensation” in the Summary Compensation Table. The Committee believes these perquisites are modest, yet competitive with the perquisites provided to similarly situated industry executives.
We do not sponsor any qualified or non-qualified defined benefit plans, or any non-qualified defined contribution plan for NEOs or other employees.
Change in Control; Severance and Retirement Arrangements; Employment Agreements
We have no employment agreements with our executive officers. In September 2022, the Committee approved the terms of the Callon Executive Change in Control Severance Plan (the “Executive CIC Plan”) that provides for certain protections upon a change in control and replaces the existing individual change in control severance agreements (“CIC Agreements”) with each of the Company’s executive officers. Also in September 2022, the Committee approved the terms of the Executive Severance Pay Plan (the “Severance Pay Plan”) that provides for certain protections upon an involuntary termination. The Committee believes that Executive CIC Plan and the Severance Pay Plan serve shareholders’ best interests by aligning executive interests with shareholders, helping ensure retention of management and diminishing potential distractions for our executive officers in the event of an involuntary termination or change in control transaction. However, the Committee believes these actions helped align pay withthat executives should not be unduly enriched, and all benefits under the Company’s performanceExecutive CIC Plan and helped manage challenging transitions inSeverance Pay Plan require a “double-trigger.” For a detailed description of the executive management team.Executive CIC Plan and the Severance Pay Plan, please refer to page 59.
In September 2022, the Committee Best Practices
We believe our compensation programs incorporate many best practices, includingalso approved new retirement benefits under the following:
|
| |
What We Do |
ü | Substantial focus on performance-based pay |
ü | Balance of short- and long-term incentives |
ü | Align executive compensation with shareholder returns through substantial weighting on long-term incentives |
ü | Retain an independent external compensation consultant |
ü | Review of peer group benchmarks when establishing compensation |
ü | Substantial stock ownership guidelines for our NEOs and directors |
ü | Double-trigger CIC severance for both cash severance and equity vesting |
ü | Annual assessment of the compensation programs to ensure avoidance of excessive risk taking |
| |
What We Don't Do |
| NO hedging or pledging of our stock
|
| NO tax gross-ups
|
| NO employment agreements
|
| NO excessive benefits or perquisites
|
RoleCPU Agreements for NEOs and other officers for the purposes of Stockholder Say-on-Pay Advisory Vote
We have historically received very strong support for our executive compensation practices. In the advisory vote heldattracting and retaining top talent and incentivizing early notice of impending retirements to ensure smooth transitions. The retirement benefits, which are available at the 2017 Annual Meeting, approximately 96%discretion of the votes cast were in favor of our 2016 executive compensation programs. The Committee acknowledged the support received from our stockholders and viewed the results as an affirmation of our existing executive compensation policies and programs. The “say-on-pay” vote serves as an additional tool to guide the Board and the Committee in ensuring alignment of our executive compensation programs with stockholder interests. Accordingly, basedeligible officers who provide at least six months’ notice prior to retirement, are described on the Committee’s analysis of this support, it generally maintained our executive compensation policies for 2017 and into 2018. The Committee will continue to review stockholder votes on our executive compensation and determine whether to make any changes to the program as a result of these votes.page 60.
How We Make Compensation Decisions
Role of IndependentOther Compensation Consultant
Perquisites and Other Benefits
For 2017, the Committee continued its engagement of Meridian Compensation Partners, LLC (“Meridian” or the “Consultant”) as its independent compensation consultant to provide information and objective advice regarding NEO and director compensation. The Committee retained Meridian because of its extensive experience and familiarity with our NEO compensation program and the compensation programsBenefits represent a relatively small part of our Peer Group, including specific experienceoverall compensation package; however, these benefits help attract and retain senior level executives. We provide benefits commonly offered in the oil and gas industry. Importantly, the Committee makes all of the decisions with respectE&P industry to our executive compensation, and in setting compensation for our NEOs, considers the Consultant’s advice as only one factor among many other factors discussed within this CD&A. Other factors include our overall performance, individual NEO performance, experience, skills, tenure with Callon, industry trends and similar factors.
Meridian reports solely to the Committee, and the Committee determines the scope of Meridian’s engagement. To help ensure that our NEO compensation programs are competitive and consistent with our compensation philosophy, the Consultant assisted the Committee as follows:
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 stockholder 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 comprehensive, 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 marketplace compensation trends in the industry, best practices and other general trends and developments affecting executive compensation.
The Committee did not direct Meridian to perform its services in any particular manner or under any particular method. The Committee has the final authority to hire and terminate the Consultant, and the Committee evaluates the Consultant annually. Meridian provides no other services to Callon aside from its role as advisor to the Committee, and pursuant to applicable SEC and NYSE rules, the Committee has determined that no conflicts of interest exist because of Meridian’s engagement by the Committee. The Committee has retained Meridian as its Consultant on NEO and director compensation for 2018.
From time to time, Meridian contacts our NEOs for information needed to fulfill the objectives established by the Committee, and makes reports and presentations to both the Committee and our NEOs. However, the Committee established procedures that it considers adequate to ensure that the Consultant’s advice to the Committee remains objective and is not influenced by our NEOs or other management.
Role of Management
The Committee considers input from our CEO in making determinations regarding our executive compensation program and the individual compensation of each of his direct reports and other select officers of Callon. The officer team makes recommendations to the Committee regarding potential objectives for the annual cash bonus incentive program and provides information to the Committee regarding the performance of the Company for the Committee’s determination of annual cash bonuses. The Committee makes the final determination of NEO compensation. Our CEO makes no recommendations regarding, and does not participate in discussions about, his own compensation.
Role of Market Data
The Compensation Committee of the Board strives to ensure that our executives are compensated in a manner that is fair, equitable, performance-based and guided by the long-term interests of investors. In order to attract, motivate and retain talented executive officers, the Committee must also ensure that our executive compensation program remains competitive with the types and ranges of compensation paid by our peer companies who compete for the same executive talent. On an annual basis, the Committee reviews and discusses compensation data for our CEO and other NEOs as compared with compensation data for similarly situated executive officers at peer companies selected by the Consultant and approved by the Committee.
The Committee engages Meridian to conduct annual assessments of our industry peer group (“Peer Group”) in order to ensure each peer remains appropriate year-over-year. The Peer Group is selected based on multiple factors, such as:
Size, including enterprise value, market capitalization, and asset size;
Similar geographic footprint and operational focus, particularly in the Permian Basin;
Comparability of asset portfolio; and
Availability of compensation data.
The Committee does not target executive compensation to a specific percentile of the Peer Group, as the market data is just one of many factors considered by the Committee in determining compensation. The Committee believes this Peer Group provides a reasonable point of reference for comparing the compensation of our NEOs to others holding similar positions and having similar responsibilities. The Committee considers Peer Group data relevant to, but not determinative of, the Committee’s consideration of overall executive compensation matters.
The Peer Group used by the Committee in evaluating the competitiveness of executive compensation and making 2017 compensation decisions consisted of the companies in the first column of the following table. The Committee also reviewed data from proprietary benchmarking surveys provided by Meridian for additional market perspective and to validate the peer group data.
Due to industry volatility and changes, the Committee re-evaluated the Peer Group in preparation for making the May 2017 grants of long-term incentives, resulting in the peer group in the second column of the following table. This Peer Group is being used to measure Callon’s relative total shareholder return (“TSR”) performance for the May 2017 grant of PSUs.
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| | |
Initial 2017 Peer Group | | May 2017 Peer Group (May 2017 LTI Awards) |
Abraxas Petroleum Corp. | | Abraxas Petroleum Corp. |
Bill Barrett Corp. | | Bill Barrett Corp. |
Bonanza Creek Energy, Inc. | | Carrizo Oil & Gas, Inc. |
Carrizo Oil & Gas, Inc. | | EP Energy Corp. |
EXCO Resources, Inc. | | Jones Energy, Inc. |
Jones Energy, Inc. | | Laredo Petroleum, Inc. |
Laredo Petroleum, Inc. | | Matador Resources, Inc. |
Matador Resources, Inc. | | Parsley Energy, Inc. |
Parsley Energy, Inc. | | PDC Energy, Inc. |
PDC Energy, Inc. | | RSP Permian, Inc. |
RSP Permian, Inc. | | Sanchez Energy Corp. |
Sanchez Energy Corp. | | SM Energy Co. |
The Committee understands the inherent limitations in using any peer group or data set including fluctuations in survey participation and competition for executive talent by companies potentially much larger than Callon. Accordingly, the Committee does not consider data collected from any of these sources to be prescriptive. Rather, the Committee relies upon this and similar data as reference points around which to make informed decisions about the appropriate level and form of compensation for each NEO.
Risk Assessment Related to our Compensation Structure
The Committee believes our compensation plans and policies are appropriately structured to encourage and reward prudent business judgment and avoid excessive risk-taking over the long term. The Committee, with the assistance of the Consultant, reviewed the compensation programs maintained by the Company during 2017 to determine whether they encouraged excessive risk taking. Upon evaluation of the assessment, the Committee concluded that our compensation policies and practices for our employees do not present risks that are reasonably likely to have a material adverse effect on the Company. The Committee’s risk review identified the following risk mitigating features designed into our compensation programs:
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 designed to encourage performance, but not excessive risk taking, and discretion to decrease payouts if it is believed management exercised excessive risk taking;
The use by the Committee of its discretion to assess annual performance in the bonus plan;
Performance targets measured at the corporate level, rather than at the individual or business unit level;
Reasonable change-in-control severance protections; and
Significant executive stock ownership requirements.
Executive Compensation Components and Philosophy
Our pay-for-performance philosophy is demonstrated in the mix of compensation that we provide to our NEOs. The Committee designs our compensation program to maintain a balance between rewarding the achievement of annual performance objectives and the long-term objective of aligning the interests of our executives with those of our stockholders. Accordingly, a significant portion of our NEOs’ compensation in 2017 was in the form of annual cash incentives and long-term incentives. Our executive compensation program is designed to do the following:
Reward the management team for delivering results against its long-term objectives, thereby creating value for the stockholders;
Emphasize pay for performance, in which Company and individual performance substantially influence the amount realized by a NEO;
Attract and retain a highly qualified and motivated management team by offering industry competitive opportunities;
Hold NEOs accountable 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 long-term interests of our stockholders by weighting the programs toward at-risk, performance-based compensation, consisting of an objective-driven annual incentive program, stock grants with three-year vesting, and TSR-contingent incentive awards.
The Committee believes that this approach awards and compensates our NEOs in a manner that fairly and reasonably provides incentives for the enhancement of stockholder value, for the successful implementation of our business plan, and the continuous improvement in corporate and personal performance. In order to compete in our industry, the Committee believes that our NEOs’ compensation should include the following components:
|
| | |
Base salary |
| | |
Purpose | l | Pay for expertise and experience; |
| l | Attract and retain talented executives; |
| l | Provide compensation stability; and |
| l | Compete with comparable companies. |
| | |
Philosophy | l
| Fixed component of compensation reflective of individual skills, experience and expertise necessary to execute our business strategy; and |
| l | Competitive with similarly sized peers. |
|
| | |
Annual Cash Bonus Incentive |
| | |
Purpose | l
| Motivate our executive officers to achieve our short-term business objectives that drive long-term performance while providing flexibility to respond to opportunities and changing market conditions; |
| l | Reward achievement of financial, operating, safety and strategic goals for which NEOs are held accountable; and |
| l | Promote and encourage pay-for-performance. |
| | |
Philosophy | l
| At-risk component of compensation, with modest or no reward for performance below expectations and potential for increased reward for exceptional performance; |
| l | Reflective of internal equity considerations; |
| l | Goals aligned with our annual performance targets; |
| l | Provide balance in compensation programs and avoid encouraging undue risk-taking; and |
| l | Competitive with similarly-sized peers. |
|
| | |
Long-term incentive (LTI) awards (60% TSR PSUs / 40% RSUs) |
| | |
Purpose | l | Motivate and reward long-term achievement of business objectives, aligning the interests of our NEOs with stockholders; |
| l | Match competitive practices to attract and retain employees; and |
| l | Provide a mix of LTI awards that focuses the NEO on creating long-term value while avoiding undue risk-taking. |
| | |
Philosophy | l | Ensures that realized value to the executive aligns with value delivered to stockholders; |
| l | Recognizes and rewards share price performance relative to industry peers; |
| l | At-risk component of compensation, providing a strong performance-based LTI component; |
| l | Aligns compensation with sustained long-term value creation; and |
| l | Allows NEOs to acquire a meaningful and sustained ownership stake in the Company. |
|
| | |
Other (Retirement; Health benefits; Severance) |
| | |
Purpose | l | Provide financial security for the NEOs and their families; |
| l | Ensure a financial safety net; |
| l | Provide competitive level of benefits; |
| l | Provide competitive benefits to attract and retain NEOs; and |
| l | Ensure NEOs consider all possible transactions to increase stockholder value related to changes in control of the Company. |
| | |
Philosophy | l
| Helps attract and retain NEO talent and remain competitive among our peers by offering a comprehensive benefits package; |
| l
| Provides financial security in the event of various individual risks and maximizes the efficiency of tax-advantaged compensation vehicles; |
| l | Benefits levels based on peer group practices while considering stockholder value; and |
| l
| Attracts and retains NEOs in a competitive and changing industry, ensures NEOs act in the best interests of the stockholders in a change in control. |
Determination of Each Element of Compensation
Base salaries
We provide all of our employees, including our NEOs, and review these benefits annually to ensure that they are competitive with industry norms. These benefits consist of:
•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").
We pay the NEOs, with an annual base salaryfull costs of these benefits, including the 401(k) plan administration, for all employees.
Under our 401(k) plan, all eligible employees may elect to compensate them for their services throughout the year. Our Committee recognizes thatdefer a substantial amount of competition exists in the oil and gas industry for attracting and retaining qualified management teams, particularly in the Permian Basin. Accordingly, the Committee evaluates our NEOs’ salaries together with other componentsportion of their compensation up to ensurethe statutorily prescribed limit. In 2022, the Company provided a matching contribution of up to 6% and a profit sharing contribution of up to 2% of the employee’s IRS eligible salary for qualified employees, including our NEOs.
Our NEOs are entitled to certain benefits that are not otherwise available to all of our employees. We provide our executive officers with use of a Company vehicle. We purchase or lease the NEOs’ total compensationvehicle and pay for all maintenance, repairs, insurance and fuel. The NEO is competitive relativerequired to market practicesrecognize taxable income using the IRS’s annual lease value method for personal use of the vehicle. We also reimburse our executive officers for their out-of-pocket cost of an executive physical, up to $2,500. The costs associated with these benefits for the NEOs are reported as “Other Compensation” in our Peer Group or our industry in general, and is consistentthe Summary Compensation Table. The Committee believes these perquisites are modest, yet competitive with the Committee’s compensation philosophy.perquisites provided to similarly situated industry executives.
Annually, generallyEXECUTIVE COMPENSATION
We do not sponsor any qualified or non-qualified defined benefit plans, or any non-qualified defined contribution plan for NEOs or other employees.
Change in March of each year,Control; Severance and Retirement Arrangements; Employment Agreements
We have no employment agreements with our executive officers. In September 2022, the Committee reviewsapproved the base salaryterms of our NEOs. Individual salary amounts reflect the Committee’s subjective analysisCallon Executive Change in Control Severance Plan (the “Executive CIC Plan”) that provides for certain protections upon a change in control and replaces the existing individual change in control severance agreements (“CIC Agreements”) with each of a number of factors, including:
Individual officer’s experience, skills, contributions and tenure with Callon;
Changes to the individual’s position within Callon;
TrendsCompany’s executive officers. Also in compensation practices within our Peer Group and industry; and
The NEO’s roles, responsibilities and expected future contribution to Callon’s success.
In addition,September 2022, the Committee also considersapproved the input and recommendations of Meridian regarding base salaries, as well as the inputterms of the CEO when evaluating base salaryExecutive Severance Pay Plan (the “Severance Pay Plan”) that provides for the other NEOs.
After considering the market analysis and advice of its Consultant, the Committee did not increase salaries at its March 2017 meeting. Upon the passing of Mr. Callon and promotion of Mr. Gatto to CEO in June 2017, the Committee increased Mr. Gatto’s salary from $400,000 to $575,000 and Mr. Newberry’s salary from $400,000 to $475,000, reflecting their increased roles and responsibilities after the transition. The salaries for Mr. Ulm and Ms. Loeffler were negotiated at their hiring and reflect consideration of market information from Meridian.
Performance-based annual cash bonus incentive
A core component of our NEO compensation philosophy is to emphasize pay-for-performance by structuring a significant portion of total annual compensation as “at risk.” Each year, the Compensation Committee establishescertain protections upon an annual performance bonus program, which is designed to promote the achievement of annual corporate objectives including key financial, operating, safety and strategic objectives that are aligned with the creation of stockholder value. Performance is judged at the end of the year based on a retrospective evaluation of performance against these specified objectives, although the Committee retains discretion to determine the ultimate bonus amounts paid.
To motivate employees to pursue our annual business goals in a way most beneficial to our stockholders, NEOs, senior management and other non-management technical personnel have the potential to receive a significant portion of their annual cash compensation as a bonus. The Committee set 2017 annual bonus award opportunities for each NEO as a percentage of the NEO’s annual base salary, and ultimately awarded a cash bonus to the NEOs based on the achievement of specified Company performance goals and the NEO’s individual performance, as determined at the Committee’s discretion.
The 2017 annual bonus award opportunities for our NEOs were as follows:
|
| | |
NEO | | Target Bonus Opportunity (% of Base Salary) |
Joseph C. Gatto, Jr. | | 100% |
Gary A. Newberry | | 100% |
James P. Ulm II | | 90% |
Other NEOs | | 60% - 70% |
Mr. Gatto and Mr. Newberry’s targets were increased from 90% to 100% in June 2017 reflecting their expanded roles and responsibilities following Mr. Callon’s passing. The bonus targets for Mr. Ulm and Ms. Loeffler were negotiated at their hiring and reflect consideration of market information from Meridian.
Setting objectives and assessing annual performance
For purposes of evaluating performance, the Committee, in collaboration with management and the Consultant, oversees a rigorous process to set performance objectives for the annual bonus program, evaluate progress toward these objectives, monitor external trends, measure competitiveness and determine compensation outcomes. During the first quarter of each year, the Committee approves our operational, financial and strategic objectives for that year’s bonus program based on recommendations and input from management. These approved company performance objectives become the individual performance objectives for our CEO.involuntary termination. The Committee believes that these quantitative and qualitative factors and performance expectations, taken together, are objective indicators of overall successful performance. The Committee prefers not to rely solely on a formulaic approach that results in automatic payouts, so the Committee retains the flexibility to exercise its judgment and discretion as appropriate and take into account special or unusual factors that may have contributed to the achievement of these objectives, such as acquisitions, commodity prices, or other factors considered appropriate by the Committee at the time of the award.
The key 2017 operational, financial and strategic objectivesExecutive CIC Plan and the Committee’s assessmentSeverance Pay Plan serve shareholders’ best interests by aligning executive interests with shareholders, helping ensure retention of performance against those objectives are as follows:
|
| | | | |
Objective | | Assessment | | Result |
Operate in a safe an environmentally friendly manner | | OSHA recordable rate was higher than prior year’s reflecting industry-wide trends; environmental spill rates and safety engagement metrics improved. | | Below expectations |
Increase daily production | | Increased approximately 50% year over year to 22,940 Boepd | | Met expectations |
Increase proved reserves | | Increased nearly 50% year over year to 137 MMBoe, with 50% PDP | | Exceeded expectations |
Manage expenses and improve margins | | LOE reduced 13% to $5.96 per Boe and cash G&A reduced 13% to $2.51 per Boe. Corporate cash margin increased 34% to $25.05 per Boe despite an inflationary service environment and substantial growth in employee count. | | Mostly exceeded expectations |
Efficiently deploy capital | | Drill-Bit F&D reduced by 6% year over year to $8.21/Boe despite inflationary service environment | | Exceeded expectations |
Maintain appropriate financial flexibility | | Lowered Debt/LTQA EBITDA(i) to 2.2x with liquidity of approximately 150% of projected 2018 capital budget
| | Met expectations |
In addition to performance criteria above, the Committee considers the economicmanagement and industry environment, commodity price fluctuations and other unforeseen influences (adverse or beneficial) in its evaluation. For 2017, the Committee took into account the following in determining bonus payouts:
Management’s successful integration of 2016 acquisitions, including the addition of a newly established Delaware Basin position;
The successful growth of Callon’s employee base to manage the increased operations activity and growing asset base; and
Managing through a challenging and unanticipated leadership transition, including the hiring of several new senior management team members.
The Committee evaluated the NEOs’ performance against the 2017 performance criteria described above and determined that overall the management team exceeded expectationsdiminishing potential distractions for the year. Based on the results of the Committee’s assessment set forth above, the Committee determined actual bonus amounts paid for 2017 performance at approximately 120% of target, as follows:
|
| | | | |
| NEO | | 2017 Annual Bonus |
| Joseph C. Gatto, Jr. | | $ | 690,000 |
|
James P. Ulm II (a) | | $ | 52,000 |
|
| Gary A. Newberry | | $ | 570,000 |
|
| Jerry A. Weant | | $ | 193,500 |
|
| Mitzi P. Conn | | $ | 189,000 |
|
Fred L. Callon (b) | | $ | 312,500 |
|
| Correne S. Loeffler | | $ | 176,400 |
|
| |
(a) | Bonus amount pro-rated for less than a full year of employment. |
| |
(b) | Bonus amount pro-rated through May 2017, based on a target bonus opportunity of 100% of base salary. |
|
| | |
(i)See Appendix B for a reconciliation of Non-GAAP financial measures.
| 38 | |
Annual award of long-term incentives
We believe that a long-term incentive program that includes awards of both restricted stock units (“RSUs”) and performance stock units (“PSUs”) provides appropriate retention incentives and effectively aligns our executive officers’ interests withofficers in the interestsevent of our stockholders on a long-term basis. PSUs also have an additional performance-based component that compares our performance with that of our peer companies. We believe this combination of LTI awards appropriately provides incentives that capture absolute total return performance of our common stock, as well as comparative returns relative to other oil and gas companies. Theinvoluntary termination or change in control transaction. However, the Committee believes that granting LTI awards isexecutives should not be unduly enriched, and all benefits under the most effective means to provide substantial forward-looking incentives to our NEOs that emphasizes:
Long-term value creation by linking compensation provided to our NEOs with long-term operational success;
AlignmentExecutive CIC Plan and Severance Pay Plan require a “double-trigger.” For a detailed description of the long-term interests of our NEOs with those of our stockholders by directly linking rewardsExecutive CIC Plan and the Severance Pay Plan, please refer to stockholder return and our pay-for-performance philosophy;page 59.
Retention incentives for our executive officers; and
Meaningful equity participation by our executive officers.
The Committee administers our long-term incentive programs, approves award recipients and amounts, and determines the vesting and performance criteria. For the grant of LTI compensation to NEOs,In September 2022, the Committee will typically consider information provided byalso approved new retirement benefits under the Consultant relatedCPU Agreements for NEOs and other officers for the purposes of attracting and retaining top talent and incentivizing early notice of impending retirements to ensure smooth transitions. The retirement benefits, which are available at the overall competitive environment associated with long-term compensation. We have no program, plan or obligation that requires us to grant LTI compensation on specified dates. However,discretion of the Committee adheres to our policy of only granting stock based compensation grants during open trading windows.eligible officers who provide at least six months’ notice prior to retirement, are described on page 60.
For 2017 LTI grants, the Committee approved a 40%/60% mix for our NEOs of time-based RSUs and performance based awards tied to relative TSR. The performance awards are granted as PSUs that settle 50% in cash and 50% in stock. The following table sets forth the number of RSUs and PSUs awarded to the NEOs at our normal annual grant in May 2017:
|
| | | | | | | | | | | |
| NEO | | Total Value $ | | RSUs Payable in
Common Stock (a) | | TSR PSUs Payable in 50% Stock and 50% cash (b) |
| Joseph C. Gatto, Jr. | | $ | 1,300,000 |
| | 42,868 |
| | 64,304 |
| |
| Gary A. Newberry | | $ | 1,300,000 |
| | 42,868 |
| | 64,304 |
| |
| Jerry A. Weant | | $ | 330,000 |
| | 10,881 |
| | 16,324 |
| |
| Mitzi P. Conn | | $ | 330,000 |
| | 10,881 |
| | 16,324 |
| |
| Fred L. Callon | | $ | 2,950,000 |
| | 97,279 |
| | 145,918 |
| |
| Correne S. Loeffler | | $ | 122,500 |
| | 7,068 |
| | 3,030 |
| (c) |
| |
(a) | Amounts represent RSUs that are scheduled to vest on May 11, 2020 and settle in Company common stock on the vesting date. |
| |
(b) | Amounts represent TSR PSUs that are scheduled to vest on December 31, 2019 and settled in 50% Company common stock and 50% cash at a variable rate between 0% and 200% based on our TSR when compared to pre-determined peer companies. |
| |
(c) | Ms. Loeffler’s TSR PSU award consists only of units that will settle in 100% cash on the vesting date. |
RSU program. The Committee awarded NEOs with time-based RSUs that will vest in full if the executive continues to be employed on the third anniversary of the grant date and will be paid in shares of the company’s common stock.
PSU program. In May 2017, the Committee awarded PSUs to the NEOs that will vest at the end of the performance period based on the Company’s TSR ranking relative to the peer group listed in the second column of the peer group table found in the Role of Market Data section above. TSR is the change in the common stock price plus dividends using a 20-day average at the beginning and end of the performance period. The Committee believes relative TSR is an appropriate long-term performance metric because it generally reflects all elements of a company’s performance and provides the best alignment of the interests of management and the Company’s stockholders. The Committee also believes that the TSR PSU program provides a good balance to the restricted stock unit program. TSR PSUs are eligible for vesting if the employee continues to be employed until the vesting date on December 31, 2019. TSR PSUs will vest at the percentage set forth below based on the Company’s relative TSR ranking for the performance period:
|
| | |
| Callon’s TSR Rank Among the Peer Companies | | TSR PSUs Vesting as a Percentage of Target |
| 1 - 2 | | 200% |
| 3 | | 183% |
| 4 | | 163% |
| 5 | | 142% |
| 6 | | 121% |
| 7 | | 100% |
| 8 | | 75% |
| 9 | | 50% |
| 10 | | 25% |
| 11 - 13 | | 0% |
However, if Callon’s TSR is negative during the performance period, the payout will be limited to 100% of target. The vested TSR PSUs will pay out 50% in cash and 50% in shares of Callon common stock.
Vesting of 2015-2017 performance awards
TSR PSUs - Results for performance period ending December 31, 2017.In May 2015, ourHow We Make Compensation Committee granted TSR PSUs to the NEOs, which vested on December 31, 2017. Under the provisions of these awards, the targeted shares were subject to our relative TSR performance compared with the TSR of the peer companies specified in the award grant. Callon TSR during the performance period ranked third relative to the 10 peer companies, resulting in vesting of 183% of the number of awarded TSR PSUs. Vested units were paid 50% in cash and 50% in Company common stock.Decisions
The table below summarizes the TSR PSUs earned by the NEOs for the 2015-2017 performance period:
|
| | | | | | |
| NEO | | Target Number
of TSR PSUs | | Percent of Target TSR PSUs Earned | | Actual Vested TSR PSUs (Settled 50% Cash and 50% Shares) |
| Joseph C. Gatto, Jr. | | 43,849 | | 183% | | 80,242 |
| Gary A. Newberry | | 43,849 | | 183% | | 80,242 |
| Jerry A. Weant | | 21,925 | | 183% | | 40,122 |
| Mitzi P. Conn | | 21,925 | | 183% | | 40,122 |
Settlement of outstanding equity awards for Mr. Callon
Upon Mr. Callon’s passing in May 2017, all outstanding equity awards vested, with the TSR Phantom Units settled based on performance to date. The table below summarizes the performance measurement and settlement of those awards based on performance through May 24, 2017.
|
| | | | | | |
| Grant Year | | Callon's TSR Rank | | Percent of Target TSR PSUs Earned | | Actual Vested TSR PSUs (Settled 50% Cash and 50% Shares) |
| 2015 | | 2 | | 200% | | 240,000 |
| 2016 | | 4 | | 163% | | 194,541 |
| 2017 | | 5 | | 142% | | 207,204 |
Promotional and inducement awards
In addition to our regular annual LTI grants, we made the following promotional or inducement awards to our NEOs in 2017:
Mr. Gatto received a $1.3 million grant of time-based RSUs vesting ratably over three years at one-third per year upon his promotion to CEO in June 2017;
Mr. Newberry received a $1.5 million grant of time-based RSUs vesting 50% after two years and 50% after three years upon our executive transition to reflect his increased role and responsibilities and to retain him through the critical transition;
Mr. Ulm received 90,000 time-based RSUs vesting ratably over three years at one-third per year upon his hiring to induce him to join the company and provide initial forfeitable retention value; and
Ms. Loeffler received a grant of 35,000 time-based RSUs vesting ratably over three years at one-third per year upon her hiring to induce her to join the company and provide initial forfeitable retention value.
Other Compensation
Perquisites and other benefits
Other Benefits
Benefits represent a relatively small part of our overall compensation package; however, these benefits help attract and retain senior level executives,executives. We provide benefits commonly offered in the E&P industry to all of our employees, including our NEOs, and we review these benefits annually to ensure that they are competitive with industry norms. We provide benefits commonly offered in the oil and gas E&P industry to all of our employees. These benefits consist of:
•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 coveragecoverage;
Callon•Callon's sponsored cafeteria plan; and
•401(k) employee savings and protection plan.
plan (the "401(k) plan").
We pay the full costs of these benefits, including the 401(k) plan administration, for all employees. Employee life insurance amounts that surpass the Internal Revenue Service maximum are treated as additional compensation to all employees.
Under our 401(k) plan, all eligible employees may elect to defer a portion of their compensation up to the statutorily prescribed limit. The company provides contributions for qualified employees, including NEOs,In 2022, the Company provided a matching contribution of 5%up to 6% and a profit sharing contribution of up to 2% of the employee’s IRS eligible salary excluding annual cash bonuses, which are paid one-half in cash and one-half in our common stock, limited to IRS regulation dollar limits. We also match employee deferral amounts, including amounts deferred by NEOs, up to a maximum of 5% of IRS eligible compensation.
Each year, we purchase a certain number of hours of flight time through a fractional aircraft ownership arrangement. These hours are made available for business use to the NEOs and our other employees in connection with their business travel requirements in an effort to reduce travel time and related disruptions and to provide additional security. We believe these flight hours are a cost-effective way to increase the NEOs availability, efficiency, and productivity. The Committee disallowsqualified employees, including NEOs, from using these hours for personal use, though the Committee recognizes occasions will arise when a personal guest (including a family member) will accompany an employee on a business-related flight at no, or immaterial, incremental cost to Callon.
our NEOs.
Our NEOs are entitled to certain benefits or perquisites, that are not otherwise available to all of our employees. We provide our executive officers with use of a Company automobile.vehicle. We purchase or lease the automobilevehicle and pay for all maintenance, repairs, insurance and fuel. The employeeNEO is required to recognize taxable income using the Internal Revenue Service’sIRS’s annual lease value method for personal use of the vehicle. We also reimburse our executive officers for their out-of-pocket cost of an executive physical, up to $2,500. The costs associated with these benefits for the NEOs are reported as “Other Compensation” in the Summary Compensation Table. The Committee believes these perquisites are modest, yet competitive with the perquisites provided to similarly situated oil and gas industry executives.
We do not sponsor any qualified or non-qualified defined benefit plans, or any non-qualified defined contribution plan for NEOs or other employees.
Change in Control; Severance protection
and Retirement Arrangements; Employment Agreements
We have no employment agreements with our NEOs, but we do haveexecutive officers. In September 2022, the Committee approved the terms of the Callon Executive Change in Control Severance Plan (the “Executive CIC Plan”) that provides for certain protections upon a change in control and replaces the existing individual change in control severance agreements (“CIC Agreements”) with each of the Company’s executive officers. Also in September 2022, the Committee approved the terms of the Executive Severance Pay Plan (the “Severance Pay Plan”) that provides for certain NEOs.protections upon an involuntary termination. The Committee believes that change-in-control severance arrangementsExecutive CIC Plan and the Severance Pay Plan serve stockholders’shareholders’ best interests by aligning executive interests with shareholders, helping ensure retention of management and diminishing potential distractions for our NEOsexecutive officers in the event of a potential corporate restructuringan involuntary termination or change-in-controlchange in control transaction. These protections also help ensure continuity of management in the event of certain corporate transactions. However, the Committee believes that executives should not be unduly enriched, if change-in-control severance arrangementsand all benefits under the Executive CIC Plan and Severance Pay Plan require a “double-trigger.” For a detailed description of the Executive CIC Plan and the Severance Pay Plan, please refer to page 59.
In September 2022, the Committee also approved new retirement benefits under the CPU Agreements for NEOs and other officers for the purposes of attracting and retaining top talent and incentivizing early notice of impending retirements to ensure smooth transitions. The retirement benefits, which are triggered. Accordingly, eachavailable at the discretion of the Committee to eligible officers who provide at least six months’ notice prior to retirement, are described on page 60.
How We Make Compensation Decisions
Role of Independent Compensation Consultant
For 2022, the Committee continued its engagement of FW Cook as its independent compensation consultant to provide information and objective advice regarding executive officer and director compensation.
The Committee makes all final decisions with respect to our executive compensation. When designing pay programs and setting compensation levels for our NEOs, the Committee considers the independent compensation consultant’s advice as one factor among many other factors discussed within this CD&A. Other factors include our overall Company performance; individual NEO has entered into an agreementperformance, experience, skills and tenure with the CompanyCompany; competitive market data; and industry trends.
The compensation consultant reports solely to the Committee, and the Committee determines the scope of the engagement. In an effort to ensure that our NEO compensation programs are competitive and consistent with our compensation philosophy, FW Cook assists the Committee as follows:
•Regularly attending meetings of the Committee and meeting privately in executive session with the 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 our 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 Callon’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.
The Committee has the final authority to hire and terminate the compensation consultant, and the Committee evaluates the consultant’s performance annually.
Pursuant to applicable SEC and NYSE rules, the Committee has determined that no conflicts of interest existed related to FW Cook’s engagement by the Committee in 2022.
Role of Management
The Committee considers input from our CEO in making determinations regarding our executive compensation program and the individual compensation of each of the executives other than himself. The officer team makes recommendations to the Committee regarding potential objectives for the incentive programs and provides certain protections upon a change-in-control.
These agreements include certain non-competition and non-solicitation provisions and are triggered only if there is both a change in controlinformation to the Committee regarding the performance of the Company for the Committee’s determination of incentive compensation outcomes. The Committee makes the final determination of all elements of NEO compensation. Our CEO makes no recommendations regarding, and does not participate in discussions about, his own compensation.
Role of Market Data
The Committee reviews compensation of our NEOs annually. Individual compensation amounts reflect the Committee’s subjective analysis of a qualifying terminationnumber of employment (commonly called a “double trigger”). In addition, in orderfactors, including:
•The NEO’s experience, skills, contributions and tenure with Callon;
•Changes to protect us if the benefits are triggered,NEO’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.
On an annual basis, the agreements contain a “claw back” provision that will applyCommittee reviews and discusses compensation data for our CEO and other NEOs as compared with compensation data for similarly situated executive officers at peer companies recommended by the compensation consultant and approved by the Committee. The peer group is selected based on multiple factors, such as:
•Size, including enterprise value and market capitalization;
•Similar geographic footprint and operational focus;
•Comparability of asset portfolio;
•Competition for executive talent in the eventmarket; and
•Availability of compensation data.
The Committee believes the NEO violates anyselected peer group provides a reasonable point of these provisions. Nonereference for comparing the compensation of our NEOs to others holding similar positions and having similar responsibilities. The peer group used by the Committee in evaluating the competitiveness of executive compensation and making 2022 compensation decisions consisted of the agreements includes an excise tax gross-up provision, andcompanies set forth in the following table.
The Committee does not consider data collected from any source to be prescriptive. Rather, the Committee chose notrelies upon this and similar data as reference points around which to provide guaranteed severance benefits outsidemake informed decisions about the appropriate level and form of a change-in-control.compensation for each NEO.
| | | | | | | | |
| | |
| 2022 Compensation Peer Group |
•Centennial Resource Development, Inc. •Cimarex Energy Co. •CNX Resources Corporation •Comstock Resources, Inc. •Kosmos Energy Ltd. | •Laredo Petroleum, Inc. •Matador Resources Company •Murphy Oil Corporation •PDC Energy, Inc. •Range Resources Corporation | • SM Energy Company • Southwestern Energy Company • Talos Energy Inc. • Whiting Petroleum Corporation |
|
|
| | |
Practices and Policies Related to Compensation Stock Ownership Policy
Guidelines
Consistent with its goal of driving long-term value creation for our stockholders and in order to discourage undue risk-taking,shareholders, the Committee’sCompany's stock ownership guidelines require significant stock ownership by the NEOsexecutive officers and directors. The Committee believes that requiring meaningful stock ownership by our NEOs and directors is an important way to further align their interests with the interests of our stockholders. Accordingly, the Committee has adopted a stock ownership policy which applies to the CEO, the other NEOs and outside directors as described below. The guidelines require the NEOsexecutive officers and directors to hold the following amounts of our stock, computed on December 31 of each year as follows:stock:
|
| | | | |
NEO/Executive Officers/Directors | | Required Common Stock Ownership as a Multiple of Annual Base Salary / Annual Retainer |
| CEO | | 6x |
Other NEOsDirectors | | 2x5x |
DirectorsOther Executive Officers | | 5x2x |
The Committee evaluates compliance with these guidelines on an annual basis. For purposes of the guidelines, shares owned directly and indirectly equivalent shares invested in the NEO’s 401(k) plan, and any unvested time-based RSUs are included. ThePursuant to the policy, shares granted under the Company’s incentive compensation plans are valued at the greater of the then-current trading price or the value on the date of unvested PSUs is excluded.
grant.
Each NEOexecutive officer and director has a transition period of five years from the date the individual becomes subject to the guidelines to attain the required investment position. If a NEOan executive officer becomes subject to a greater ownership requirement due to a promotion or an increase in salary, the NEOexecutive officer will be expected to attain the higher level within three years of the change. The Committee reserves the right to approve an alternate stock ownership guideline for NEOs who can demonstrate a severe hardship in meeting the general guidelines.
Each outside director is required to achieve a minimum valueAs of common stock equal to at least five times the annual retainer within five years following their election as a director.
AllDecember 31, 2022, all participants are currentlywere in compliance with the stock ownership policy, either through meeting the ownership requirement or by being within the transition period.
Internal Revenue Service Limitations
When establishing our compensation programs, the Committee considers the effects of relevant tax laws. The Committee reviewed and considered the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code which providesof 1986, as amended (the "Tax Code") places a limit of $1.0 million on the amount of compensation that we may deduct in any one year with respect to compensation paid to each covered employee. The Committee considers the deductibility of compensation in its decision making and implements compensation programs that it believes are competitive and in the best interests of the Company generally may not deduct for federal income tax purposes annual compensation in excess of $1 million paid to any “covered employee.” However, the $1 million limit did not apply to qualifying performance-based compensation that is paid pursuant to stockholder-approved plans and is approved by directors who qualify as “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code. The Committee generally structured and administered executive compensation plans and arrangements so that they would not be subject to the 162(m) deduction limit, where appropriate. However, tax deductibility is only one factor the Committee considers in structuring appropriate compensation programs, and the Committee reserves the right to use its judgment to authorize compensation payments that are not deductible under Section 162(m) when it believes that such payments are appropriate. The performance-based compensation exception under Section 162(m) was repealed by the 2017 Tax Cuts and Jobs Act for new awards granted after November 2, 2017.
Insider Trading Policy
The Company’s Board has adoptedmaintains a comprehensive Insiderinsider trading policy (the "Insider Trading Policy (“Policy”Policy") for employees and directors to promote compliance with federal and state securities laws that prohibitlaws. The Insider Trading Policy prohibits certain persons who are aware of material nonpublicnon-public information about a company from: (i) trading in securities of that company; or (ii) providing material nonpublicnon-public information to other persons who may trade on the basis of that information. When material non-public information about us may exist and may have an influence on the marketplace, a trading blackout period is placed in effect by management. All employees, including our NEOs and members of our Board, are subject to this Policy and are prohibited from engaging in short-term or speculative transactions in our securities, including short sales, options and other derivatives, hedging and from holding Company securities in a margin account or pledging securities as collateral for a loan. In addition, thisthe Insider Trading Policy also applies to family members, other members of a person’s household, and entities controlled by a person covered by this Insider Trading Policy. Officers,
directors, and designated employees, as well as the family members and controlled entities of such persons, may not engage in any transaction in Company securities without first obtaining pre-clearance of the transaction from our General Counsel.
Under the Compliance Officer.
Certain RelationshipsInsider Trading Policy, directors, executive officers and Related Party Transactions
other employees are prohibited from entering into any hedging or monetization transactions relating to Callon's securities or otherwise trading in any instrument relating to the securities' future price. This Insider Trading Policy also prevents directors and executive officers from pledging Callon common stock as collateral for loans or holding Callon securities in a margin account. The Board’s Audit Committee charter provides that the Audit Committee shall review and approve all related party transactions.Insider Trading Policy is published as Addendum A transaction will be considered a “related party transaction” if the transaction would be required to be disclosed under Item 404 of Regulation S-K. In addition, our Code of Business Conduct and Ethicsis available at www.callon.com/about-callon/governance.
Clawback Policy
The Committee maintains the Clawback Policy, which provides that an officer’s orthe Committee the authority to recoup previously-paid compensation under the following circumstances:
•If there is a director’s conflict of interest with Calloncorrection to previously approved performance metrics (not necessarily limited to a financial restatement), the Committee may only be waived if the Nominating and Corporate Governance Committee approves the waiver and the full Board ratifies the waiver. As of December 31, 2017, we are not aware of any related party transactions with ourclawback from executive officers thatany 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 causeclawback annual and long-term incentive compensation paid in the past year from the executive officer.
The Committee believes the Clawback Policy helps protect Callon and its shareholders in the unlikely event of a conflict of interest with us.
Recoupment Policy
We have no recoupment policy applicablerestatement or potential fraud or misconduct by an executive officer. The clawback rights described above are in addition to annual incentive bonuses or LTI awards other than those required under the Sarbanes-Oxley legislation, thoughAct of 2002.
The Committee is reviewing the final rule issued by the SEC implementing the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to recoupment of incentive-based compensation and will amend the Clawback Policy when the NYSE adopts listing standards in accordance with the final rules.
Risk Assessment Related to Our Compensation Structure
The Committee believes our compensation plans and policies are appropriately structured to encourage and reward prudent business judgment and avoid excessive risk-taking. The Committee, with the assistance of FW Cook, reviewed the compensation programs maintained by the Company during 2022 to determine whether they encouraged excessive risk taking. Upon evaluation of the assessment, the Committee regularly evaluatesconcluded that our compensation policies and practices for our employees do not present risks that are reasonably likely to have a material adverse effect on the needCompany. The Committee’s risk review identified the following risk-mitigating features of our compensation programs:
•A balance of short-term and long-term programs to adopt such a policy.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;
•A Clawback Policy that grants 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.
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the CD&A required by Item 402(b) of Regulation S-K promulgated under the Securities Exchange Act, of 1934, as amended, and based on such review and discussions, the Committee has recommended to the Board that the CD&A be included in this Proxy Statement relating to the 2018 Annual Meeting of Stockholders.
Meeting.
Respectfully submitted by the Compensation Committee of the Board of Directors,
Matthew R. Bob, Chairman
Chair
Frances Aldrich Sevilla-Sacasa
Barbara J. Faulkenberry
L. Richard Flury
Anthony J. Nocchiero
James M. Trimble
John C. Wallace
(non-voting member)
|
|
|
EXECUTIVE COMPENSATION TABLES |
SummaryExecutive Compensation Table
Tables
The compensation paid to the Company’s executive officers generally consists of base salaries, annual cash incentive payments, awards under the 20112018 Omnibus Incentive Plan (the "2018 Plan") and the 2020 Plan, contributions to the Company’s defined contribution 401(k) retirement plan and miscellaneous perquisites. The table below sets forth information regarding fiscal years 2017, 20162022, 2021, and 20152020 compensation awarded to, earned by or paid to the Company’s NEOs, in each case for the years in which these individuals constituted "named executive officers" under SEC rules. This includes all individuals who served as the Company’sCompany's CEO or CFO during 20172022, and the three other most highly compensated NEOsexecutive officers serving at the end of the fiscal year. The CD&A above provides a full description of our 2022 executive compensation program design.
Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | Year | Salary | Bonus | Stock
Awards(a) | Non-Equity Incentive Plan Compensation (b) | All Other Compensation (c) | Total |
Joseph C. Gatto, Jr.(d) President & CEO | 2022 | $ | 896,606 | $ | — | $ | 1,828,585 | $ | 1,441,847 | | $ | 29,167 | | $ | 4,196,205 |
| 2021 | $ | 865,000 | $ | — | $ | 2,092,309 | $ | 2,718,028 | | $ | 34,142 | | $ | 5,709,479 |
| 2020 | $ | 773,885 | $ | — | $ | 3,945,450 | $ | 1,378,902 | | $ | 30,288 | | $ | 6,128,525 |
Kevin Haggard(e)(f) Senior Vice President & CFO | 2022 | $ | 475,578 | $ | — | $ | 767,246 | $ | 554,355 | | $ | 37,547 | | $ | 1,834,726 |
| 2021 | $ | 276,923 | $ | — | $ | 1,289,435 | $ | 708,750 | | $ | 18,000 | | $ | 2,293,108 |
Jeffrey S. Balmer(g)(h) Senior Vice President & Chief Operating Officer | 2022 | $ | 528,269 | $ | 175,000 | $ | 878,032 | $ | 645,478 | | $ | 36,875 | | $ | 2,263,654 |
| 2021 | $ | 510,000 | $ | 175,000 | $ | 1,041,649 | $ | 1,323,863 | | $ | 27,272 | | $ | 3,077,784 |
| 2020 | $ | 464,827 | $ | — | $ | 1,863,529 | $ | 699,339 | | $ | 23,242 | | $ | 3,050,937 |
Michol L. Ecklund(i) Senior Vice President, General Counsel & Corporate Secretary | 2022 | $ | 448,269 | $ | — | $ | 575,450 | $ | 520,065 | | $ | 30,407 | | $ | 1,574,191 |
| 2021 | $ | 430,000 | $ | — | $ | 656,241 | $ | 1,057,414 | | $ | 33,773 | | $ | 2,177,428 |
| 2020 | $ | 394,289 | $ | — | $ | 1,173,912 | $ | 560,246 | | $ | 31,986 | | $ | 2,160,433 |
Gregory F. Conaway(j) Vice President & Chief Accounting Officer | 2022 | $ | 320,961 | $ | — | $ | 223,753 | $ | 309,563 | | $ | 37,692 | | $ | 891,969 |
| 2021 | $ | 305,385 | $ | — | $ | 256,065 | $ | 609,663 | | $ | 35,323 | | $ | 1,206,436 |
| 2020 | $ | 286,125 | $ | — | $ | 672,040 | $ | 307,210 | | $ | 25,653 | | $ | 1,291,028 |
(a) 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 estimates for forfeitures. The PSUs granted in 2020 are subject to market conditions and have been valued utilizing a Monte Carlo simulation as of the year:grant date of the awards; no PSUs were granted in 2021 or 2022.
(b) The amounts reported in the “Non-Equity Incentive Plan Compensation” column represent payouts under the annual performance bonus program for 2020, 2021, and 2022. See “Performance-Based Annual Cash Bonus Incentive” in the CD&A above and “2020 Transition and Retention Incentive Awards” in the CD&A in our 2022 proxy statement for further information.
(c) See the "Table of All Other Compensation” below and related footnotes for reconciliation.
(d) Mr. Gatto's salary was increased from $865,000 to $908,250 effective March 9, 2022.
(e) Mr. Haggard was not an NEO prior to 2021.
(f) Mr. Haggard's salary was increased from $450,000 to $485,000 effective March 9, 2022.
(g) Dr. Balmer received a fixed cash retention bonus of $175,000 in October 2021 and October 2022.
(h) Dr. Balmer's salary was increased from $510,000 to $535,000 effective March 9, 2022.
(i) Ms. Ecklund's salary was increased from $430,000 to $455,000 effective March 9, 2022.
(j) Mr. Conaway's salary was increased from $310,000 to $325,000 effective March 9, 2022.
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| NEO | | Year | | Annual Salary | | Cash Bonus | | Stock Awards | | Other (a) | | Total |
| Joseph C. Gatto, Jr. | | 2017 | | $ | 494,568 |
| (b) | | $ | 690,000 |
| (c) | | $ | 2,599,998 |
| (d)(e) | | $ | 41,816 |
| | $ | 3,826,382 |
|
| | 2016 | | 367,308 |
| | | 630,000 |
| | | 1,907,000 |
| (f)(g) | | 35,948 |
| | 2,940,256 |
|
| | | 2015 | | 350,000 |
| | | 600,000 |
| | | 600,000 |
| (h) | | 35,281 |
| | 1,585,281 |
|
| | | | | | | | | | | | | | | | |
| James P. Ulm II | | 2017 | | $ | 17,885 |
| (i) | | $ | 52,000 |
| (c)(j) | | $ | 989,100 |
| (k) | | $ | — |
| | $ | 1,058,985 |
|
| | | | | | | | | | | | | | | | |
| Gary A. Newberry | | 2017 | | $ | 440,529 |
| (l) | | $ | 570,000 |
| (c) | | $ | 2,799,995 |
| (d)(m) | | $ | 41,171 |
| | $ | 3,851,695 |
|
| | 2016 | | 367,308 |
| | | 630,000 |
| | | 1,907,000 |
| (f)(n) | | 40,613 |
| | 2,944,921 |
|
| | | 2015 | | 350,000 |
| | | 600,000 |
| | | 600,000 |
| (h) | | 40,522 |
| | 1,590,522 |
|
| | | | | | | | | | | | | | | | |
| Jerry A. Weant | | 2017 | | $ | 250,000 |
| | | $ | 193,500 |
| (c) | | $ | 329,997 |
| (d) | | $ | 36,211 |
| | $ | 809,708 |
|
| | 2016 | | 250,000 |
| | | 250,000 |
| | | 330,000 |
| (f) | | 36,740 |
| | 866,740 |
|
| | | 2015 | | 250,000 |
| | | 225,000 |
| | | 300,000 |
| (h) | | 36,661 |
| | 811,661 |
|
| | | | | | | | | | | | | | | | |
| Mitzi P. Conn | | 2017 | | $ | 225,000 |
| | | $ | 189,000 |
| (c) | | $ | 329,997 |
| (d) | | $ | 30,118 |
| | $ | 774,115 |
|
| | 2016 | | 198,370 |
| | | 250,000 |
| | | 471,400 |
| (f)(o) | | 28,811 |
| | 948,581 |
|
| | | 2015 | | 190,000 |
| | | 225,000 |
| | | 300,000 |
| (h) | | 30,194 |
| | 745,194 |
|
| | | | | | | | | | | | | | | | |
| Fred L. Callon | | 2017 | | $ | 360,577 |
| (p) | | $ | 312,400 |
| (c)(q) | | $ | 2,949,979 |
| (d) | | $ | 32,741 |
| | $ | 3,655,697 |
|
| | 2016 | | 525,000 |
| | | 918,750 |
| | | 2,200,000 |
| (f) | | 53,633 |
| | 3,697,383 |
|
| | | 2015 | | 525,000 |
| | | 800,000 |
| | | 1,642,000 |
| (h) | | 53,347 |
| | 3,020,347 |
|
| | | | | | | | | | | | | | | | |
| Correne S. Loeffler | | 2017 | | $ | 164,904 |
| (r) | | $ | 176,400 |
| (c) | | $ | 537,239 |
| (d)(s) | | $ | 3,710 |
| | $ | 882,253 |
|
EXECUTIVE COMPENSATION
| |
(a) | See the Table of All Other Compensation and related footnotes below for reconciliation of Other. |
| |
(b) | During May 2017, Mr. Gatto was promoted to CEO, which increased his salary to $575,000 from $400,000 |
| |
(c) | Cash bonus awarded in March 2018 in recognition of 2017 performance. |
| |
(d) | Represents the grant date fair value of the RSUs and TSR PSUs granted to the NEOs on May 11, 2017 computed in accordance with FASB ASC Topic 718. The assumptions utilized in the calculation of these amounts are set forth in footnotes 8 and 9 to our consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on February 28, 2018. |
| |
(e) | Includes the grant date fair value of the RSUs granted to Mr. Gatto on July 11, 2017, following his promotion to CEO. |
| |
(f) | Represents the grant date fair value of the RSUs and TSR PSUs granted to the NEOs on May 13, 2016 computed in accordance with FASB ASC Topic 718. The assumptions utilized in the calculation of these amounts are set forth in footnotes 8 and 9 to our consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 28, 2017. |
| |
(g) | Includes the grant date fair value of the RSUs granted to Mr. Gatto on August 24, 2016, following his promotion to President. |
| |
(h) | Represents the grant date fair value of the RSUs and TSR PSUs granted to the NEOs on May 14, 2015 computed in accordance with FASB ASC Topic 718. The assumptions utilized in the calculation of these amounts are set forth in footnotes 8 and 9 to our consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 5, 2016. |
| |
(i) | Salary amount of $465,000 pro-rated for less than a full year of employment. |
| |
(j) | Bonus amount pro-rated for less than a full year of employment. |
| |
(k) | Represents the grant date fair value of the RSUs granted to Mr. Ulm upon his employment as CFO in December 2017. |
| |
(l) | During May 2017, Mr. Newberry’s salary was increased to $475,000 from $400,000. |
| |
(m) | Includes the grant date fair value of the RSUs granted to Mr. Newberry on July 11, 2017. |
| |
(n) | Includes the grant date fair value of the RSUs granted to Mr. Newberry on August 24, 2016, following his promotion to COO. |
| |
(o) | Includes the grant date fair value of the RSUs granted to Ms. Conn on August 24, 2016, following her promotion to Vice President and CAO. |
| |
(p) | Salary amount of $625,000 pro-rated through May 2017. |
| |
(q) | Bonus amount pro-rated through May 2017. |
| |
(r) | Salary amount of $245,000 pro-rated for less than a full year of employment. |
| |
(s) | Represents the grant date fair value of the RSUs granted to Ms. Loeffler upon her employment as Treasurer in April 2017. |
Table of All Other Compensation
| | | | | | | | | | | | | | | | | | | | | | | |
| NEO | Year | Company
Contributions to 401(k)(a) | Company
Provided
Auto(b) | | Other(c) | Total |
| Joseph C. Gatto, Jr. | 2022 | $ | 21,839 | | $ | 7,328 | | | $ | — | | $ | 29,167 |
| Kevin Haggard | 2022 | $ | 26,477 | | $ | 11,070 | | $ | — | | $ | 37,547 |
| Jeffrey S. Balmer | 2022 | $ | 22,670 | | $ | 14,205 | | | $ | — | | $ | 36,875 |
| Michol L. Ecklund | 2022 | $ | 24,015 | | $ | 4,292 | | | $ | 2,100 | | $ | 30,407 |
| Gregory F. Conaway | 2022 | $ | 24,262 | | $ | 11,280 | | | $ | 2,150 | | $ | 37,692 |
(a) Subject to IRS limits, Company contributions to each NEO's 401(k) account for 2022 consist of a 6% matching contribution plus a 2% profit sharing contribution for 2022. |
| | | | | | | | | | | | | | | | | | | | | | |
| NEO | | Year | | Company Contributed Cash to 401(k) | | Company Contributed Common Stock to 401(k) (a) | | Company Provided Auto (b) | | Company Paid Other (c) | | Total |
| Joseph C. Gatto, Jr. | | 2017 | | $ | 24,750 |
| | $ | 6,750 |
| | $ | 10,316 |
| | $ | — |
| | $ | 41,816 |
|
| | | 2016 | | 19,875 |
| | 6,625 |
| | 9,448 |
| | — |
| | 35,948 |
|
| | | 2015 | | 19,875 |
| | 6,625 |
| | 8,781 |
| | — |
| | 35,281 |
|
| | | | | | | | | | | | | |
| James P. Ulm II | | 2017 | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | | | | | | | | | | | | |
| Gary A. Newberry | | 2017 | | $ | 20,250 |
| | $ | 6,750 |
| | $ | 14,171 |
| | $ | — |
| | $ | 41,171 |
|
| | | 2016 | | 19,875 |
| | 6,625 |
| | 14,113 |
| | — |
| | 40,613 |
|
| | | 2015 | | 19,875 |
| | 6,625 |
| | 14,022 |
| | — |
| | 40,522 |
|
| | | | | | | | | | | | | |
| Jerry A. Weant | | 2017 | | $ | 18,750 |
| | $ | 6,250 |
| | $ | 11,211 |
| | $ | — |
| | $ | 36,211 |
|
| | | 2016 | | 18,750 |
| | 6,250 |
| | 11,740 |
| | — |
| | 36,740 |
|
| | | 2015 | | 18,750 |
| | 6,250 |
| | 11,661 |
| | — |
| | 36,661 |
|
| | | | | | | | | | | | | |
| Mitzi P. Conn | | 2017 | | $ | 16,875 |
| | $ | 5,625 |
| | $ | 7,618 |
| | $ | — |
| | $ | 30,118 |
|
| | | 2016 | | 15,159 |
| | 5,053 |
| | 8,599 |
| | — |
| | 28,811 |
|
| | | 2015 | | 14,250 |
| | 4,750 |
| | 11,194 |
| | — |
| | 30,194 |
|
| | | | | | | | | | | | | |
| Fred L. Callon | | 2017 | | $ | 19,832 |
| | $ | 6,611 |
| | $ | 6,298 |
| | $ | — |
| | $ | 32,741 |
|
| | | 2016 | | 19,875 |
| | 6,625 |
| | 12,444 |
| | 14,689 |
| | 53,633 |
|
| | | 2015 | | 19,875 |
| | 6,625 |
| | 12,158 |
| | 14,689 |
| | 53,347 |
|
| | | | | | | | | | | | | |
| Correne S. Loeffler | | 2017 | | $ | 2,768 |
| | $ | 942 |
| | $ | — |
| | $ | — |
| | $ | 3,710 |
|
| |
(a) | Subject to IRS limits, Company contributions to each person’s 401(k) account consist of a 2.5% non-matching contribution in cash and a 2.5% non-matching contribution in the form of the Company’s stock unit fund plus a matching contribution at the rate of 0.625% in cash for every 1% that the participant deferred, limited to a maximum matching contribution by the Company of 5% in cash. The number of shares contributed to the Company’s stock unit fund is determined on a quarterly basis using the closing market price on the last trading day of the quarter. |
| |
(b) | Represents annual depreciation based on a three-year life, plus insurance, fuel, maintenance and repairs, pursuant to IRS Reg §1.61-21, Taxation of Fringe Benefits. |
| |
(c) | Represents premiums paid by us on a personal life insurance policy for which Mr. Callon was the sole beneficiary. |
Grants of Plan-Based Awards During 2017
The following table presents grants of equity awards during the fiscal year ending December 31, 2017:
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | Estimated Future Payouts Under
Equity Incentive Plan Awards (a) | | | | | |
| NEO | | Grant Date | | Threshold | | Target | | Maximum | | Other Awards (Shares or Units) | | Grant Date Fair Value (b) |
| Joseph C. Gatto, Jr. | | 5/11/2017 | | — |
| | — |
| | | — |
| | | 42,868 |
| (c) | | $ | 519,989 |
|
| | | 5/11/2017 | | — |
| | 64,304 |
| | | 128,608 |
| | | — |
| | | 780,008 |
|
| | | 7/11/2017 | | — |
| | — |
| | | — |
| | | 120,148 |
| (d) | | 1,300,001 |
|
| | | | | | | | | | | | | | | | |
| James P. Ulm II | | 12/11/2017 | | — |
| | — |
| | | — |
| | | 90,000 |
| (e) | | $ | 989,100 |
|
| | | | | | | | | | | | | | | | |
| Gary A. Newberry | | 5/11/2017 | | — |
| | — |
| | | — |
| | | 42,868 |
| (c) | | $ | 519,989 |
|
| | | 5/11/2017 | | — |
| | 64,304 |
| | | 128,608 |
| | | — |
| | | 780,008 |
|
| | | 7/11/2017 | | — |
| | — |
| | | — |
| | | 138,632 |
| (f) | | 1,499,998 |
|
| | | | | | | | | | | | | | | | |
| Jerry A. Weant | | 5/11/2017 | | — |
| | — |
| | | — |
| | | 10,881 |
| (c) | | $ | 131,987 |
|
| | | 5/11/2017 | | — |
| | 16,324 |
| | | 32,648 |
| | | — |
| | | 198,010 |
|
| | | | | | | | | | | | | | | | |
| Mitzi P. Conn | | 5/11/2017 | | — |
| | — |
| | | — |
| | | 10,881 |
| (c) | | $ | 131,987 |
|
| | | 5/11/2017 | | — |
| | 16,324 |
| | | 32,648 |
| | | — |
| | | 198,010 |
|
| | | | | | | | | | | | | | | | |
| Fred L. Callon | | 5/11/2017 | | — |
| | — |
| | | — |
| | | 97,279 |
| (c) | | $ | 1,179,994 |
|
| | | 5/11/2017 | | — |
| | 145,918 |
| | | 291,836 |
| | | — |
| | | 1,769,985 |
|
| | | | | | | | | | | | | | | | |
| Correne S. Loeffler | | 4/24/2017 | | — |
| | — |
| | | — |
| | | 35,000 |
| (g) | | $ | 414,750 |
|
| | | 5/11/2017 | | — |
| | — |
| | | — |
| | | 7,068 |
| (c) | | 85,735 |
|
| | | 5/11/2017 | | — |
| | 3,030 |
| (h) | | 6,060 |
| (h) | | — |
| | | 36,754 |
|
| |
(a) | Amounts represent TSR PSUs payable in 50% cash and 50% stock on the vesting date, with the exception of Ms. Loeffer, which will be adjusted between 0% and 200% based on our TSR compared with the TSR of the peer companies. The adjusted PSUs will vest on December 31, 2019. |
| |
(b) | 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 assumptions utilized in the calculation of these amounts are set forth in footnotes 8 and 9 to our consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 27, 2018. 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. |
| |
(c) | Amounts represent RSUs subject to cliff vesting on May 11, 2020 that will settle in common stock. |
| |
(d) | Amounts represent RSUs subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche will vest on July 1, 2018. The second tranche will vest on July 1, 2019. The third and final tranche will vest on July 1, 2020. |
| |
(e) | Amounts represent RSUs subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche will vest on January 1, 2019. The second tranche will vest on January 1, 2020. The third and final tranche will vest on January 1, 2021. |
| |
(f) | Amounts represent RSUs subject to ratable vesting with one-half vesting on the second year subsequent to the award year. The second half will vest on the third anniversary of the grant date. |
| |
(g) | Amounts represent RSUs subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche vested on March 1, 2018. The second tranche will vest on March 1, 2019. The third and final tranche will vest on March 1, 2020. |
| |
(h) | Ms. Loeffler’s TSR PSU award consists only of units that will settle in 100% cash on the vesting date. |
(c) Executive officers are reimbursed up to $2,500 for an annual physical.
Stock-Based Incentive Compensation Plans
The 20112018 Plan was approved by stockholdersshareholders on May 12, 2011 and amended10, 2018. The 2020 Plan was approved by shareholders on May 14, 2015.June 8, 2020. Awards available under each of the 20112018 Plan and the 2020 Plan include grants of stock options, stock appreciation rights or units, restricted stock, RSUs, phantom stock orand performance shares or units. As of June 8, 2020, no more shares were issued from the 2018 Plan and the then-remaining 1,008,354 shares authorized and available for issuance under the 2018 Plan were transferred into the 2020 Plan. In addition, shares which would otherwise become available for issuance under the 2018 Plan as a result of vesting and/or forfeiture of any equity awards existing prior to the effective date of the 2020 Plan, are made available for grant under the 2020 Plan. As of March 16, 2018, 1,370,3102, 2023, approximately 1,721,901 shares remain unissued withinand available for grant in the 20112020 Plan.
Grants of Plan-Based Awards During 2022
The following table presents grants of awards under the 2020 Plan during the fiscal year ending December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Grant
Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(a) | Other Awards
(Shares or Units)(b) | | Grant Date
Fair Value of Stock Awards(c) |
| NEO | Threshold | Target | Maximum | |
| Joseph C. Gatto, Jr. | 1/1/2022 | | $ | — | $ | 1,135,313 | | $ | 2,270,626 | | | | |
| 3/9/2022 | | | | | 31,014 | | | $ | 1,828,585 | |
| 3/9/2022 | | $ | — | $ | 2,574,000 | | $ | 5,148,000 | | | | |
| Kevin Haggard | 1/1/2022 | | $ | — | $ | 436,500 | | $ | 873,000 | | | | |
| 3/9/2022 | | | | | 13,013 | | | $ | 767,246 | |
| 3/9/2022 | | $ | — | $ | 1,080,000 | | $ | 2,160,000 | | | | |
| Jeffrey S. Balmer | 1/1/2022 | | $ | — | $ | 508,250 | | $ | 1,016,500 | | | | |
| 3/9/2022 | | | | | 14,892 | | | $ | 878,032 | |
| 3/9/2022 | | $ | — | $ | 1,236,000 | | $ | 2,472,000 | | | | |
| Michol L. Ecklund | 1/1/2022 | | $ | — | $ | 409,500 | | $ | 819,000 | | | | |
| 3/9/2022 | | | | | 9,760 | | | $ | 575,450 | |
| 3/9/2022 | | $ | — | $ | 810,000 | | $ | 1,620,000 | | | | |
| Gregory F. Conaway | 1/1/2022 | | $ | — | $ | 243,750 | | $ | 487,500 | | | | |
| 3/9/2022 | | | | | 3,795 | | | $ | 223,753 | |
| 3/9/2022 | | $ | — | $ | 315,000 | | $ | 630,000 | | | | |
(a) Amounts represent the threshold, target, and maximum payouts for the 2022 annual performance bonus program and the CPUs granted to the NEOs in 2022. The actual amounts paid under the 2022 annual performance bonus program are included in the "Non-Equity Incentive Compensation" column in the Summary Compensation Table above. The CPUs will be earned at the end of the performance period ending December 31, 2024 based on the Company’s achievement of performance objectives relating to the Company’s adjusted free cash flow, GHG emissions intensity reduction, and return on capital employed. Subject to certain qualifying termination events, the participant is required to be employed on the award settlement date in order to vest in the award.
(b) Amounts represent RSUs granted to our NEOs on March 9, 2022. The first, second and third tranches are scheduled to vest in equal installments on April 1, 2023, 2024 and 2025, respectively, subject to the NEO’s continued service.
(c) 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 NEO upon the actual vesting of the awards may be more or less than the grant date fair value.
Outstanding Equity Awards at Fiscal Year-End
The following table contains information concerning all unvestedoutstanding equity awards that were held as of December 31, 2017 for2022, by the NEOs:
| | | | | | | | | | | | | | | | | | | | |
| 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. | 31,014 | | (b) | $ | 1,150,309 | — | | — |
| 35,135 | | (c) | $ | 1,303,157 | — | | — |
| 16,266 | | (d) | $ | 603,306 | | | — |
| Kevin Haggard | 13,013 | | (b) | $ | 482,652 | — | | — |
| 10,665 | | (e) | $ | 395,565 | | | |
| 16,408 | | (f) | $ | 608,573 | — | | — |
| Jeffrey S. Balmer | 14,892 | | (b) | $ | 552,344 | — | | — |
| 17,492 | | (c) | $ | 648,778 | | | — |
| 7,683 | | (d) | $ | 284,962 | | | |
| Michol L. Ecklund | 9,760 | | (b) | $ | 361,998 | — | | — |
| 11,020 | | (c) | $ | 408,732 | | | — |
| 4,839 | | (d) | $ | 179,479 | | | |
Gregory F. Conaway(h) | 3,795 | | (b) | $ | 140,757 | — | | — |
| 4,300 | | (c) | $ | 159,487 | | | — |
| 1,788 | | (d) | $ | 66,317 | | | |
| 1,645 | | (g) | $ | 61,013 | | | |
(a) Amounts calculated using the closing price of $37.09 per share of our common stock on the last trading day of 2022.
(b) Stock settleable RSUs awarded on March 9, 2022, subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche will vest on April 1, 2023. The second tranche will vest on April 1, 2024. The third and final tranche will vest on April 1, 2025.
(c) Stock settleable RSUs awarded on March 12, 2021, subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche vested on April 1, 2022. The second tranche will vest on April 1, 2023. The third and final tranche will vest on April 1, 2024.
(d) Stock settleable RSUs awarded on January 31, 2020, subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche vested on April 1, 2021. The second tranche vested on April 1, 2022. The third and final tranche will vest on April 1, 2023.
(e) Stock settleable RSUs awarded to Mr. Haggard on May 10, 2021, upon his appointment as an executive officer, subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche vested on April 1, 2022. The second tranche will vest on April 1, 2023. The third and final tranche will vest on April 1, 2024.
(f) Stock settleable RSUs awarded to Mr. Haggard on May 10, 2021 upon his appointment as an executive officer, subject to cliff vesting in full on June 1, 2024.
(g) Stock settleable RSUs awarded to Mr. Conaway on January 1, 2020 upon his appointment as an executive officer, subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche vested on January 1, 2021. The second tranche vested on January 1, 2022. The third and final tranche vested on January 1, 2023.
(h) Mr. Conaway held the following outstanding cash-settled stock appreciation right awards as of December 31, 2022:
|
| | | | | | | | | | | | | | | | |
| | | Stock Awards |
| | | Unvested Shares or
Units of Stock | | Equity Incentive
Plan Awards |
| NEO | | Number of Unvested Shares or Units of Stock | | Market Value of Unvested Shares or Units of
Stock (a) | | Number of Unearned Shares, Units or Other Unvested Rights | | Market of Payout Value of Unearned Shares, Units or Other Unvested Rights (a) |
| Joseph C. Gatto, Jr. | | 24,848 |
| (b) | | $ | 301,903 |
| | 4,385 |
| (c) | | $ | 53,278 |
|
| | | 36,890 |
| (d) | | 448,214 |
| | 6,510 |
| (e) | | 79,097 |
|
| | | 50,000 |
| (f) | | 607,500 |
| | — |
| | | — |
|
| | | 42,868 |
| (g) | | 520,846 |
| | — |
| | | — |
|
| | | 120,148 |
| (h) | | 1,459,798 |
| | — |
| | | — |
|
| | | — |
| | | — |
| | 32,550 |
| (i) | | 395,483 |
|
| | | 32,550 |
| (j) | | 395,483 |
| | — |
| | | — |
|
| �� | | — |
| | | — |
| | 32,152 |
| (k) | | 390,647 |
|
| | | 32,152 |
| (l) | | 390,647 |
| | — |
| | | — |
|
| | | | | | | | | | | |
| James P. Ulm II | | 90,000 |
| (m) | | $ | 1,093,500 |
| | — |
| | | $ | — |
|
| | | | | | | | | | | |
| Gary A. Newberry | | 24,848 |
| (b) | | $ | 301,903 |
| | 4,385 |
| (c) | | $ | 53,278 |
|
| | | 36,890 |
| (d) | | 448,214 |
| | 6,510 |
| (e) | | 79,097 |
|
| | | 50,000 |
| (f) | | 607,500 |
| | — |
| | | — |
|
| | | 42,868 |
| (g) | | 520,846 |
| | — |
| | | — |
|
| | | 138,632 |
| (n) | | 1,684,379 |
| | — |
| | | — |
|
| | | — |
| | | — |
| | 32,550 |
| (i) | | 395,483 |
|
| | | 32,550 |
| (j) | | 395,483 |
| | — |
| | | — |
|
| | | — |
| | | — |
| | 32,152 |
| (k) | | 390,647 |
|
| | | 32,152 |
| (l) | | 390,647 |
| | — |
| | | — |
|
| | | | | | | | | | | |
| Jerry A. Weant | | 12,424 |
| (b) | | $ | 150,952 |
| | 2,192 |
| (c) | | $ | 26,633 |
|
| | | 10,145 |
| (d) | | 123,262 |
| | 1,790 |
| (e) | | 21,749 |
|
| | | 10,881 |
| (g) | | 132,204 |
| | — |
| | | — |
|
| | | — |
| | | — |
| | 8,951 |
| (i) | | 108,755 |
|
| | | 8,951 |
| (j) | | 108,755 |
| | — |
| | | — |
|
| | | — |
| | | — |
| | 8,162 |
| (k) | | 99,168 |
|
| | | 8,162 |
| (l) | | 99,168 |
| | — |
| | | — |
|
| | | | | | | | | | | |
| Mitzi P. Conn | | 12,424 |
| (b) | | $ | 150,952 |
| | 2,192 |
| (c) | | $ | 26,633 |
|
| | | 10,145 |
| (d) | | 123,262 |
| | 1,790 |
| (e) | | 21,749 |
|
| | | 10,000 |
| (f) | | 121,500 |
| | — |
| | | — |
|
| | | 10,881 |
| (g) | | 132,204 |
| | — |
| | | — |
|
| | | — |
| | | — |
| | 8,951 |
| (i) | | 108,755 |
|
| | | 8,951 |
| (j) | | 108,755 |
| | — |
| | | — |
|
| | | — |
| | | — |
| | 8,162 |
| (k) | | 99,168 |
|
| | | 8,162 |
| (l) | �� | 99,168 |
| | — |
| | | — |
|
| | | | | | | | | | | |
| Correne S. Loeffler | | 35,000 |
| (o) | | $ | 425,250 |
| | — |
| | | $ | — |
|
| | | 7,068 |
| (g) | | 85,876 |
| | — |
| | | — |
|
| | | — |
| | | — |
| | 3,030 |
| (i) | | 36,815 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | 3,144 | | (1) | — | | — | | | $ | 83.90 | | | 3/17/2025 |
| 4,258 | | (2) | — | | — | | | $ | 62.80 | | | 3/17/2026 |
(1) 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.
| |
(a) | Amounts calculated using the closing price of $12.15 per share of our common stock on the last trading day of 2017. |
| |
(b) | Stock settleable RSUs awarded on May 14, 2015 subject to cliff vesting on May 14, 2018. |
(2) 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.
| |
(c) | Cash settleable RSUs awarded on May 14, 2015 subject to cliff vesting on May 14, 2018. |
| |
(d) | Stock settleable RSUs awarded on May 13, 2016 subject to cliff vesting on May 13, 2019. |
| |
(e) | Cash settleable RSUs awarded on May 13, 2016 subject to cliff vesting on May 13, 2019. |
| |
(f) | Stock settleable RSUs awarded August 24, 2016 subject to cliff vesting on August 24, 2019. |
| |
(g) | Stock settleable RSUs awarded on May 11, 2017 subject to cliff vesting on May 11, 2020. |
| |
(h) | Stock settleable RSUs awarded on July 11, 2017 subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche will vest on July 1, 2018. The second tranche will vest on July 1, 2019. The third
Option Exercises and final tranche will vest on July 1, 2020. |
| |
(i) | Cash settleaable TSR PSUs awarded on May 13, 2016 with vesting terms subject to a performance criteria related to the TSR of the Company compared to a group of peer companies on December 31, 2018. The number of units subject to vest under this award can range from 0% to 200%. |
| |
(j) | Stock settleaable TSR PSUs awarded on May 13, 2016 with vesting terms subject to a performance criteria related to the TSR of the Company compared to a group of peer companies on December 31, 2018. The number of units subject to vest under this award can range from 0% to 200%. |
| |
(k) | Cash settleaable TSR PSUs awarded on May 11, 2017 with vesting terms subject to a performance criteria related to the TSR of the Company compared to a group of peer companies on December 31, 2019. The number of units subject to vest under this award can range from 0% to 200%. |
| |
(l) | Stock settleaable TSR PSUs awarded on May 11, 2017 with vesting terms subject to a performance criteria related to the TSR of the Company compared to a group of peer companies on December 31, 2018. The number of units subject to vest under this award can range from 0% to 200%. |
| |
(m) | Stock settleable RSUs awarded on December 11, 2017 subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche will vest on January 1, 2019. The second tranche will vest on January 1, 2020. The third and final tranche will vest on January 1, 2021. |
| |
(n) | Stock settleable RSUs awarded on July 11, 2017 subject to three-year ratable vesting with one-half vesting on the second year subsequent to the award year. The first tranche will vest on July 1, 2019. The second and final tranche will vest on July 1, 2020. |
| |
(o) | Stock settleable RSUs awarded on April 24, 2017 subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche vested on March 1, 2018. The second tranche will vest on March 1, 2019. The third and final tranche will vest on March 1, 2020. |
Stock Vested
The following table provides information about the value realized by the NEOs on vestingsvesting of RSUs phantom stock units and PSUs during 2017:2022. No options were awarded, outstanding, or exercised by any NEO in fiscal year 2022.
| | | | | | | | | | | |
| Stock Awards(a) |
| NEO | Number of Shares
Acquired on Vesting (#) | | Value Realized on Vesting $ |
| Joseph C. Gatto, Jr. | 7,043 | | (b) | $ | 439,624 |
| 13,176 | | (c) | $ | 481,978 |
| 16,266 | | (d) | $ | 1,015,324 |
| 17,568 | | (e) | $ | 1,096,595 |
| Kevin Haggard | 5,333 | | (f) | $ | 332,886 |
| Jeffrey S. Balmer | 3,000 | | (g) | $ | 141,750 |
| 6,222 | | (c) | $ | 227,601 |
| 7,683 | | (d) | $ | 479,573 |
| 8,746 | | (e) | $ | 545,925 |
| Michol L. Ecklund | 1,638 | | (b) | $ | 102,244 |
| 3,920 | | (c) | $ | 143,394 |
| 4,840 | | (d) | $ | 302,113 |
| 5,510 | | (e) | $ | 343,934 |
| Gregory F. Conaway | 1,645 | | (h) | $ | 77,726 |
| 1,448 | | (c) | $ | 52,968 |
| 1,788 | | (d) | $ | 111,607 |
| 2,150 | | (e) | $ | 134,203 |
(a) 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, without taking into account any shares withheld to satisfy applicable tax obligations.
(b) Represents RSUs awarded on January 31, 2019, the third tranche of which vested on April 1, 2022.
(c) Represents PSUs awarded on January 31, 2020, that settled 50% in stock and 50% in cash on December 31, 2022, at 18% of target.
(d) Represents RSUs awarded on January 31, 2020, the second tranche of which vested on April 1, 2022.
(e) Represents RSUs awarded on March 12, 2021, the first tranche of which vested on April 1, 2022.
(f) Represents RSUs awarded to Mr. Haggard upon his hiring on May 10, 2021, the first tranche of which vested on April 1, 2022.
(g) Represents RSUs awarded to Dr. Balmer upon his hiring on January 1, 2019, the third and final tranche of which vested on January 1, 2022.
(h) Represents RSUs awarded to Mr. Conaway upon his appointment as an executive officer on January 1, 2020, the second tranche of which vested on January 1, 2022.
|
| | | | | | | | | |
| | | Vesting (a) |
| NEO | | Number of Shares Acquired | | Value Realized $ |
| Joseph C. Gatto, Jr. | | 20,482 |
| (b) | | $ | 255,001 |
| (c) |
| | | | | | 44,452 |
| (d) |
| | | 40,120 |
| (e) | | 487,458 |
| (c) |
| | | | | | 487,482 |
| (c)(f) |
| | | | | | | |
| Gary A. Newberry | | 20,482 |
| (b) | | $ | 255,001 |
| (c) |
| | | | | | 44,452 |
| (d) |
| | | 40,120 |
| (e) | | 487,458 |
| (c) |
| | | | | | 487,482 |
| (c)(f) |
| | | | | | | |
| Jerry A. Weant | | 5,598 |
| (b) | | $ | 69,695 |
| (c) |
| | | | | | 12,152 |
| (d) |
| | | 20,060 |
| (e) | | 243,729 |
| (c) |
| | | | | | 243,753 |
| (c)(f) |
| | | | | | | |
| Mitzi P. Conn | | 5,598 |
| (b) | | $ | 69,695 |
| (c) |
| | | | | | 12,152 |
| (d) |
| | | 20,060 |
| (e) | | 243,729 |
| (c) |
| | | | | | 243,753 |
| (c)(f) |
| | | | | | | |
| Fred L. Callon | | 56,052 |
| (b) | | $ | 697,847 |
| (c) |
| | | — |
| | | 121,672 |
| (d) |
| | | 68,000 |
| (g) | | 822,120 |
| (h) |
| | | | | | 146,040 |
| (i) |
| | | 120,000 |
| (j) | | 1,450,800 |
| (h) |
| | | | | | 1,450,800 |
| (h)(k) |
| | | 67,631 |
| (l) | | 817,659 |
| (h) |
| | | | | | 145,249 |
| (m) |
| | | 97,270 |
| (n) | | 1,175,997 |
| (h) |
| | | | | | 1,175,997 |
| (h)(o) |
| | | 97,279 |
| (p) | | 1,176,103 |
| (h) |
| | | 103,602 |
| (q) | | 1,252,546 |
| (h) |
| | | | | | 1,252,546 |
| (h)(r) |
EXECUTIVE COMPENSATION
| |
(a) | No options were awarded, outstanding, expired, or exercised by any NEO in 2017. |
| |
(b) | Represents RSUs awarded on May 14, 2014 that settled in stock on the May 14, 2017 vesting date. |
| |
(c) | 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. |
| |
(d) | Represents phantom stock units awarded on May 14, 2014 that were settled in cash on the May 14, 2017 vesting date, based on the average of the opening and 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. |
| |
(e) | Represents TSR PSUs awarded on May 14, 2015 that settled in stock on the December 31, 2017 vesting date. |
| |
(f) | Represents TSR PSUs awarded on May 14, 2015 that settled in cash on the December 31, 2017 vesting date. |
| |
(g) | Represents RSUs awarded on May 14, 2015 that settled in stock on the May 24, 2017 accelerated vesting date triggered by the passing of Mr. Callon. |
| |
(h) | 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. |
| |
(i) | Represents phantom stock units awarded on May 14, 2015 that were settled in cash on the May 24, 2017 accelerated vesting date triggered by the passing of Mr. Callon, based on the average of the opening and closing market price per share of Company common stock on the vesting date. |
| |
(j) | Represents TSR PSUs awarded on May 14, 2015 that settled in stock on the May 24, 2017 accelerated vesting date triggered by the passing of Mr. Callon. |
| |
(k) | Represents TSR PSUs awarded on May 14, 2015 that settled in cash on the May 24, 2017 accelerated vesting date triggered by the passing of Mr. Callon. |
| |
(l) | Represents RSUs awarded on May 13, 2016 that settled in stock on the May 24, 2017 accelerated vesting date triggered by the passing of Mr. Callon. |
| |
(m) | Represents phantom stock units awarded on May 13, 2016 that were settled in cash on the May 24, 2017 accelerated vesting date triggered by the passing of Mr. Callon, based on the average of the opening and closing market price per share of Company common stock on the vesting date. |
| |
(n) | Represents TSR PSUs awarded on May 13, 2016 that settled in stock on the May 24, 2017 accelerated vesting date triggered by the passing of Mr. Callon. |
| |
(o) | Represents TSR PSUs awarded on May 13, 2016 that settled in cash on the May 24, 2017 accelerated vesting date triggered by the passing of Mr. Callon. |
| |
(p) | Represents RSUs awarded on May 11, 2017 that settled in stock on the May 24, 2017 accelerated vesting date triggered by the passing of Mr. Callon. |
| |
(q) | Represents TSR PSUs awarded on May 11, 2017 that settled in stock on the May 24, 2017 accelerated vesting date triggered by the passing of Mr. Callon. |
| |
(r) | Represents TSR PSUs awarded on May 11, 2017 that settled in cash on the May 24, 2017 accelerated vesting date triggered by the passing of Mr. Callon. |
Employment Agreements, Termination of Employment and Change‑in‑Change in Control Arrangements
Employment agreements
Agreements
We do not have employment agreements with any of our executive officers.
Severance compensation agreements
We entered intoExecutive Severance Compensation Agreements (“SCA”) withPlans
During 2022, the Committee adopted the Severance Pay Plan and the Executive CIC Plan, pursuant to which eligible participants, including each of our NEOs. The SCA will terminate, exceptNEOs, are eligible to receive certain severance payments and benefits upon an involuntary termination (pursuant to the extent that any obligation of Callon thereunder remains unpaid as of such time,Severance Pay Plan) or upon an Eligible Termination or Deemed Eligible Termination in connection with a Change in Control (pursuant to the earliest of (i) December 31, 2018, provided, however, that, on each anniversary date thereafter,Executive CIC Plan). For additional background information, please see “Change in Control, Severance, and Employment Agreements” in the expiration date shall automatically be extended for one additional year unless, immediately prior to such anniversary date, either party shall have given written notice that it does not wish to extend this SCA, but in noCD&A above.
Severance Pay Plan
In the event shall the expiration date be earlier than the second anniversary of the effective date of a change of control; (ii) the termination of the NEOs employment with Callon based on death, disabilityNEO’s Involuntary Termination (as defined in the SCA)Severance Pay Plan), or causesubject to the NEO’s (1) execution of a release of claims against the Company and (2) continued employment with the Company through the ultimate date established by the Company as the NEO’s termination date, the NEO is entitled to receive: (i) the Accrued Obligations (as defined in the SCA); and (iii)Severance Pay Plan), (ii) an amount equal to the voluntary resignationsum of (x) the Applicable Multiple (as defined below) times the sum of the NEOsNEO’s (A) annual base salary and (B) target annual bonus, (y) any earned but unpaid annual bonus for any reason other than good reasonthe calendar year prior to the year of the Involuntary Termination, based on the Company’s actual performance during such calendar year and (z) an amount equal to a pro rata portion of the NEO’s annual bonus for the calendar year of the Involuntary Termination, with the amount subject to proration to be calculated as follows based on the number of days in the calendar year the NEO remained employed through the date of the Involuntary Termination (as applicable, the “Pro-Rata Bonus”): (1) if the Involuntary Termination occurs prior to July 1st, the NEO’s Target Annual bonus (as defined in the SCA).Severance Pay Plan) or (2) if the Involuntary Termination occurs on or after July 1st, the NEO’s actual annual bonus for the year in which the Involuntary Termination occurs, as determined by the Committee (the severance benefits provided in this clause (ii), collectively, the “Severance Pay”) and (iii) continued health and welfare benefits coverage for the NEO and the NEO’s eligible dependents for a period of 12 months after the date of the Involuntary Termination. For purposes of the Severance Pay Plan, “Applicable Multiple” means 2x for Mr. Gatto and 1.5x for each of the other NEOs.
PursuantExcept with respect to the SCA, ifPro-Rata Bonus for any Involuntary Termination occurring on or after July 1st, the executive incursSeverance Pay (less all applicable withholdings and deductions) will be paid in a “separation from service” from Callonlump sum as soon as practicable following the date the release signed by the NEO has become final and irrevocable. In no event, however, will the Severance Pay be paid later than the last day of the second taxable year following the taxable year in which occurs the NEO’s Involuntary Termination.
As a condition to any NEO’s receipt of severance benefits under the Severance Pay Plan, the NEO must comply with non-competition and non-solicitation covenants that apply for a period of one year after the date of termination, as well as customary non-disparagement, non-disclosure, confidentiality, and ownership covenants.
Executive CIC Plan
The Executive CIC Plan was adopted by the Committee in September 2022 to replace then-existing individual Change in Control Severance Compensation Agreements (the “CIC Agreements”). The Executive CIC Plan is effective for each NEO as of the earlier of (i) the date on which such NEO agrees in writing to the early termination of the NEO’s CIC Agreement or (ii) January 1, 2023. The Executive CIC Plan provides for severance payments and benefits in the event that (i) there is a Change in Control (as such term is defined in final Treasury Regulations issued under Code Section 409Athe Executive CIC Plan), and other authoritative guidance issued thereunder) without cause by Callon or for good reason by himthe NEO’s employment is terminated within two years after the date of such Change in Control either (a) by the Company other than for Cause or due to the NEO’s Disability (each as defined in the Executive CIC Plan) or (b) by the NEO for Good Reason (as defined in the Executive CIC Plan), or (ii) there is a Merger of Equals (as defined in the Executive CIC Plan), and the NEO’s employment is terminated by the Company other than for Cause or due to the NEO’s Disability within 12 months following a changethe date of controlsuch Merger of Callon (or in certain cases,Equals (each an “Eligible Termination”). If the NEO’s employment is terminated by the Company for reasons other than Cause or Disability within six months prior to the date on which a changeChange in Control is effective and it is reasonably demonstrated that such termination: (x) was at the request of control),a third party who has taken steps reasonably calculated to effectuate such Change in Control or (y) otherwise arose in connection with such Change in Control, then for all purposes of the executive isExecutive CIC Plan, such termination will be deemed to have occurred following such Change in Control (for purposes of the Executive CIC Plan, a “Deemed Eligible Termination”).
Upon an Eligible Termination or a Deemed Eligible Termination, and subject to the NEO’s satisfaction of the conditions described below, the NEO would be entitled to receive, subject to the NEO’s execution (without revocation) of a single lump-sumrelease of claims against the Company: (i) a lump sum cash payment, (payablepayable on the date that is six months following the triggering event) in an amountdate of the NEO’s termination of employment, equal to threethe sum of: (x) the Applicable Multiplier (as defined below) times the sum with respect to our CEO Mr. Gatto, of (i)(A) the NEO’s annual base salary as in effect immediately prior to the changeChange in Control or Merger of controlEquals, as applicable, or, if higher, in effect immediately prior to the separation from service,date of termination and (ii)(B) the greatergreatest of (1) the average annual bonus earned with respect to the three most recently completed full fiscal years (provided that if the NEO has not been employed for the entire duration of each of the three most recently completed full fiscal years, the NEO will be deemed to have earned his or her target annual bonus for any year for which he or she was not employed for the entire fiscal year for purposes of calculating the average), (2) the target annual bonus for the fiscal year in which the changeChange in Control or Merger of controlEquals, as applicable, occurs based on a forecast that has been approved byor (3) the Board of the resultstarget annual bonus for the fiscal year in which the changedate of control occurs. For the other NEOs, the salary and bonus multiple is two times. In addition, we must maintain at our expense until thirty-six months aftertermination occurs, (y) a separation from service all life, disability, medical, dental, accident, and health insurance coverage for Mr. Gatto. For the other NEOs, the continued benefit period is twenty-four months. If the executive’s employment is terminated because of his death or disability, we are only required to make such payments if the termination occurred within six months after a change of control. “Good reason” is generallyPro-Rata Bonus (as defined in the SCAExecutive CIC Plan) and (z) any actual annual bonus for any completed calendar year that has been earned by but not paid to the NEO as of such NEO’s date of termination and (ii) continued health and welfare benefits coverage for the NEO and the NEO’s eligible dependents for a change inperiod of 24 months. For purposes of the executive’s compensation,Executive CIC Plan, “Applicable Multiplier” means 3x for Mr. Gatto and 2x for each of the other NEOs.
As a condition to any NEO’s receipt of severance benefits position, responsibilities, or location. A changeunder the Executive CIC Plan, the NEO must comply with non-competition and non-solicitation covenants that apply for a period of control is generallyone year after the date of termination, as well as customary non-disparagement, non-disclosure, and confidentiality covenants.
If the Total Payments (as defined in the SCA as (i) any person or group of persons acting in concert shall have becomeExecutive CIC Plan), were to cause the beneficial owner of more than 50% of our outstanding common stock; (ii) our stockholders shall cause a change in the majority of the members of the Board within a twelve-month period; or (iii) we or our stockholders shall enter into an agreementNEO to dispose of all or substantially all of our assets or outstanding capital stock.
The SCAs also provide that, upon a change of control, all stock options shall automatically become fully exercisable and all performance shares, restricted stock, stock appreciation rights and other similar rights held by the executive shall become fully vested, provided, however, that such acceleration of vesting shall not occur if it would be an impermissible acceleration under Section 409A of the Code. If we cannot provide for acceleration of vesting as a result of provisions in existence priorsubject to a change of control, any plan or agreement, or Section 409A, we must provide in lieu thereof a lump-sum cash payment equal to the total value of the outstanding and unvested stock rights as of the date of separation from service.
The SCAs incorporate a provision to provide for the possible impact of the federal excise tax on excess parachute payments. The so-called “golden parachute” tax rules subject “excess parachute payments” to a dual penalty: the imposition of a 20 percent excise tax upon the recipient and non-deductibility of such payments by the paying corporation. While the excise tax is seemingly evenhanded, the excise tax can discriminate against long-serving employees in favorprovisions of new hires, against individuals who do not exercise stock options in favor of those who do and against those who elect to defer compensation in favor of those who do not. For these reasons, we believe that the “net-best” provision included in the SCA is appropriate. If any payment is subject to any excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended, then the paymentamount of the Total Payments will either be reduced, such that the excise tax would not be applicable, or the NEO will be reduced so that no portionentitled to retain such NEO’s full Total Payments, whichever results in the better after-tax position to the NEO.
Long-Term Incentive Award Agreements
We are party to Restricted Stock Unit Award Agreements (the “RSU Agreements”) with our NEOs. Pursuant to the terms of the payment is subjectRSU Agreements, upon termination of the NEO’s employment with the Company as a result of the death or “disability” (as defined in the RSU Agreement) of the NEO, all of the NEO’s RSUs then outstanding under the RSU Agreement will immediately vest.
We are also party to such excise tax ifCash Performance Unit Award Agreements (the “CPU Agreements”) with our NEOs as described in under the net benefit payablesub-heading “Cash Performance Units” in the CD&A above. Pursuant to the terms of the CPU Agreements, upon termination of the NEO’s employment with the Company as a result of the death or “disability” (as defined in the CPU Agreement) of the NEO, all of the NEO’s CPUs then outstanding will immediately vest and payout based on actual results from completed quarters and target results for all other periods, and the Year 3 GHG intensity modifier would be at leastnot apply.
During 2022, the Committee adopted new retirement benefits under the CPU Agreements for NEOs and other officers for the purposes of attracting and retaining top talent and incentivizing early notice of impending retirements to ensure smooth transitions. In the event of a “qualifying retirement” (as defined the amendments to the CPU Agreements), the NEO’s outstanding CPUs would vest on a pro rata basis based on actual results for completed quarters and target results for any “stub” quarters that were not complete as much as itof his or her retirement date, and the Year 3 GHG intensity modifier would have been if no reductionnot apply. As of December 31, 2022, Dr. Balmer was made.the only NEO who was eligible for a “qualifying retirement” based on his age and years of service.
Potential paymentsPayments upon terminationTermination or change-in-control
Change in Control
The following table shows the estimated gross taxable compensation payable upon a qualifying termination following a change in control ("CIC") or upon death, disability, involuntary termination without cause, or retirement. No amounts would be payable upon termination for other causes. The information assumes, in each case, that the officer’sNEO’s termination was effective as of December 31, 2017.2022. In presenting this disclosure, we describe amounts earned through December 31, 20172022 and, in those cases where the actual amounts to be paid out can only be determined at the time of such executive’s separation from us, the estimates are of the amounts which would be paid out to the executives upon their termination.
| | | | | | | | | | | | | | | | | |
| NEO / Reason for Termination | Base
Salary(a) | Cash
Bonus(a) | Accelerated Cash Incentive and Stock Award Vesting(b)(c) | Continued
Employee
Benefits(d) | Total |
| Joseph C. Gatto, Jr. | | | | | |
| Change in Control | $ | — | $ | — | $ | — | $ | — | $ | — |
Change in Control Termination(e) | $ | 2,724,750 | $ | 5,247,483 | $ | 8,876,131 | $ | 52,521 | $ | 16,900,885 |
Death or Disability(f) | $ | — | $ | — | $ | 8,876,131 | $ | — | $ | 8,876,131 |
Retirement(g) | $ | — | $ | — | $ | — | $ | — | $ | — |
Involuntary Termination Without Cause(h) | $ | 1,816,500 | $ | 3,712,472 | $ | — | $ | 26,261 | $ | 5,555,233 |
| Kevin Haggard | | | | | |
| Change in Control | $ | — | $ | — | $ | — | $ | — | $ | — |
Change in Control Termination(e) | $ | 970,000 | $ | 1,687,425 | $ | 3,786,230 | $ | 52,858 | $ | 6,496,513 |
Death or Disability(f) | $ | — | $ | — | $ | 3,786,230 | $ | — | $ | 3,786,230 |
Retirement(g) | $ | — | $ | — | $ | — | $ | — | $ | — |
Involuntary Termination Without Cause(h) | $ | 727,500 | $ | 1,209,105 | $ | — | $ | 26,429 | $ | 1,963,034 |
| Jeffrey S. Balmer | | | | | |
| Change in Control | $ | — | $ | — | $ | — | $ | — | $ | — |
Change in Control Termination(e) | $ | 1,070,000 | $ | 1,861,839 | $ | 4,336,832 | $ | 52,966 | $ | 7,321,637 |
Death or Disability(f) | $ | — | | $ | 4,336,832 | $ | — | $ | 4,336,832 |
Retirement(g) | $ | — | $ | — | $ | 1,762,022 | $ | — | $ | 1,762,022 |
Involuntary Termination Without Cause(h) | $ | 802,500 | $ | 1,407,853 | $ | — | $ | 26,483 | $ | 2,236,836 |
| Michol L. Ecklund | | | | | |
| Change in Control | $ | — | $ | — | $ | — | $ | — | $ | — |
Change in Control Termination(e) | $ | 910,000 | $ | 1,495,705 | $ | 2,778,184 | $ | 52,378 | $ | 5,236,267 |
Death or Disability(f) | $ | — | $ | — | $ | 2,778,184 | $ | — | $ | 2,778,184 |
Retirement(g) | $ | — | $ | — | $ | — | $ | — | $ | — |
Involuntary Termination Without Cause(h) | $ | 682,500 | $ | 1,134,315 | $ | — | $ | 26,189 | $ | 1,843,004 |
| Gregory F. Conaway | | | | | |
| Change in Control | $ | — | $ | — | $ | — | $ | — | $ | — |
Change in Control Termination(e) | $ | 650,000 | $ | 887,332 | $ | 1,139,755 | $ | 52,966 | $ | 2,730,053 |
Death or Disability(f) | $ | — | $ | — | $ | 1,139,755 | $ | — | $ | 1,139,755 |
Retirement(g) | $ | — | $ | — | $ | — | $ | — | $ | — |
Involuntary Termination Without Cause(h) | $ | 487,500 | $ | 675,188 | $ | — | $ | 26,483 | $ | 1,189,171 |
(a)In accordance with the Executive CIC Plan, the computation uses a 3x multiple with respect to the severance amount relating to salary and target bonus for Mr. Gatto, and a 2x multiple for each of the other NEOs. In accordance with the Severance Pay Plan, the computation uses a 2x multiple with respect to the severance amount relating to salary and target bonus for Mr. Gatto, and a 1.5x multiple for each of the other NEOs. See “Employment Agreements, Termination of Employment and Change in Control Arrangements.”
|
| | | | | | | | | | | | | | | | | | | | |
| 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) | | $ | 1,725,000 |
| | $ | 1,920,000 |
| | $ | 5,042,894 |
| | $ | 57,771 |
| | $ | 8,745,665 |
|
Death, Disability or Retirement (e) | | — |
| | — |
| | 5,042,894 |
| | — |
| | 5,042,894 |
|
| | | | | | | | | | | |
James P. Ulm II - CIC (d) | | $ | 930,000 |
| | $ | 837,000 |
| | $ | 1,093,500 |
| | $ | 38,514 |
| | $ | 2,899,014 |
|
Death, Disability or Retirement (e) | | — |
| | — |
| | 1,093,500 |
| | — |
| | 1,093,500 |
|
| | | | | | | | | | | |
Gary A. Newberry - CIC (d) | | $ | 950,000 |
| | $ | 1,200,000 |
| | $ | 5,267,475 |
| | $ | 25,878 |
| | $ | 7,443,353 |
|
Death, Disability or Retirement (e) | | — |
| | — |
| | 5,267,475 |
| | — |
| | 5,267,475 |
|
| | | | | | | | | | | |
Jerry A. Weant - CIC (d) | | $ | 500,000 |
| | $ | 445,667 |
| | $ | 870,645 |
| | $ | 25,878 |
| | $ | 1,842,190 |
|
Death, Disability or Retirement (e) | | — |
| | — |
| | 870,645 |
| | — |
| | 870,645 |
|
| | | | | | | | | | | |
Mitzi P. Conn - CIC (d) | | $ | 450,000 |
| | $ | 442,667 |
| | $ | 992,145 |
| | $ | 38,514 |
| | $ | 1,923,326 |
|
Death, Disability or Retirement (e) | | — |
| | — |
| | 992,145 |
| | — |
| | 992,145 |
|
| | | | | | | | | | | |
Correne S. Loeffler - CIC (d) | | $ | 490,000 |
| | $ | 294,000 |
| | $ | 547,941 |
| | $ | 38,514 |
| | $ | 1,370,455 |
|
Death, Disability or Retirement (e) | | — |
| | — |
| | 547,941 |
| | — |
| | 547,941 |
|
| |
(a) | In accordance with Mr. Gatto’s Severance Compensation Agreement, the computation uses a three-year multiple with respect to the severance amount relating to salary and target bonus, while a two-year 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, 2017 using the closing price of $12.15 per share of our common stock on the last trading day of 2017. |
| |
(c) | Benefits consist of thirty-six months of employer provided family medical and dental insurance, life insurance, dependent life insurance, accidental death coverage and disability coverage for Mr. Gatto and twenty-four months for the other NEOs in the table. |
| |
(d) | We entered into a Severance Compensation Agreement with each of the NEOs listed in the table above. See “Employment Agreements, Termination of Employment and Change‑in‑Control (“CIC”) Arrangements.” |
| |
(e) | “Disability” 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 an age which the Board determines to be consistent with normal retirement age. |
(c)The amounts include the value of unvested stock awards at December 31, 2022 using the closing price of $37.09 per share of our common stock on the last trading day of 2022. Unvested stock awards are forfeited at the date of termination due to retirement.
(d)Benefits consist of 24 and 12 months of employer-provided family medical, dental and vision insurance for the NEOs in the table for termination due to change in control and involuntary termination, respectively. Director(e)Each of the NEOs listed in the table above are eligible to receive benefits pursuant to the Executive CIC Plan. See “Employment Agreements, Termination of Employment and Change in Control Arrangements.”
(f)"Disability,” for purposes of the incentive awards is generally defined as the employee’s inability to carry out the normal and usual duties of the employee's 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, the employee will be unable to carry out the employee's normal and usual duties of employment.
(g)For RSUs, “Retirement” is generally defined as the employee’s attainment of age 55 with at least 10 years of service. None of the NEOs who were active employees as of December 31, 2022, were retirement eligible under this general definition. However, for purposes of the CPUs, “Qualified Retirement” means the termination of employment with the Company, other than (x) for Cause or (y) due to death or Disability (each as defined in the CPU Award agreements), on a date that is more than six months following the effective date, provided that, as of the date of such termination, the grantee (A) has attained a minimum of three years of employment with the Company, (B) has attained the age of 55 and the sum of the grantee’s years of employment and the grantee’s age totals at least 60, (C) has provided the Company with notice of such intent to terminate at least six months prior to the termination date and satisfactorily completed the duties of his position up to the termination date, including any transition services reasonably requested by the Company, (D) enters into an agreement not to compete with, and not directly or indirectly induce any employee to leave the employment of, the Company, any subsidiary or affiliate for a period of at least one year following the grantee’s termination of employment, which agreement, in both form and substance, is provided by the Committee or is otherwise satisfactory to the Committee, and (E) timely executes (and does not revoke in any time provided to do so) a release of claims in favor of the Company in a form reasonably acceptable to the Committee. The retirement provisions in the CPU agreements are described on page 60. As of December 31, 2022, Dr. Balmer was the only NEO who was retirement eligible for purposes of the CPU Award Agreements based on his age and years of service.
(h)In accordance with the Severance Pay Plan, the computation uses a 2x multiple with respect to the severance amount relating to salary and target bonus for Mr. Gatto and a 1.5x multiple for the other NEOs. See “Employment Agreements, Termination of Employment and Change in Control Arrangements.”
Pension and Non-Qualified Deferred Compensation Plans
We sponsor a 401(k) plan for all eligible employees, including the NEOs, as described on page 48. We do not sponsor any qualified or non-qualified defined benefit plans, or any non-qualified defined contribution plan for NEOs or other employees. The Board or Compensation Committee may elect to adopt qualified or non-qualified defined benefit plans or non-qualified defined contribution plans in the future if it determines that doing so is in the Company’s best interest.
Equity Compensation Plan Information
The compensationfollowing table summarizes information regarding the number of shares of our non-employee directorscommon stock that are available for issuance under all of our existing equity compensation plans as of December 31, 2022.
| | | | | | | | | | | | | | | | | |
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
(a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)(1) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)) (c)(2) |
| Equity compensation plans approved by security holders | 799,661 | | | $ | — | | 1,703,829 | |
| Equity compensation plans not approved by security holders | — | | $ | — | | — |
| Total | 799,661 | | | $ | — | | 1,703,829 | |
(1) The weighted-average exercise prices of outstanding options is reviewed by the Compensation Committee and is approved by the Board. We use a combinationomitted because no options or equity-based stock appreciation rights were outstanding as of cash and stock-based incentive compensationDecember 31, 2022.
(2) Relates to attract and retain qualified candidates to serve on our Board. In determining director compensation, we consider the significant amount of time the directors spend fulfilling their duties, as well as the competitive marketremaining shares available for skilled directors. Annually the Compensation Committee directly engages Meridian to conduct an analysis of director compensation, and recommends any adjustments to the total annual compensation of the non-employee directors. Specifically, Meridian evaluates competitive market data, utilizing peer and general industry data for comparison.
In 2017, each non-employee director received compensation consisting of an annual retainer of $60,000 per year, with an additional $20,000 per year for the chairman of the Audit Committee, an additional $15,000 per year to the chairman of the Compensation Committee, an additional $10,000 per year to the chairman of the Nominating and Corporate Governance Committee, and an additional $10,000 to the chairman of the Strategic Planning and Reserves Committee. As indicated herein, with the passing of Mr. Callon, Chairman of the Board and CEO, the Board appointed Mr. Flury as the non-executive Chairman of the Board, with an annual retainer of $120,000. Each non-employee director is reimbursed for reasonable out-of-pocket costs incurred to attend Board meetings. In addition to cash compensation, we also grant to our non-employee directors restricted common sharesissuance under our stock-based compensation plan. These grants are to compensateplans for our directorsexecutives, employees and to provide them with incentives to remain as a director by offering them a long-term stake in
our potential future value. During 2017, the Compensation Committee awarded RSUs with equivalent value equal to $135,000 each to the non-employee directors.
Pay Versus Performance
The RSUs will vest ratably over three years or the Compensation Committee may determine in its sole discretion that the RSUs shall vest on a “qualified separation from service.” If a member of our Board is an officer or employee of the Company, they do not receive compensation for their services as a director. Thefollowing table below indicatesshows the total compensation earnedfor our NEOs for the past three fiscal years as set forth in the Summary Compensation Table, the “compensation actually paid” to our CEO and, paid during 2017on an average basis, our other NEOs. The table also provides our TSR performance, the selected peer group TSR, net income and our company selected financial measure of adjusted free cash flow, all measured over the same time period.
Pay Versus Performance Table
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Value of initial fixed $100 investment based on: | | |
| Year | Summary Compensation table total for CEO(a) | Compensation Actually Paid to CEO(b) | Average Summary Compensation Table for non-CEO named executive officers(c) | Average compensation actually paid to non-CEO named executive officers(b)(c) | Total Shareholder Return(d) | Peer Group Total Shareholder Return(d) | Net Income/Loss (In Thousands) | Adjusted Free Cash Flow(e) (In Thousands) |
| 2022 | $ | 4,196,205 | | $ | (1,513,003) | | $ | 1,641,135 | | $ | 236,676 | | $ | 76.79 | | $ | 154.35 | | $ | 1,209,816 | | $ | 622,698 | |
| 2021 | $ | 5,709,479 | | $ | 13,034,840 | | $ | 1,909,774 | | $ | 3,256,601 | | $ | 97.83 | | $ | 106.21 | | $ | 365,151 | | $ | 274,172 | |
| 2020 | $ | 6,128,525 | | $ | 912,538 | | $ | 2,367,554 | | $ | 1,046,732 | | $ | 27.25 | | $ | 63.69 | | $ | (2,533,621) | | $ | 10,705 | |
(a) Mr. Gatto was the CEO for each non-employee director:of 2020, 2021, and 2022.
(b) The SEC requires an additional disclosure that reconciles the differences between our CEO and NEO Summary Compensation Table (“SCT”) pay and Compensation Actually Paid (“CAP”) as defined and calculated under applicable SEC rules. Once SCT pay is calculated, CAP is adjusted to include the fair market value of equity awards as of December 31st of 2020, 2021, and 2022. Our NEOs do not participate in benefit programs requiring an adjustment for pension benefits calculation. The following table provides the adjustments made between SCT pay and CAP.
Non-Employee Director Compensation | | | | | | | | | | | | | | | | | | | | |
| Year | CEO/NEO | Summary Compensation table total | Remove Value of Equity Awards Granted(1) | Prior Year Equity Award Adjustments(2) | Compensation Actually Paid |
| 2022 | CEO | $ | 4,196,205 | | $ | (1,828,585) | | $ | (3,880,623) | | $ | (1,513,003) | |
| Other NEOs | $ | 1,641,135 | | $ | (611,120) | | $ | (793,339) | | $ | 236,676 | |
| 2021 | CEO | $ | 5,709,479 | | $ | (2,092,309) | | $ | 9,417,670 | | $ | 13,034,840 | |
| Other NEOs | $ | 1,909,774 | | $ | (648,678) | | $ | 1,995,505 | | $ | 3,256,601 | |
| 2020 | CEO | $ | 6,128,525 | | $ | (3,945,450) | | $ | (1,270,537) | | $ | 912,538 | |
| Other NEOs | $ | 2,367,554 | | $ | (1,373,630) | | $ | 52,808 | | $ | 1,046,732 | |
| (1) Represents the grant date fair value and average grant date fair value of the equity awards granted to the CEO and NEOs, respectively. (2) Reflects the fair value/change in fair value of the awards at year end or upon vesting; RSUs are revalued using updated stock price on 12/30/22. |
(c) For 2022, the other NEOs were Dr. Balmer, Ms. Ecklund, and Messrs. Haggard and Conaway. For 2021, the other NEOs were Dr. Balmer, Ms. Ecklund, and Messrs. Haggard, Ulm, and Conaway. For 2020, the other NEOs were Dr. Balmer, Ms. Ecklund, and Messrs. Ulm and Conaway.
(d) TSR is determined based on the value of an initial fixed income of $100. The peer group used for 2017TSR comparisons is the XOP index.
(e) Adjusted free cash flow is defined as adjusted EBITDA minus the sum of operational capital, capitalized interest, capitalized general and administrative expense and interest expense. Adjusted EBITDA and Adjusted free cash flow are non-GAAP financial measures. See Appendix A for additional information regarding non-GAAP financial measures, including a reconciliation of non-GAAP financial measures to the nearest comparable GAAP measures.
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| Director | | Fees Earned or Paid in Cash (a) | | Stock Awards (b) | | Option Awards | | All Other Compensation | | Total |
| Matthew R. Bob | | $ | 75,000 |
| (c) | | $ | 135,000 |
| | | $ | — |
| | $ | — |
| | $ | 210,000 |
|
| Michael L. Finch | | $ | 60,000 |
| | | $ | 135,000 |
| | | $ | — |
| | $ | — |
| | $ | 195,000 |
|
| L. Richard Flury | | $ | 180,000 |
| (d) | | $ | 135,000 |
| (e) | | $ | — |
| | $ | — |
| | $ | 315,000 |
|
| Larry D. McVay | | $ | 70,000 |
| (f) | | $ | 135,000 |
| | | $ | — |
| | $ | — |
| | $ | 205,000 |
|
| Anthony J. Nocchiero | | $ | 70,000 |
| (g) | | $ | 135,000 |
| | | $ | — |
| | $ | — |
| | $ | 205,000 |
|
| James M. Trimble | | $ | 60,000 |
| | | $ | 135,000 |
| | | $ | — |
| | $ | — |
| | $ | 195,000 |
|
| John C. Wallace | | $ | 80,000 |
| (h) | | $ | 135,000 |
| | | $ | — |
| | $ | — |
| | $ | 215,000 |
|
The following list identifies the seven most important financial performance measures used to link compensation actually paid to our NEOs to company performance. These financial measures are integrated within our incentive programs and align with our short-term and long-term strategic plans.
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(a) | Does not include reimbursement of expenses associated with attending the Board meetings.Important Financial Performance Measures |
| •Adjusted Free Cash Flow | •Leverage - Net Debt to EBITDA |
| •Cash Return on Cash Invested | •Return on Capital Employed |
| •Corporate Cash Margin | •Stock Price Performance |
| •GHG Intensity | |
Relationship Between CAP and Performance Measures
We believe the table above shows the alignment between compensation actually paid to the NEOs and the Company’s performance, consistent with our compensation philosophy as described in our CD&A on page 39.The following charts below show, for 2020 – 2022, provide a summary of our TSR performance versus the peer group TSR consisting of the XOP Index and correlation between CAP and various financial measures (TSR, Net Income, and Adjusted Free Cash Flow).
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(b) | Amounts calculated utilizing the provisions of FASB ASC Topic 718. See footnotes 8 and 9 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2017 regarding assumptions underlying valuation of equity awards.Stock Price Return Performance Chart |
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(c) | Represents annual retainer of $60,000 and an additional $15,000 for acting as chairman of the Compensation Committee.Pay Versus TSR 2020-2022 |
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(d) | Represents annual retainer of $60,000 and an additional $120,000 for acting as the non-executive Chairman of the Board. Mr. Flury elected to have his annual retainer deferred pursuant to the terms of a Deferred Compensation Plan for non-employee directors, under which participants may elect to convert the cash fees to phantom shares and defer the receipt of the proceeds in cash until separation of service as a director.Pay Versus Net Income 2020-2022 |
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(e) | Represents a director who elected to have his restricted stock award deferred pursuant to the terms of a Deferred Compensation Plan for non-employee directors, under which participants may elect to defer the receipt of the proceeds in cash until separation of service as a director.Pay Versus Adjusted Free Cash Flow 2020-2022 |
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(f) | Represents annual retainer of $60,000 and an additional $10,000 for acting as chairman of the Strategic Planning and Reserves Committee. |
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(g) | Represents annual retainer of $60,000 and an additional $10,000 for acting as chairman of the Nominating and Corporate Governance Committee. |
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(h) | Represents annual retainer of $60,000 and an additional $20,000 per year for acting as chairman of the Audit Committee. |
CEO Pay Ratio
Pursuant to a mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are disclosing here that the ratio of theour median employee’s compensation to the Chief Executive Officer (CEO)compensation of Callon Petroleumour CEO is 25:18:1.
In order to find the median employee, we used the Consistently Applied Compensation Measure (CACM) defined as sum of the base salary and bonus, including any overtime or commission that was paid to the employee. Furthermore, we annualized the bonus, base salary, and any overtime for employees that were not employed the entire 2017 year. We identified theour median employee from the employee population as of December 31, 2017.
2022, by comparing the sum of the base salary, bonus, and any overtime paid to each employee that was employed by the Company on December 31, 2022. For any employees who were not employed the entire 2022 calendar year (excluding temporary and seasonal employees), we annualized the base salary, bonus, and any overtime.
In accordance with SEC rules, we then determined the amount of the median of the annual total compensation of all our employees (excluding the CEO)median employee for 20172022 was $140,628.$213,106. This amount represents the total compensation that would have been reported in the Summary Compensation Table in accordance with the requirements of Item 402(c)(x) of Regulation S-K for the median employee if the employee had been a NEO for fiscal year 2017.2022. For purposes of calculating the ratio, an additional value of $14,466$18,878 was included in the annual compensation for non-discriminatory benefits bringing the annual total compensation to $155,094.
$231,984.
We determined the amount of the CEO’s annual total compensation was $3,826,382$4,196,205, which represents the amount reported for the CEO in the “Total” column of our 20172022 Summary Compensation Table. For purposes of the ratio, an additional value of $23,432$28,203 was included in the annual total compensation for non-discriminatory benefits to bring the value to $3,849,814.
$4,224,408.
Based on the foregoing, for 20172022 the ratio of the median of the annual total compensation of all employees to the annual total compensation of our CEO (the "CEO Pay Ratio") is 25:18:1.
This ratio demonstrates a lower pay ratio for 2022 than 2021, reducing from 29:1 in 2021 to the current ratio of 18:1 for 2022.
The pay ratioCEO Pay Ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records.
Stockholders’
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Proposal 3 Advisory Vote on the Frequency of Future Advisory Votes on the Compensation of the Company’s NEOs | | The Board recommends a vote for the option of “ONE YEAR” as the frequency for future advisory votes on the compensation of our named executive officers. • The Board believes that an advisory vote on the compensation of the Company’s NEOs held every year is in the best interests of Callon and its shareholders based on the information presented below. |
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Section 14A of the Exchange Act requires the Company to submit for a vote a proposal as to whether to have the advisory vote on executive compensation on the agenda for future annual meetings of shareholders every one, two, or three years.
The Board recognizes the importance of receiving regular input from the Company’s shareholders on important issues such as the Company’s executive compensation program. Additionally, the Board is aware that many influential commentators in the area of corporate governance recommend that the advisory vote on executive compensation be held every year. Therefore, the Board recommends that the advisory vote on the compensation of the Company’s NEOs be held every year.
While the Board recommends that the advisory vote on the compensation of the Company’s NEOs be held every year, the proxy card provides you the ability to vote to approve holding the vote every one, two, or three years, or to abstain from voting. This vote is advisory and is not binding on the Company, the Board, or the Compensation Committee in any way, and the outcome of the vote will not require the Board or the Compensation Committee to take any action. The outcome of the vote will not be construed as overruling any decision of the Board or the Compensation Committee or creating or implying any additional fiduciary duty of the Board or the Compensation Committee. However, the Board and the Compensation Committee will carefully consider the outcome of the vote in determining the frequency of future advisory votes on executive compensation.
You may vote for any of the three alternatives (every one, two, or three years) or abstain from voting. Approval of this proposal requires the affirmative vote of the holders of a majority of the stock having voting power present in person or represented by proxy at the Annual Meeting. Because this vote is advisory and non-binding, if none of the frequency options receives a majority of the votes, the choice receiving the greatest number of votes will be considered the frequency recommended by the Company’s shareholders. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions will have the effect of a vote cast against the proposal. Broker non-votes will not be counted as shares having voting power, and so will have no effect upon the outcome of the vote.
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| The Board recommends a vote for the option of “ONE YEAR” as the frequency for future advisory votes on the compensation of the Company’s named executive officers. |
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Proposal 4 Ratification of the Appointment of the Independent Registered Public Accounting Firm, Grant Thornton LLP, for 2023 | | The Board recommends a 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, 2023. • 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. |
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The Audit Committee has appointed Grant Thornton LLP as the independent registered public accounting firm to audit our consolidated financial statements for the year ending December 31, 2023. We are asking shareholders to ratify this appointment. Grant Thornton LLP has served as the Company’s independent registered public accounting firm since being appointed effective March 3, 2016. A representative of Grant Thornton LLP will be present at the Annual Meeting and will have the opportunity to make a statement, if they desire, and to respond to appropriate questions from shareholders.
Fees
The following table sets forth the fees incurred by us for services performed by Grant Thornton LLP in the fiscal years 2021 and 2022:
| | | | | | | | |
| Fee Category | 2021 | 2022 |
Audit fees(a) | $ | 1,518,400 | | $ | 1,315,000 | |
Audit-related fees(b) | $ | — | | $ | 125,000 | |
Tax fees(c) | $ | — | | $ | — | |
All other fees(d) | $ | — | | $ | — | |
| Total | $ | 1,518,400 | | $ | 1,440,000 | |
(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.
Pre-approval policy
The Audit Committee pre-approves all audit and permissible non-audit services (including the fees and terms thereof) exceeding $25,000 to be performed on behalf of the Company by our independent registered public accounting firm, as required by applicable law or listing standards and subject to the terms of the audit and non-audit services pre-approval policy in accordance with the Audit Committee charter. The Committee may delegate authority to one or more of its members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that any decisions to grant pre-approvals are consistent with the terms of the delegation and the Audit Committee charter and are presented to the full Committee at its next scheduled meeting.
Required Vote
The submission of this matter for approval by shareholders is not legally required. However, the Board and Audit Committee believe that this submission is consistent with best practices in corporate governance and is an opportunity for shareholders to provide direct feedback to the Board and Audit Committee on an important issue of corporate governance. Although the results of the vote are not binding on the Audit Committee, if the appointment is not ratified by the shareholders, then the Audit Committee will consider whether it should select another independent registered public accounting firm.
This proposal will be approved if it receives the affirmative vote of the holders of a majority of the shares of our common stock having voting power present in person or represented by proxy at the Annual Meeting. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will have the authority to vote your shares in its discretion on this proposal. Abstentions will have the effect of a vote cast against this proposal.
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The Board recommends a vote FOR the ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm. |
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Audit Committee Report
Acting pursuant to its charter, the Audit Committee reviewed and discussed the Company’s audited financial statements for the year ended December 31, 2022, with management and Grant Thornton LLP, and recommended that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, for filing with the SEC. This recommendation was based on:
•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 PCAOB;
•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 (“GAAP”); and
•Other matters the Audit Committee deemed relevant and appropriate.
Management is responsible for the preparation, presentation and integrity of our consolidated financial statements in accordance with GAAP, the establishment and maintenance of our disclosure controls and procedures, and the establishment, maintenance and evaluation of the effectiveness of our internal controls over financial reporting. The independent registered public accounting firm is responsible for performing an independent audit of our consolidated financial statements and internal control over financial reporting in accordance with the standards of the PCAOB and issuing reports thereon. The Audit Committee’s responsibilities include monitoring and overseeing these processes.
Members of the Audit Committee rely, without independent verification, on the information provided to them and on the representations made by management and our independent registered public accounting firm. The Audit Committee’s considerations and discussions referred to above do not assure that the audit of our financial statements and internal control over financial reporting have been carried out according to the standards of the PCAOB, that the financial statements are presented according to GAAP, or that Grant Thornton LLP is in fact independent.
Respectfully submitted by the Audit Committee of the Board of Directors,
Frances Aldrich Sevilla-Sacasa, Chair
L. Richard Flury
Anthony J. Nocchiero
Mary Shafer-Malicki
OTHER MATTERS
Beneficial Ownership of Securities
Principal Shareholders and Management
The following table sets forth beneficial ownership information with respect to our common stock as of the Record Date (March 2, 2023) for (i) each person known by us to beneficially own 5% or more of our outstanding common stock; (ii) each of our NEOs, (iii) each of our directors and nominees for director, and (iv) all of our directors and current executive officers as of the Record Date, as a group. Unless otherwise noted, each person listed below has sole voting and investment power with respect to the shares of our common stock listed below as beneficially owned by the person. Information set forth in the table with respect to beneficial ownership of common stock has been obtained from filings made by the named beneficial owners with the SEC as of March 2, 2023, or, in the case of our current executive officers and directors, has been provided to us by such individuals. As of March 2, 2023, the Company had 61,625,170 shares outstanding.
None of the shares beneficially owned by our executive officers or directors has been pledged as security for an obligation. Our Insider Trading Policy prohibits our executive officers and directors from holding Callon securities in a margin account or pledging Callon securities as collateral for a loan.
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| Beneficial Ownership(1) |
| Name of Beneficial Owner | Shares (#) | Percent of Class |
| Holders of More Than 5%: | | |
BlackRock, Inc.(2) | 7,998,948 | | 13.0 | % |
The Vanguard Group, Inc.(3) | 6,728,744 | | 10.9 | % |
Blackstone Inc.(4) | 5,832,824 | | 9.5 | % |
State Street Corporation(5) | 4,506,810 | | 7.3 | % |
| Named Executive Officers: | | |
Joseph C. Gatto, Jr.(6) | 147,221 | | * |
Kevin Haggard(7) | 13,690 | | * |
Jeffrey S. Balmer(8) | 45,154 | | * |
Michol L. Ecklund(9) | 32,398 | | * |
Gregory F. Conaway(10) | 44,462 | | * |
| Directors: | | |
Frances Aldrich Sevilla-Sacasa(11) | 10,679 | | * |
Matthew R. Bob(12) | 18,531 | | * |
Barbara J. Faulkenberry(13) | 15,343 | | * |
L. Richard Flury(14) | 40,190 | | * |
Anthony J. Nocchiero(15) | 24,316 | | * |
Mary Shafer-Malicki(16) | 4,278 | | * |
James M. Trimble(17) | 16,631 | | * |
Steven A. Webster(18) | 769,891 | | 1.2 | % |
All Current Executive Officers and Directors as a Group (consisting of 13 persons)(19) | 1,182,784 | | 1.9 | % |
* Less than 1%
(1)The amounts shown for our directors and NEOs include, as of the Record Date, (a) shares of common stock owned outright by the individual; and (b) shares of common stock that may be acquired within 60 days through the vesting or settlement of certain RSUs, if any. Until RSUs vest, these individuals have neither voting nor investment power over the underlying shares of common stock, and share amounts are represented on a pre-tax basis. As of the Record Date, none of the directors or executive officers held any stock options to purchase shares of Company stock.
(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 of 7,938,708 shares and sole dispositive power of 7,998,948 shares. BlackRock does not have shared voting power or shared dispositive power over any shares. BlackRock’s address is 55 East 52nd Street, New York, NY 10055. This information is based on BlackRock’s most recent Statement on Schedule 13G, which was filed on January 26, 2023.
(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 does not have sole voting power over any shares, but has shared voting power over 96,953 shares, sole dispositive power over 6,587,577 shares and shared dispositive power over 141,167 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 9, 2023.
(4)Represents 5,832,824 shares held directly by BPP HoldCo LLC. BPP HoldCo LLC maintains sole voting and sole dispositive power of 5,832,824 shares.
BX Primexx Topco LLC is the sole member of BPP HoldCo LLC. BCP VII/BEP II Holdings Manager L.L.C. is the managing member of BX Primexx Topco LLC. Blackstone Energy Management Associates II L.L.C. and Blackstone Management Associates VII L.L.C. are the managing members of BCP VII/BEP II Holdings Manager L.L.C. Blackstone EMA II L.L.C. is the sole member of Blackstone Energy Management Associates II L.L.C. BMA VII L.L.C. is the sole member of Blackstone Management Associates VII L.L.C. Blackstone Holdings III L.P. is the managing member of each of BMA VII L.L.C. and Blackstone EMA II L.L.C. Blackstone Holdings III GP L.P. is the general partner of Blackstone Holdings III L.P. Blackstone Holdings III GP Management L.L.C. is the general partner of Blackstone Holdings III GP L.P. Blackstone Inc. is the sole member of Blackstone Holdings III GP Management L.L.C. The sole holder of the Series II preferred stock of Blackstone Inc. is Blackstone Group Management L.L.C. Blackstone Group Management L.L.C. is wholly-owned by Blackstone’s senior managing directors and controlled by its founder, Stephen A. Schwarzman. The address of the principal business office of Blackstone Inc. is 345 Park Avenue, New York, NY 10154. The above information is based on the most recent Statement on Schedule 13D of Blackstone Inc. and the other entities referred to above, which was filed on January 25, 2023.
(5)State Street Corp. ("State Street"), in its capacity as a parent holding company or control person for various subsidiaries, 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 4,470,486 shares and shared dispositive power over 4,506,810 shares. State Street's subsidiary, SSGA Funds Management, Inc. ("SSGA"), has shared voting power over 3,608,808 shares and shared dispositive power over 3,619,908 shares. Neither State Street nor SSGA has 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, which was filed on February 2, 2023.
(6)Comprised of 103,049 shares held directly by Mr. Gatto and 44,172 unvested RSUs payable in stock that will vest within 60 days of the Record Date. Does not include 38,243 unvested RSUs payable in stock.
(7)Comprised of 4,019 shares held directly by Mr. Haggard and 9,671 unvested RSUs payable in stock that will vest within 60 days of the Record Date. Does not include 30,415 unvested RSUs payable in stock.
(8)Comprised of 23,761 shares held directly by Dr. Balmer and 21,393 unvested RSUs payable in stock that will vest within 60 days of the Record Date. Does not include 18,674 unvested RSUs payable in stock.
(9)Comprised of 18,795 shares held directly by Ms. Ecklund and 13,603 unvested RSUs payable in stock that will vest within 60 days of the Record Date. Does not include 12,016 unvested RSUs payable in stock.
(10)Comprised of 39,259 shares held directly by Mr. Conaway and 5,203 unvested RSUs payable in stock that will vest within 60 days of the Record Date. Does not include 4,680 unvested RSUs payable in stock.
(11)Comprised of 7,624 shares held directly by Ms. Aldrich Sevilla-Sacasa, which includes 5,277 vested deferred RSUs, pursuant to Ms. Aldrich Sevilla-Sacasa’s election under the Deferred Compensation Plan, which are payable in cash upon her separation of service as a director, and 3,055 unvested deferred RSUs, pursuant to Ms. Aldrich Sevilla-Sacasa’s election under the Deferred Compensation Plan, which are payable in cash upon her separation of service as a director and that will vest within 60 days of the Record Date.
(12)Comprised of 15,476 shares held directly by Mr. Bob and 3,055 unvested RSUs payable in stock that will vest within 60 days of the Record Date.
(13)Comprised of 12,288 shares held directly by Ms. Faulkenberry and 3,055 unvested RSUs payable in stock that will vest within 60 days of the Record Date.
(14)Comprised of 34,135 shares held directly by Mr. Flury, which includes 15,559 vested deferred RSUs, pursuant to Mr. Flury’s election under the Deferred Compensation Plan, which are payable in cash upon his separation of service as a director, 3,000 shares held in a joint tenancy with his spouse, and 3,055 unvested RSUs payable in stock that will vest within 60 days of the Record Date.
(15)Comprised of 21,261 shares held directly by Mr. Nocchiero and 3,055 unvested RSUs payable in stock that will vest within 60 days of the Record Date.
(16)Comprised of 1,223 vested deferred RSUs, pursuant to Ms. Shafer-Malicki's election under the Deferred Compensation Plan, which are payable in cash upon her separation of service as a director, and 3,055 unvested deferred RSUs, pursuant to Ms. Shafer-Malicki's election
under the Deferred Compensation Plan, which are payable in cash upon her separation of service as a director and that will vest within 60 days of the Record Date.
(17)Comprised of 13,576 shares held directly by Mr. Trimble and 3,055 unvested RSUs payable in stock that will vest within 60 days of the Record Date.
(18)Comprised of 552,961 shares held directly by Mr. Webster, which includes 13,192 vested deferred RSUs, pursuant to Mr. Webster’s election under the Deferred Compensation Plan, which are payable in cash upon his separation of service as a director, 64,500 shares held indirectly with his spouse, 149,375 shares held indirectly through San Felipe Resources Company, and 3,055 unvested RSUs payable in stock that will vest within 60 days of the Record Date.
(19)Comprised of 847,427 shares held directly by the Company’s current executive officers and directors, 3,000 shares held in a joint tenancy, 64,500 shares held indirectly by a spouse, 149,375 shares held indirectly by San Felipe Resources Company, and 118,482 unvested RSUs payable in stock that will vest within 60 days of the Record Date.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our officers and directors and persons who own 10% or more of our common stock to file reports of beneficial ownership and changes in ownership with the SEC. These persons are required by SEC regulations to furnish us with copies of these reports. Based solely on our review of these reports received by us during fiscal year 2022 and representations from certain reporting persons that they have complied with the relevant filing requirements, we believe that all such filing requirements were complied with in 2022 and 2023 to date.
Certain Relationships and Related Party Transactions
The Audit Committee charter provides that the Audit Committee shall review and approve all related party transactions. A transaction will be considered a “related party transaction” if the transaction would be required to be disclosed under Item 404 of Regulation S-K. In addition, our Code provides that an officer’s or a director’s conflict of interest with Callon may only be waived if the Audit Committee approves the waiver and the full Board ratifies the waiver.
We are not aware of any related party transactions that require disclosure under Item 404 of Regulation S-K.
Shareholders’ Proposals and Director Nominations for the 20192024 Annual Meeting
Stockholders who desireIn order for a proposal to present proposals atbe considered for inclusion in the 2019proxy statement for the 2024 Annual Meeting of Stockholders andShareholders (the “2024 Annual Meeting”) pursuant to haveRule 14a-8 of the Exchange Act, such proposals included in our proxy materials,proposal must submit their proposals to usbe received by the Secretary of the Company at our principal executive offices notoffice no later than November 13, 2023 (assuming the date of the 2024 Annual Meeting has not been changed by more than 30 2018.days from the date of this year’s Annual Meeting), and must otherwise be in compliance with the requirements of the SEC’s proxy rules. If the date of the 20192024 Annual Meeting of Stockholders is changed by more than 30 days from the date of the 2018this Annual Meeting, of Stockholders,then the deadline for submitting proposals is a reasonable time before we begin to print and mailsend our proxy materials for our 2019the 2024 Annual Meeting.
For a shareholder proposal to be introduced for consideration at the 2024 Annual Meeting but not intended to be considered for inclusion in the Company's proxy statement and form of Stockholders.proxy relating to such meeting (i.e., not pursuant to Rule 14a-8 of the Exchange Act), including shareholder nominations for candidates for election as directors, a shareholder must provide written notice of such proposal to Company not later than 120 days nor earlier than 150 days before the date of the 2024 Annual Meeting. Any such notice must describe the shareholder proposal in reasonable detail and otherwise comply with the requirements set forth in our bylaws. In addition to satisfying the notice, informational and other requirements contained in our
bylaws, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 of the Exchange Act, which notice must be postmarked or
transmitted electronically to the Company at its principal executive office no later February 26, 2024 (assuming the date of the 2024 Annual Meeting has not been changed by more than 30 days from the date of this year’s Annual Meeting). If the date of the 20192024 Annual Meeting of Stockholders is advanced or delayedchanged by more than 30 calendar days from the date of the 2018this Annual Meeting, then notice must be provided by the later of Stockholders, we shall, in a timely manner, inform our stockholders of such change, by including a notice, under Item 5, in our earliest possible quarterly report on Form 10-Q. The notice will include the new deadline for submitting proposals to be included in our Proxy Statement and the new date for determining whether we may exercise discretionary voting authority because we have not received timely notice of a matter.
In order to avoid controversy as60 days prior to the date of the 2024 Annual Meeting or the tenth day following the day on which we receive any such proposal, we suggest that stockholders submit their proposals by certified mail, return receipt requested, or other means that permit them to provepublic announcement of the date of delivery. We reserve the right to reject, rule out2024 Annual Meeting is first made by the Company .
Nominating Process
In accordance with our certificate of order or take other appropriate action with respect toincorporation, any proposal that does not comply with the requirements described above or other applicable requirements.
Our Certificate of Incorporation requires that any person intending toshareholder may nominate a person for election to serve as a directorthe Board upon delivery of Callon must provide written notice to us of such nomination. Such notice must be sent as provided in our certificate of incorporation on or before the intentdeadline set forth in our certificate of incorporation, and must otherwise comply with the procedures set forth in our certificate of incorporation. For nominations, the Board will consider individuals identified by shareholders on the same basis as nominees identified from other sources. A submission recommending a nominee should include:
•Sufficient biographical information to nominate at least 120 days priorallow the N&ESG 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 scheduled date of the 2019 annual meeting.Board; and
•The proposed nominee’s written consent to serve if nominated and elected.
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ANNUAL MEETING INFORMATION |
ANNUAL MEETING INFORMATION
Information Concerning Solicitation and Voting
We are providing you this Proxy Statement in connection with the solicitation of proxies by ourthe Board to be voted at the 2018 Annual Meeting, of stockholders of Callon Petroleum Company. The Annual Meetingwhich will be held on Thursday, May 10, 2018April 26, 2023, at 9:00 a.m. CDTEDT in the Grand BallroomBoardroom of the Natchez Grand Hotel, 111 BroadwayThe Ritz-Carlton New York, Nomad, located at 25 West 28th Street, Natchez, Mississippi 39120.New York, NY. This Proxy Statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully.
The Board will primarily solicit proxies by mail, and we will bear all costs incurred in the solicitation of proxies, including the preparation, printing and mailing of these proxy materials. In addition to solicitation by mail, our directors, officers and employees may solicit proxies personally or by telephone, email, facsimile or other means, without additional compensation. We may also make arrangements with brokerage houses and other custodians, nominees and fiduciaries for the forwarding of solicitation material to the beneficial owners of the common stock held by such persons, and we may reimburse those brokerage houses and other custodians, nominees and fiduciaries for reasonable expenses incurred in connection therewith. In addition, to assist us with our solicitation efforts, we have retained the services of Alliance AdvisorsInnisfree M&A Incorporated for a fee of approximately $15,000,$16,500, plus out-of-pocket expenses.
Information About Voting and the Annual Meeting
Who may vote
You may vote if you are the record holder of our common stock as of the close of business on the Record Date. On that date, 201,947,88461,625,170 shares of our common stock were outstanding and are entitled to vote at the Annual Meeting. Each share of common stock is entitled to one vote on each matter considered at this meeting.
A list of shareholders entitled to vote at the Annual Meeting will be available at our office at 2000 West Sam Houston Parkway South, Suite 2000, Houston, TX 77042 during normal business hours for a period of ten days prior to the meeting and will also be available for inspection at the Annual Meeting.
Attending the Annual Meeting
If you meet the above criteria to vote at our Annual Meeting, you may attend the Annual Meeting. If you wish to attend the Annual Meeting in person, you must present valid, government-issued picture identification. If your shares are held in the name of a bank, broker or other nominee and you plan to attend the Annual Meeting, in order to be admitted you must present proof of your beneficial ownership of the common stock, such as a bank or brokerage account statement, or copy of your Voting Instruction Form or Notice, indicating that you owned shares of our common stock at the close of business on the Record Date.
For safety and security reasons, no cameras, recording equipment, cellular telephones, electronic devices, large bags, briefcases or packages will be permitted in the Annual Meeting. No banners, signs, firearms or weapons will be allowed in the meeting room. We reserve the right to inspect all items entering the meeting room.
Proposals
Qualifying stockholdersshareholders will vote on the following four proposals at the meeting:Annual Meeting:
1)The election of three Class II directors;
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1) | The election of directors; |
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2) | Advisory approval of our executive compensation; |
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3) | The approval of the 2018 Plan; and |
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4) | The ratification of the appointment of Grant Thornton LLP. |
2)Advisory approval of our executive compensation;
3)Advisory vote on the frequency of future advisory votes of our executive compensation; and
4)The ratification of the appointment of Grant Thornton LLP.
ANNUAL MEETING INFORMATION
Notice and access
The Company is furnishing proxy materials to its stockholdersshareholders through the Internet as permitted under the rules of the Securities and Exchange Commission (the “SEC”).SEC. Under these rules, the Company’s stockholdersshareholders will receive a Notice Regarding the Availability of Proxy Materials instead of a paper copy of the Notice of 20182023 Annual Meeting of StockholdersShareholders and Proxy Statement, our proxy card, and our Annual Report on Form 10-K, often referred to as “notice and access.” We believe this process gives us the opportunity to serve you more efficiently by making the proxy materials available quickly online and reducing costs associated with printing and distributing our proxy materials. This Notice includes instructions on how to access the proxy materials over the Internet or to request a paper copy of proxy materials, including a proxy card or voting instruction form. In addition and as described in the Notice, stockholdersshareholders may request to receive future proxy materials in printed form by mail or electronically by email. A stockholder’sshareholder’s election to receive proxy materials by mail or email will remain in effect until terminated by the stockholder.shareholder.
Our Board has made theseThe Company's proxy materials were made available to youby the Board on the Internet on or about March 23, 201813, 2023, at https://www.viewproxy.com/CallonPetroleum/2018,2023, which is the cookies-free website described in the Notice. Accordingly, we are sending the Notice to our stockholdersshareholders of record and beneficial owners of our stock, and filing the Notice with the SEC, on or about March 23, 2018.13, 2023. Please note that the Notice identifies the itemsproposals on which stockholdersshareholders will vote at the meeting, but stockholdersshareholders cannot vote by marking the Notice and returning it. The Notice provides instructions on how to vote via the Internet, by telephone or by requesting and returning a paper proxy card, or by submitting a ballot in person at the meeting.
In addition to the proxy materials being available for review at https://www.viewproxy.com/CallonPetroleum/2018,2023, the site contains instructions on how to access the proxy materials on a website or to request free of charge printed materials, including a copy of our Annual Report on Form 10-K for the year ended December 31, 20172022, as filed with the SEC. On an ongoing basis, stockholdersshareholders may contact our Corporate Secretary at our principal offices in Natchez, MississippiHouston, Texas to request proxy materials by mail or by e-mail.
email.
Casting your vote
There are three methods for registered stockholdersshareholders to vote by proxy without attending the Annual Meeting:
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| 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. CDTEDT on May 9, 2018.April 25, 2023. 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. |
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| 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. CDTEDT on May 9, 2018.April 25, 2023. Voting by telephone is available 24 hours a day. |
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| 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. |
If you receive more than one Notice and/or Proxy Statement then it means that your shares are likely registered in more than one account. Please provide voting instructions for all Notices, proxy and voting instruction cards you receive. If you send us a signed proxy card without marking your voting selections, your shares will be voted on each proposal as recommended by ourthe Board, and in the discretion of the proxy holders as to any other matters that may properly come before the meeting or any postponement or adjournment of the meeting. The Board is not presently aware of any other proposals or any other business to be considered at the Annual Meeting.
Difference between a “holder of record” and a “street name” holder
If your shares are registered directly in your name, you are considered the stockholdershareholder of record with respect to those shares. If your shares are held in a stock brokerage account or by a bank, trust or other nominee, then the broker, bank, trust or other nominee is considered to be the stockholdershareholder of record with respect to those shares. However, you are still considered to be the beneficial owner of those shares, and your shares are said to be held in “street name.” Street name holders generally cannot submit a proxy or vote their shares directly and must instead instruct the broker, bank, trust or other nominee how to vote their shares. You will receive instructions from your broker, bank or other nominee that you must follow in order for your broker, bank or other nominee to vote your shares per your instructions. Many brokerage firms and banks have a process for their beneficial
ANNUAL MEETING INFORMATION
holders to provide instructions via the Internet or over the telephone. If Internet or telephone voting is unavailable from your broker, bank or other nominee, please complete and return the enclosed voting instruction card in the addressed, postage paid envelope provided.
In the event you do not provide instructions on how to vote shares held in street name, your broker may have authority to vote your shares. Under the rules that govern brokers who are voting with respect to shares that are held in street name, brokers have the discretion to vote such shares on routine matters, but they are not permitted to vote (a “broker non-vote”) on non-routine or non-discretionary items absent instructions from the beneficial owner. With respect to the Annual Meeting, brokers are prohibited from exercising discretionary authority in the election of directors, the non-binding advisory proposal on executive compensation, and the non-binding advisory proposal to approveon the 2018 Plan,frequency of future advisory votes on executive compensation, but such brokers may exercise discretionary authority with respect to the ratification of the appointment of our independent registered public accounting firm. Your vote is especially important. Therefore, please promptly instruct your your broker regarding how to vote your shares on these matters.
If you hold shares through a broker, bank or other nominee and wish to be able to vote in person at the meeting, you must obtain a legal proxy from your broker, bank or other nominee and present it to the inspector of election with your ballot at the meeting. If you need
assistance in obtaininghave questions about how to obtain a legal proxy, please call Alliance AdvisorsInnisfree M&A Incorporated toll-free at (833)-786-5511.(888) 750-5834. Submitting your proxy by mail will not affect your right to vote in person if you decide to attend the Annual Meeting.
Revoking a proxy
You may revoke or change a previously delivered proxy at any time before the meeting by delivering another proxy with a later date, by voting again via the Internet or by telephone, or by delivering written notice of revocation of your proxy to our Corporate Secretary at our principal officesexecutive office in Natchez, MississippiHouston, Texas before the beginning of the meeting. You may also revoke your proxy by attending the meeting and voting in person, although attendance at the meeting will not necessarily revoke a valid proxy that was previously delivered. If you hold shares through a broker, bank or other nominee, you must contact that nominee to revoke any prior voting instructions. You also may revoke any prior voting instructions by voting in person at the meeting if you obtain a legal proxy as described above.
Recommendation of the Board
The Board unanimously recommends you vote “FOR” each of the proposals. A proxy that is properly completed and submitted will be voted at the Annual Meeting in accordance with the instructions on the proxy. If you properly complete and submit a proxy, but do not indicate any contrary voting instructions, your shares will be voted as follows:
•“FOR” the election of each of the nominees named in this Proxy Statement to ourthe Board of Directors;
•“FOR” the approval, on an advisory basis, of our executive compensation;
“FOR”•"ONE YEAR" as the approvalfrequency of the 2018 Plan;future advisory votes on executive compensation; and
•“FOR” the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018
2023.
Counting the vote
We have appointed Alliance Advisors to serve as the inspector of election and to tabulate and certify the vote.
Quorum
A quorum is the number of shares that must be present to hold the meeting. The quorum requirement for the meeting is a majority of the outstanding shares as of the Record Date, present in person or represented by proxy. We will count your shares for purposes of determining if there is a quorum if either you are present and vote in person at the meeting or have voted on the Internet, by telephone or by properly submitting a proxy card or voting instruction card by mail. Abstentions and broker non-votes also count toward the quorum.
ANNUAL MEETING INFORMATION
Required Vote
Proposal 1 - Election of directors
The nominees for election as directors will be elected by a plurality of allthe votes cast subjectby the shares entitled to vote in the Company’s majority voting policy. Becauseelection of directors. However, because the number of director nominees equals the number of directors to be elected at this Annual Meeting, if any nominee for director receives a greater number of votes “withheld” than votes “for,” then such nominee is required to promptly tender his or her resignation for consideration by the N&ESG Committee. Such resignation will only be elected, each director must receive a majorityeffective upon Board acceptance of such resignation after receiving the recommendation of the votes cast. A majority of the votes cast means that the number of shares voted “for” a director must exceed the number of shares voted “withheld.”N&ESG Committee. Abstentions and broker non-votes will not be included in determining the number of votes cast in the election of directors and will not have any effect on the outcome. This majority voting standard is discussed further under “Proposal 1 - Election of directors - Majority Vote Standard.Class II Directors.”
Proposal 2 - Advisory vote to approve NEO compensation
The advisory vote on our executive compensation is non-binding, so no specific vote is required. Abstentions will have the same effect as a vote against this proposal, and broker non-votes will not be counted as shares present and entitled to vote, and, accordingly, will not affect the outcome of the vote on this proposal. While the law requires this advisory vote, the vote will neither be binding on us, the Board or our Board,the Compensation Committee, nor will it create or imply any change in the fiduciary duties of, or impose any additional fiduciary duty on, us, the Board, or our Board.the Compensation Committee. However, the views of our stockholdersshareholders are important to us, and ourthe Compensation Committee will take into account the outcome of the vote when considering future executive compensation decisions. We urge you to read the section entitled “Compensation Discussion and Analysis,” which discusses in detail how our executive compensation program implements our compensation philosophy.
Proposal 3 - ApprovalAdvisory vote on the frequency of future advisory votes to approve NEO compensation
The advisory vote on the frequency of future advisory votes on the compensation of our NEOs is non-binding, so no specific vote is required. If none of the 2018 Plan
Pursuant to our bylaws, approval of the 2018 Plan requires the affirmative vote offrequency options receives a majority of the common shares present in person or by proxy and entitled to vote onvotes, the proposal. In addition tochoice receiving the vote required by our bylaws, under New York Stock Exchange (“NYSE”) rules, approval of the 2018 plan requires approval of a majoritygreatest number of votes cast onwill be considered the proposal. In both cases, abstentionsfrequency recommended by the Company’s shareholders. Abstentions will have the same effect ofas a vote cast against the proposal. Brokerthis proposal, and broker non-votes will not be counted as shares present and entitled to vote, and, soaccordingly, will have no effect uponnot affect the outcome of the vote.
vote on this proposal. While the law requires this advisory vote, the vote will neither be binding on us, the Board, or the Compensation Committee, nor will it create or imply any change in the fiduciary duties of, or impose any additional fiduciary duty on, us, the Board, or the Compensation Committee. However, the views of our shareholders are important to us, and the Board and the Compensation Committee will carefully consider the outcome of the vote in determining the frequency of future advisory votes on executive.
Proposal 4 - Ratification of the appointment of the independent registered public accounting firm
The advisory vote on the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the 20182023 fiscal year is non-binding, so no specific vote is required. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will have the authority to vote your shares in its discretion on this proposal. An abstention will have the effect of a vote against this proposal. Because your vote is advisory, it will not be binding on the Board or the Company. However, the Board and the Audit Committee will consider the outcome of the vote in determining the selection of the Company’s independent registered public accounting firm.
ANNUAL MEETING INFORMATION
Voting Results
We will announce the preliminary voting results at the Annual Meeting and will publish the final voting results in a current reportCurrent Report on Form 8-K to be filed with the SEC within four business days of the meeting.
Householding Information
The SEC permits companies and intermediaries (such as brokers and banks) to satisfy delivery requirements for proxy statements and annual reports with respect to two or more stockholdersshareholders sharing the same address by delivering a single proxy statement and annual report to those stockholders.shareholders. This process, which is commonly referred to as “householding,” is intended to reduce the volume of duplicate information stockholdersshareholders receive and reduce expenses for companies. Both we and some of our intermediaries may be householding our proxy materials and annual report. Once you have received notice from your broker or another intermediary that they will be householding materials sent to your address, householding will continue until you are notified otherwise or until you revoke your consent. Should you wish to receive separate copies of our Annual Reportannual report and Proxy Statementproxy statement in the future, we will promptly deliver a separate copy of each of these documents to you if you send a written request to us at our address appearing on the cover of this Proxy Statement, to the attention of the Corporate Secretary. If you hold your shares through an intermediary that is householding and you want to receive separate copies of our Annual Reportannual report and Proxy Statementproxy statement in the future, you should contact your bank, broker or other nominee record holder.
Financial Statements and Other Available Documents
Financial statements for our most recent fiscal year are contained in the 20172022 Annual Report to StockholdersShareholders and our Annual Report on Form 10-K for the fiscal year ended December 31, 2017,2022 filed with the SEC on February 28, 2018.23, 2023. Our Annual Report, our Annual Report on Form 10-K, Corporate Governance Guidelines, Code, of Business Conduct and Ethics, and Charterscharters of Board Committeescommittees may be accessed by stockholdersshareholders on our website at www.callon.com or printed copies are available upon written request to B.F. Weatherly,Michol L. Ecklund, Corporate Secretary at our principal executive office in Natchez, Mississippi.Houston, Texas.
Other Business
The Board is not aware of any matter to be acted upon at the 2018 Annual Meeting other than those described above. If other business properly comes before the 2018 Annual Meeting, the persons named on the proxy will vote the proxy in accordance with what they consider to be in the best interests of us and our stockholders.shareholders. Please sign, date, and return your proxy promptly to avoid unnecessary expense. All stockholdersshareholders are urged, regardless of the number of shares owned, to participate in the 2018 Annual Meeting by voting their shares.
By Order of the Board of Directors
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| By Order of the Board of Directors, | |
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Joseph C. Gatto, Jr.
President, Chief Executive Officer and Director | Houston, Texas
March 13, 2023 |
APPENDIX A
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| NON-GAAP RECONCILIATIONS | | | |
Adjusted EBITDA (in thousands): | 2020 | 2021 | 2022 |
| Net income (loss) | $ | (2,533,621) | | $ | 365,151 | | $ | 1,209,816 | |
| Adjustments: | | | |
| Loss on derivatives contracts | $ | 27,773 | | $ | 522,300 | | $ | 330,953 | |
| Gain (loss) on commodity derivative settlements, net | $ | 95,856 | | $ | (423,306) | | $ | (467,420) | |
| Non-cash expense related to share-based awards | $ | 2,663 | | $ | 12,923 | | $ | 2,507 | |
| Impairment of evaluated oil and gas properties | $ | 2,547,241 | | $ | — | | $ | — | |
| Merger, integration, transaction, and other | $ | 43,107 | | $ | 21,944 | | $ | 3,414 | |
| Income tax expense | $ | 122,054 | | $ | 180 | | $ | 11,793 | |
| Interest expense, net | $ | 94,329 | | $ | 102,012 | | $ | 79,667 | |
| Depreciation, depletion and amortization | $ | 480,631 | | $ | 356,556 | | $ | 466,517 | |
| (Gain) loss on extinguishment of debt | $ | (170,370) | | $ | 41,040 | | $ | 45,658 | |
| Adjusted EBITDA | $ | 709,663 | | $ | 998,800 | | $ | 1,682,905 | |
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Adjusted Free Cash Flow (in thousands): | | 2020 | 2021 | 2022 |
| Net cash provided by operating activities | | $ | 559,775 | | $ | 974,143 | | $ | 1,501,517 | |
| Changes in working capital and other | | $ | 33,993 | | $ | (53,312) | | $ | 79,939 | |
| Change in accrued hedge settlements | | $ | (3,015) | | $ | (28,208) | | $ | 26,294 | |
| Cash interest expense, net | | $ | 90,428 | | $ | 91,888 | | $ | 74,386 | |
| Merger, integration and transaction | | $ | 28,482 | | $ | 14,289 | | $ | 769 | |
| Adjusted EBITDA | | $ | 709,663 | | $ | 998,800 | | $ | 1,682,905 | |
| Less: Operational capital expenditures (accrual) | | $ | 488,623 | | $ | 508,616 | | $ | 841,525 | |
| Less: Capitalized interest | | $ | 88,599 | | $ | 89,738 | | $ | 101,073 | |
| Less: Interest expense, net of capitalized amounts | | $ | 94,329 | | $ | 91,888 | | $ | 74,386 | |
| Less: Capitalized cash G&A | | $ | 27,407 | | $ | 34,386 | | $ | 43,223 | |
| Adjusted Free Cash Flow | | $ | 10,705 | | $ | 274,172 | | $ | 622,698 | |
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| Net Debt | 2020 | 2021 | 2022 |
| Total debt | $ | 2,969,264 | | $ | 2,694,115 | | $ | 2,241,295 | |
| Unamortized premiums, discount, and deferred loan costs, net | $ | 43,377 | | $ | 28,806 | | $ | 19,726 | |
| Adjusted total debt | $ | 3,012,641 | | $ | 2,722,921 | | $ | 2,261,021 | |
| Less: Cash and cash equivalents | $ | 20,236 | | $ | 9,882 | | $ | 3,395 | |
| Net Debt | $ | 2,992,405 | | $ | 2,713,039 | | $ | 2,257,626 | |
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Total Corporate Cash Margin (in thousands, except per Boe data): | 2020 | 2021 | 2022 |
| Adjusted free cash flow | $ | 10,705 | | $ | 274,172 | | $ | 622,698 | |
| Plus: Operational capital expenditures (accrual) | $ | 488,623 | | $ | 508,616 | | $ | 841,525 | |
| Total Corporate Cash Margin | $ | 499,328 | | $ | 782,788 | | $ | 1,464,223 | |
| Total production in barrels of oil equivalent | 37,193 | | 34,894 | | 38,053 | |
| Total Corporate Cash Margin per Boe | $ | 13.43 | | $ | 22.43 | | $ | 38.48 | |
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Total Proved Reserves - PV-10 (in millions): | 2020 | 2021 | 2022 |
| Standardized measure of discounted future net cash flows | $ | 2,310 | | $ | 6,251 | | $ | 9,004 | |
| Plus: present value of future income taxes discounted at 10% per annum | $ | 35 | | $ | 800 | | $ | 841,525 | |
| Total Proved Reserves - PV-10 | $ | 2,345 | | $ | 7,051 | | $ | 850,529 | |
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| CALLON PETROLEUM COMPANY |
| ANNUAL MEETING OF SHAREHOLDERS |
| APRIL 26, 2023, AT 9:00 A.M. EDT |
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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 Boardroom of The Ritz-Carlton New York, Nomad, 25 West 28th Street, New York, NY 10001 on April 26, 2023, 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, "ONE YEAR" ON PROPOSAL 3, AND “FOR” PROPOSAL 4, 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 2023 Annual Meeting of Shareholders and Proxy Statement dated March 13, 2023, 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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March 23, 2018 | | |
Natchez, Mississippi | | Joseph C. Gatto, Jr. |
| | President and Chief Executive Officer |
Appendix A
CALLON PETROLEUM COMPANY
2018 OMNIBUS INCENTIVE PLAN
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1. | Plan. This Callon Petroleum Company 2018 Omnibus Incentive Plan (this “Plan”) was adopted by Callon Petroleum 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 Callon Petroleum Company. | PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. | | |
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2. | Definitions. As used herein, the terms set forth below shall have the following respective meanings:
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“Affiliate” has the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations of the Exchange Act.
“Award” means the grant of any Option, SAR, Stock Award, Cash Award or Performance Award whether granted singly, in combination or in tandem, to a Participant pursuant to such applicable terms, conditions and limitations as the Committee may establish in order to fulfill the objectives of this Plan.
“Award Agreement” means the document (in written or electronic form) setting forth the terms, conditions and limitations applicable to an Award. Such agreement shall be written except that the Committee may, in its discretion, require or allow that the Participant electronically execute or accept such Award Agreement.
“Board” means the Board of Directors of the Company.
“Cash Award” means an Award denominated in cash.
“Change in Control” means the occurrence of one or more of the following:
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(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 stockholders 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
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(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 stockholders, 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
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(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 stockholders of the Company immediately after the transfer, through a transfer to (1) a stockholder 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.
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Notwithstanding the foregoing, no Change in Control payment event shall be deemed to have occurred with respect to an Award that is subject to Section 409A of the Code unless such event constitutes a permissible payment event specified in Section 409A of the Code and the Treasury regulations promulgated thereunder.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Committee” means (i) the Compensation Committee of the Board or (ii) such other committee of the Board as is designated by the Board to administer this Plan or (iii) to the extent contemplated hereby, the Board.
“Common Stock” means the common stock, par value $.01 per share, of the Company.
“Company” means Callon Petroleum Company, a Delaware corporation.
“Director” means an individual serving as a member of the Board.
“Dividend Equivalents” means, with respect to the shares of Common Stock subject to a Stock Award other than Restricted Stock, an amount equal to all dividends and other distributions (or the economic equivalent thereof) that are payable to stockholders of record during the Restriction Period on a like number of shares of Common Stock.
“Effective Date” means May 10, 2018.
“Employee” means an employee of the Company or any of its Subsidiaries.
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
“Fair Market Value” of a share of Common Stock means, as of a particular date, (i)(A) if the shares of Common Stock are listed or on a national securities exchange (including the NASDAQ Global Select Market), the closing price per share of the Common Stock on the consolidated transaction reporting system for the principal national securities exchange on which shares of Common Stock are listed on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported, or, at the discretion of the Committee, the price prevailing on the exchange at the time of exercise or other relevant event (as determined under procedures established by the Committee) including the average of the closing bid and asked price on that date, (B) if the shares of Common Stock are not so listed but are listed or quoted on another securities exchange or market, the closing price per share of Common Stock reported on the principal securities exchange or market on which the shares of Common Stock are traded (as determined by the Committee), or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported or, at the discretion of the Committee, the price prevailing on such principal securities exchange or market at the time of exercise or other relevant event, including the average of the closing bid and asked price on that date, or, if there are no quotations available for such date, on the last preceding date on which such quotations shall be available, (C) if the shares of Common Stock are not publicly traded, the most recent value determined by an independent appraiser appointed by the Company for such purpose, or (D) if none of (A)-(C) are applicable, the fair market value of a share of Common Stock as determined in good faith by the Committee; or (ii) if applicable, the price per share as determined in accordance with the procedures of a third party administrator retained by the Company to administer this Plan and as approved by the Committee.
“Incentive Option” means an Option that is intended to comply with the requirements set forth in Section 422 of the Code.
“Independent Contractor” means an individual providing services to the Company or any of its Subsidiaries, who is not an Employee. An Independent Contractor can include an individual who is serving as a Non-employee Director.
“Non-employee Director” means a Director who is not an Employee. A Non-employee Director may, in the discretion of the Committee, receive an Award both in the capacity as a Non-employee Director and Independent Contractor.
“Nonqualified Stock Option” means an Option that is not an Incentive Option.
“Option” means a right to purchase a specified number of shares of Common Stock at a specified price, which is either an Incentive Option or a Nonqualified Stock Option.
“Participant” means an Employee, Non-employee Director or Independent Contractor to whom an Award has been made under this Plan.
“Performance Award” means an award made pursuant to this Plan to a Participant which is subject to the attainment of one or more Performance Goals.
“Performance Goal” means a standard established by the Committee, to determine in whole or in part whether a Performance Award shall be earned.
“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.
“Prior Plan” means the Callon Petroleum Company 2011 Omnibus Incentive Plan, as thereafter amended.
“Restricted Stock” means any Common Stock that is restricted or subject to forfeiture provisions.
“Restricted Stock Unit” means a right to receive a share of Common Stock or the value thereof on such terms and conditions as may be established by the Committee. For the avoidance of doubt, such term includes phantom shares and phantom stock units.
“Restriction Period” means a period of time beginning as of the date upon which a Stock Award is made pursuant to this Plan and ending as of the date upon which the Common Stock subject to such Stock Award is deliverable or no longer restricted or such Stock Award is no longer subject to forfeiture provisions.
“Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act, or any successor rule.
“SAR” means a right to receive a payment, in cash or Common Stock, equal to the excess of the Fair Market Value or other specified valuation of a specified number of shares of Common Stock on the date the right is exercised over a specified strike price, in each case, as determined by the Committee.
“Stock Award” means an award in the form of shares of Common Stock or units denominated in shares of Common Stock, including Restricted Stock and Restricted Stock Units. For the avoidance of doubt, a Stock Award does not include an Option or SAR.
“Subsidiary” means (i) in the case of a corporation, any corporation of which the Company directly or indirectly owns shares representing more than 50% of the combined voting power of the shares of all classes or series of capital stock of such corporation which have the right to vote generally on matters submitted to a vote of the stockholders of such corporation and (ii) in the case of a partnership or other business entity not organized as a corporation, any such business entity of which the Company directly or indirectly owns more than 50% of the voting, capital or profits interests (whether in the form of partnership interests, membership interests or otherwise).
“Voting Stock” shall mean stock of any class or kind having the power to vote generally for the election of Directors.
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3. | Eligibility. All Employees, Non-employee Directors and Independent Contractors are eligible for Awards under this Plan in the sole discretion of the Committee.
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4. | Common Stock Available for Awards. Subject to the provisions of Section 14 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 9,400,000 shares of Common Stock, plus the shares remaining available for awards under the Prior Plan as of the Effective Date, all of which shall be available for Incentive Options. The number of shares of Common Stock that are the subject of Awards under this Plan or the Prior Plan, 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, shall again immediately become available for additional Awards hereunder. 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 settlement of a stock-settled SAR or Option, (ii) shares of Common Stock used to pay the exercise price or withholding taxes related to an outstanding Option or SAR, or (iii) shares of Common Stock repurchased on the open market with the proceeds of the option exercise price. The Board and the appropriate officers of the Company shall from time to time take whatever actions are necessary to file any required documents with governmental authorities, stock exchanges and transaction reporting systems to ensure that shares of Common Stock are available for issuance pursuant to Awards.
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5. | Administration.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 26, 2023. |
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(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. |
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(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. |
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(c) | Notwithstanding the foregoing, except in connection with a transaction involving the Company or its capitalization (as provided in Section 14), the terms of outstanding Awards may not be amended without approval of the stockholders 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. |
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(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.
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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.
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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 include, but are not limited to, continuous service with the Company, its Affiliates and Subsidiaries, or achievement of specific performance or business objectives. Upon the termination of service with the Company, its Affiliates and Subsidiaries of a Participant, any unexercised, deferred, unvested or unpaid Awards shall be treated as set forth in the applicable Award Agreement.
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(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 using the minimum tax rate applicable to the Participant. 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.
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(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 using the minimum tax rate applicable to the Participant. 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.
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(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.
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(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.
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(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.
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Unless otherwise stated, such a Performance Goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo or limiting economic losses (measured, in each case, by reference to specific business criteria). The amount of cash or shares payable or vested pursuant to Performance Awards may be adjusted upward or downward, either on a formula or discretionary basis or any combination, as the Committee determines. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any Performance Awards made pursuant to this Plan shall be determined by the Committee.
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(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. |
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(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. |
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(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.
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(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 Award or Performance Award is forfeited, dividends and Dividend Equivalents paid with respect to such shares during the Restriction Period shall also be forfeited. No Dividend Equivalents may be paid in respect of an Award of Options or SARs.
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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.
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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.
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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 stockholders 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 stockholder approval is otherwise required by applicable legal requirements.
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13. | 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 13 shall be null and void.
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(a) | The existence of outstanding Awards shall not affect in any manner the right or power of the Company or its stockholders 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. |
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(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. |
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(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 14 shall be made in a manner that results in noncompliance with Section 409A of the Code, to the extent applicable.
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15. | 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
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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.
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16. | 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.
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17. | 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.
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18. | 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.
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19. | 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.
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20. | 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 stockholders.
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21. | 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.
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22. | Effectiveness. This Plan, as approved by the Board on March 21, 2018, shall be effective as of the Effective Date, the date on which it was approved by the stockholders 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 stockholders at the Company’s 2018 annual stockholders meeting to be held on May 10, 2018 or any adjournment or postponement thereof. If the stockholders 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.
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IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized officer.
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| CALLON PETROLEUM COMPANY |
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| THE PROXY STATEMENT IS AVAILABLE AT: | |
By: | HTTP://WWW.VIEWPROXY.COM/CALLONPETROLEUM/2023 | |
Title: | | | | | | |
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Appendix B | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Please mark votes as in this example | ý |
| THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” PROPOSALS 1, 2, and 4, and "ONE YEAR" IN PROPOSAL 3. | |
| 1. | Election of Directors: | | 3 | Advisory vote on the frequency of future advisory votes on the compensation of our named executive officers. |
| | | | | | FOR ALL | | WITHHOLD
ALL | | FOR ALL
EXCEPT | |
| 01 | Matthew R. Bob | ¨
| | ¨
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| ONE YEAR | ¨
| TWO YEARS | ¨ | THREE
YEARS | ¨
| ABSTAIN |
| 02 | James E. Craddock | | | | | ¨ | | | | | | | | | | |
| 03 | Anthony J. Nocchiero | | | | | ¨ | | | | | | | | | | |
| | | | | | | 4 | The ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023. |
| 2. | The approval, by non-binding advisory vote, of the compensation of our named executive officers. | | | |
| ¨ | FOR | ¨ | AGAINST | ¨ | ABSTAIN | | | | ¨ | FOR | ¨ | AGAINST | ¨ | ABSTAIN |
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| | | | | | | | | | | MARK “X” HERE IF YOU PLAN TO ATTEND THE MEETING: | ¨ |
| | | | | | | | | | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
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| | DO NOT PRINT IN THIS AREA
(Shareholder Name & Address Data)
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| | | Date | | |
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| | | | Signature | | | | | | | |
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| | | Signature (if held jointly) | | | | | | |
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Address Change/Comments: (If you noted any Address Changes and/or Comments above, please mark box.) ¨ | | | | | | | CONTROL NUMBER | | |
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| | | PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. | | | |
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| | | 2Q17 | | 3Q17 | | 4Q17 |
| EBITDA Reconciliation | | | | | | |
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| Net income (loss) | | $ | 33,390 |
| | $ | 17,081 |
| | $ | 22,824 |
|
| Adjustments: | | | | | | |
| Write-down of oil and natural gas properties | | — |
| | — |
| | — |
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| Net (gain) loss on derivatives, net of settlements | | (10,761 | ) | | 12,947 |
| | 26,037 |
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| Non-cash stock-based compensation expense | | 6,850 |
| | 1,952 |
| | 2,101 |
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| Loss on early redemption of debt | | — |
| | — |
| | — |
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| Withdrawn proxy contest expenses | | — |
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| Acquisition expense | | 2,373 |
| | 205 |
| | (112 | ) |
| Income tax expense | | 322 |
| | 237 |
| | 248 |
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| Interest expense | | 589 |
| | 444 |
| | 461 |
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| Depreciation, depletion and amortization | | 26,765 |
| | 29,132 |
| | 37,222 |
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| Accretion expense | | 208 |
| | 131 |
| | 154 |
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| EBITDA | | $ | 59,736 |
| | $ | 62,129 |
| | $ | 88,935 |
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| Debt/LQA EBITDA Reconciliation | | | | | | |
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| Debt at December 31, 2017 | | | | | | $ | 625,000 |
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| LQA EBITDA | | | | | | $ | 355,740 |
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| Debt/LQA EBITDA | | | | | | 1.8x |
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| Debt/LTQA EBITDA Reconciliation | | | | | | |
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| Debt at December 31, 2017 | | | | | | $ | 625,000 |
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| LTQA EBITDA | | | | | | $ | 281,067 |
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| Debt/LTQA EBITDA | | | | | | 2.2x |
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| | | | | | | | CONTROL NUMBER | | | |
| | | SCAN TO VIEW MATERIALS & VOTE | | | | | | |
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| | | PROXY VOTING INSTRUCTIONS | | | |
| Please have your 11 digit control number ready when voting by Internet or Telephone. |
| If you vote by phone, fax or Internet, please DO NOT mail your proxy card. |
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| INTERNET | | TELEPHONE | | MAIL | |
| Vote Your Proxy on the Internet: | | Vote Your Proxy by Phone: | | Vote Your Proxy by Mail: | |
| Go to www.AALVote.com/CPE | | Call 1 (866) 804-9616 | | | |
| Have your proxy card available when you access the above website. Follow the prompts to vote your shares. | | 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. | | Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided. | |
