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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934
Filed by the Registrant x Filed by a party other than the Registrant ¨
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GOODRICH PETROLEUM CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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GOODRICH PETROLEUM CORPORATION | ||||||||
(Name of Registrant as Specified In Its Charter) | ||||||||
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||||||||
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Goodrich Petroleum Corporation
801 Louisiana Street
Suite 700
Houston, Texas 77002
February 12, 2016
April 24, 2018
To Our Preferred Stockholders:
It is my pleasure to invite you to the Special2018 Annual Meeting of Stockholders of Goodrich Petroleum Corporation, a Delaware corporation (the “Company”, “we”, “us” or “our”), to be held at The Coronado Club, located at 919 Milam, Suite 500, Houston, Texas, 77002,77010, on March 14, 2016,May 23, 2018, at 11:00 a.m. local time (the “Special Meeting”"Annual Meeting").
The Special Meeting is being called to request approval by our preferred stockholders of amendments to the Certificates of Designation of each of our four series of preferred stock to provide us with the ability to require the mandatory conversion of our outstanding shares of preferred stock into shares of our common stock for a period of 90 days following the consummation of the respective Preferred Exchange Offers described herein (the “Proposals”).
The Proposals are being submitted to our stockholders to facilitate a proposed recapitalization of the Company in an effort to simplify our capital structure, preserve liquidity and increase our ability to comply with our debt instruments during the current decline in the oil and gas industry. We intend to accomplish this recapitalization plan (the “Recapitalization Plan”) through:
certain exchange offers described herein, which will offer holders of our various unsecured senior notes (the “Existing Unsecured Notes”) the opportunity to exchange their Existing Unsecured Notes for shares of our common stock (the “Unsecured Notes Exchange Offers”);
certain exchange offers described herein, which will offer holders of shares of our various series of preferred stock (the “Existing Preferred Stock”) the opportunity to exchange their shares of Existing Preferred Stock for shares of our common stock (the “Preferred Exchange Offers”);
certain exchange offers, described herein, which will offer holders of our outstanding 8.0% Second Lien Senior Secured Notes due 2018 and 8.875% Second Lien Senior Secured Notes due 2019 (together, the “Second Lien Notes”) the opportunity to exchange their Second Lien Notes for new notes with materially identical terms except that interest thereon may be either (i) paid, at our option, in cash or in-kind or (ii) deferred for some period of time (up to maturity) to allow us to temporarily reduce our cash interest expense (the “Second Lien Exchange Offers” and, together with the Unsecured Notes Exchange Offers and the Preferred Exchange Offers, the “Exchange Offers”);
the Proposals, which if approved would provide us with the ability to require the mandatory conversion of our outstanding Existing Preferred Stock into shares of our common stock following consummation of the Preferred Exchange Offers; and
upon completion of the Exchange Offers, (i) amending our 2006 Long-Term Incentive Plan (the “2006 Plan”) to increase the number of shares of Common Stock available for delivery pursuant to awards under the 2006 Plan (the “LTIP Amendment”) and (ii) issuing a number of restricted shares of Common Stock pursuant to the 2006 Plan equal to approximately 27.1 million shares of Common Stock to our existing management and employees (the “Retention Awards”). The Retention Awards would represent 7.5% of the outstanding shares of Common Stock of the Company if all of the Existing Unsecured Notes and all of the Existing Preferred Stock participate in the Exchange Offers, or 8.4% if the Exchange Offers are completed with only the minimum participation conditions met, as there would be fewer total shares outstanding.
The Exchange Offers will each be conditioned upon, among other things, the approval by the common stockholders of an amendment to our Restated Certificate of Incorporation to increase the number of authorized
shares of the Company’s Common Stock to 400 million shares. Moreover, the success of the Exchange Offers is likely to be influenced by whether or not the Proposals are approved, as the holders of the Existing Unsecured Notes are expected to be more willing to convert into Common Stock if all of the Existing Preferred Stock is converted into Common Stock as well. If we are unable to complete the Recapitalization Plan, including the Exchange Offers, and address our near-term liquidity needs, we may not be able to make our interest payments on our Existing Unsecured Notes and our Second Lien Notes beginning in March 2016, at which time we are likely to seek relief under the U.S. Bankruptcy Code. This relief may include: (i) seeking bankruptcy court approval for the sale or sales of some, most or substantially all of our assets pursuant to section 363(b) of the U.S. Bankruptcy Code and a subsequent liquidation of the remaining assets in the bankruptcy case; (ii) pursuing a plan of reorganization (where votes for the plan may be solicited from certain classes of creditors prior to a bankruptcy filing) that we would seek to confirm (or “cram down”) despite any classes of creditors who reject or are deemed to have rejected such plan; or (iii) seeking another form of bankruptcy relief, all of which involve uncertainties, potential delays and litigation risks. In such an event, we expect that the holders of our Existing Unsecured Notes, shares of preferred stock and shares of our common stock would receive little or no consideration.
Our Board of Directors believes that each of the Proposals is in the best interests of the Company and its stockholders and, therefore, recommends that you vote “FOR” each of the Proposals.
This proxy statement shall not constitute an offer to exchange any of our Existing Unsecured Notes, shares of Existing Preferred Stock or Second Lien Notes. The Exchange Offers will be made by, and be subject to the terms and conditions of, separate offers to exchange.
Details of the business to be conducted at the SpecialAnnual Meeting are provided in the attached Notice of SpecialAnnual Meeting and Proxy Statement. Additionally, enclosed with the proxy materials is our Annual Report to Stockholders for the year ended December 31, 2017.
The Proxy Statement does not constitute the Exchange Offers, which are being conducted pursuant to separate amended and restated Offers to Exchange, each dated February 5, 2016, or, in the case of the Second Lien Exchange Offers, pursuant to private exchange agreements.
You received these materials with a proxy card that indicates the number of votes that you will be entitled to cast at the SpecialAnnual Meeting according to our records or the records of your broker or other nominee. Our Boardboard of Directorsdirectors has determined that owners of record of the Company’s preferredour common stock at the close of business on February 5, 2016April 2, 2018 are entitled to notice of, and have the right to vote at, the SpecialAnnual Meeting and any reconvened meeting following any adjournment or postponement of the meeting.
On behalf of the Board of Directors and our employees, I would like to express my appreciationthank you for your ongoing support and continued interest in our affairs.Goodrich Petroleum Corporation.
By Order of the Board of Directors Walter G. "Gil" Goodrich Chairman and Chief Executive Officer |
By OrderTable of the Board of DirectorsContents
Walter G. “Gil” Goodrich
Chairman and Chief Executive Officer
Goodrich Petroleum Corporation
801 Louisiana Street
Suite 700
Houston, Texas 77002
NOTICE OF SPECIALANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 14, 2016MAY 23, 2018
To Our Preferred Stockholders:
Notice is hereby given that a Special The 2018 Annual Meeting of the Stockholders of Goodrich Petroleum Corporation, a Delaware corporation, (the “Company”, “we”, “us” or “our”), will be held at The Coronado Club, located at 919 Milam, Suite 500, Houston, Texas, 77002,77010, on March 14, 2016,May 23, 2018, at 11:00 a.m. local time (the “Special Meeting”"Annual Meeting").
At the SpecialAnnual Meeting, preferred stockholders will be asked to:
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The Company’s Board of Directors recommends that stockholders vote “FOR” eachDirectors;Proposals.
Only preferred stockholders of record at the close of business on February 5, 2016April 2, 2018 are entitled to notice of and to vote at the SpecialAnnual Meeting. For specific voting information, see “General Information”"General Information about the Annual Meeting" beginning on page 1 of the enclosed Proxy Statement.proxy statement. A list of stockholders will be available commencing February 25, 2016May 11, 2018 and may be inspected at our offices during normal business hours prior to the SpecialAnnual Meeting. The list of stockholders will also be available for review at the SpecialAnnual Meeting. In the event there are not sufficient votes for a quorum or to approve the items of business at the time of the SpecialAnnual Meeting, the SpecialAnnual Meeting may be adjourned in order to permit further solicitation of proxies.
Whether or not you attend the SpecialAnnual Meeting, it is important that your shares be represented and voted at the meeting. Therefore, I urge you to promptly vote and submit your proxy. You may vote by telephone, Internet or mail. To vote by telephone, call 1-800-PROXIES (1-800-776-9437) using a touch-tone phone to transmit your voting instructions up until 11:59 p.m. (EDT) the day before the SpecialAnnual Meeting date. Have your proxy card in hand when you call and then follow the instructions. To vote electronically, accesswww.voteproxy.com over the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. (EDT) the day before the SpecialAnnual Meeting date. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. You may vote by mail by signing, dating and returning the enclosed proxy card in the enclosed envelope. If you decide to attend the SpecialAnnual Meeting, you will be able to vote in person, even if you have previously submitted your proxy.
By Order of the Board of Directors
Michael J. Killelea
Senior Vice President, General Counsel and Corporate Secretary
February 12, 2016
By Order of the Board of Directors | ||
Michael J. Killelea Executive Vice President, General Counsel and Corporate Secretary | ||
April 24, 2018 Houston, Texas |
Important Notice Regarding the Availability of Proxy Materials
For the Special MeetingTable of Stockholders to be Held on March 14, 2016Contents
The Company’s Notice of Special Meeting, Proxy Statement, 2014 Annual Report on Form 10-K and September 30, 2015 Form 10-Q are available athttp://www.proxydocs.com/GDP.
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PROPOSAL NO. | ||||
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Security Ownership of Certain Beneficial Owners and Management | ||||
INFORMATION ABOUT OUR EXECUTIVE OFFICERS | 14 | |||
EXECUTIVE COMPENSATION | 15 | |||
Summary Compensation | 15 | |||
Narrative Disclosure to Summary Compensation Table | 16 | |||
Outstanding Equity Awards Value at Fiscal Year-End Table | 19 | |||
Additional Narrative Disclosure | 20 | |||
AUDIT COMMITTEE MATTERS | 22 | |||
Audit Committee Report | 22 | |||
Audit and Non-Audit Fees | 23 | |||
Audit Committee Pre-Approval Policy | 24 | |||
CORPORATE GOVERNANCE | 25 | |||
Our Board | 25 | |||
Director Nomination Process | 28 | |||
Standing Committees of our Board | 29 | |||
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION | 33 | |||
TRANSACTIONS WITH RELATED PERSONS | 34 | |||
Policies and Procedures | 34 | |||
DIRECTOR COMPENSATION | 36 | |||
General | 36 | |||
Retainer / Fees | 36 | |||
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR THE | ||||
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Goodrich Petroleum Corporation
801 Louisiana Street
Suite 700
Houston, Texas 77002
These proxy materials are being furnished to you in connection with the solicitation of proxies by the Board of Directors (the “Board” or “Board of Directors”"Board") of Goodrich Petroleum Corporation, a Delaware corporation (the “Company,” “Goodrich,” “we,” “us”("we" or “our”"the Company" or "Goodrich"), for use at a Specialthe 2018 Annual Meeting of Stockholders and any adjournments or postponements of the meeting (the “Special Meeting”"Annual Meeting"). The SpecialAnnual Meeting will be held at The Coronado Club, located at 919 Milam, Suite 500, Houston, Texas, 77002,77010, on March 14, 2016,May 23, 2018, at 11:00 a.m. local time. The Notice of SpecialAnnual Meeting, this Proxy Statement andproxy statement, the enclosed proxy card and our Annual Report to Stockholders for the fiscal year ended December 31, 2017 (the "Annual Report") are being mailed to stockholders beginning on or about February 12, 2016.April 24, 2018.
A. | 1. | The |
offers to exchange (the “Unsecured Notes Exchange Offers”), upon the terms and condition set forth in the offers to exchange, any and all of our outstanding 3.25% Convertible Senior Notes due 2026, 5.00% Convertible Senior Notes due 2029, 5.00% Convertible Senior Notes due 2032, 5.00% Convertible Exchange Senior Notes due 2032 and 8.875% Senior Notes due 2019 (together, the “Existing Unsecured Notes”) for newly issued shares of our common stock, par value $0.20 per share (the “Common Stock”);
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offers to exchange, upon the terms and conditions set forth in separate offers to exchange, any and all of our outstanding Second Lien Notes for new notes with materially identical terms except that interest thereon may be either (i) paid, at our option, in cash or in-kind or (ii) deferred for some period of time (up to maturity) to allow us to temporarily reduce our cash interest expense (the “Second Lien Exchange Offer” and, together with the Unsecured Notes Exchange Offers and the Preferred Exchange Offers, the “Exchange Offers”);
the Proposals, which if approved would provide us with the ability to require the mandatory conversion of our outstanding Existing Preferred Stock into shares of our Common Stock following consummation of the Preferred Exchange Offers; and
upon completion of the Exchange Offers, (i) amending our 2006 Long-Term Incentive Plan (the “2006 Plan”) to increase the number of shares of Common Stock available for delivery pursuant to awards under the 2006 Plan (the “LTIP Amendment”) and (ii) issuing a number of restricted shares of Common Stock pursuant to the 2006 Plan equal to approximately 27.1 million shares of Common Stock to our existing management and employees (the “Retention Awards”). The Retention Awards would represent 7.5% of the outstanding shares of Common Stock of the Company if all of the Existing Unsecured Notes and all of the Existing Preferred Stock participate in the Exchange Offers, or 8.4% if the Exchange Offers are completed with only the minimum participation conditions met, as there would be fewer total shares outstanding.
2. | The ratification of the | |||
3. | Approve, on an advisory basis, the compensation of our Named Executive Officers as described in | |||
4. | Approve a |
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If you are a beneficial holder of shares of Company stock as of the record date, meaning you own your shares through an intermediary, such as a broker, bank or other nominee, you must follow the instructions provided by such intermediary in order to vote in advance of the Annual Meeting or revoke your vote. Most brokers permit beneficial holders to vote via telephone or Internet, but you must follow the instructions provided to you. To vote your shares in person at the Annual Meeting, you must present proof that you own the shares as of the record date through brokers' statements or similar proof, a legal proxy from the intermediary, and identification. If you do not provide your broker with instructions on how to vote your shares, the broker cannot vote on non-discretionary matters on your behalf, which will result in a broker "non-vote", but may vote on discretionary matters. Of the known matters to be voted upon at the Annual Meeting, only the ratification of the selection of Moss Adams LLP as our independent registered public accounting firm is a discretionary matter.
A. | 1. | The Board unanimously recommends that you voteFOR the election of the nominated slate of Class II directors. | ||
2. | The Board unanimously recommends that you voteFOR ratification of the selection of Moss Adams LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018. | |||
3. | The Board unanimously recommends that you voteFOR the approval, on an advisory basis, of the compensation of our Named Executive Officers as described in "Executive Compensation," compensation tables and accompanying narrative discussion discussed in the Proxy Statement. | |||
4. | The Board unanimously recommends that you voteFOR the approval of a third amendment to the Goodrich Petroleum Corporation 2016 Long-Term Incentive Plan, as amended from time to time. |
There must be a quorum for the Annual Meeting to be held. A quorum is the presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the shares of common stock issued and outstanding and entitled to vote at the Annual Meeting on the record date. The presence of the holders of at least 5,781,064 shares of common stock is required to establish a quorum for the Annual Meeting. Proxies that are voted "FOR," "AGAINST" or "WITHHELD" are treated as being present at the Annual Meeting for purposes of establishing a quorum and also treated as shares "represented and voting" at the Annual Meeting with respect to such matter.
Abstentions and broker non-votes are counted for purposes of determining the presence or absence of a quorum for the transaction of business.
The ratification of the appointment of the independent registered public accounting firm requires the affirmative vote of a majority of shares represented in person or by proxy and entitled to vote at the Annual Meeting. Abstentions will have the same effect as a vote against the proposal. Brokers have discretion to vote on the ratification of the appointment of the independent registered public accounting firm, therefore, if the beneficial owner of shares does not provide the broker with instructions on how to vote, the broker may still vote on this proposal.
The approval, on an advisory basis, of the compensation of our Named Executive Officers, requires the affirmative vote of a majority of shares represented in person or by proxy and entitled to vote at the Annual Meeting. Abstentions will have the same effect as a vote against the proposal. Broker non-votes will have no legal effect on the proposal.
The approval of the third amendment to the Goodrich Petroleum Corporation 2016 Long-Term Incentive Plan, as amended from time to time, to increase the number of shares of Company common stock authorized for issuance thereunder requires the affirmative vote of a majority of shares represented in person or by proxy and entitled to vote at the Annual Meeting. Abstentions will have the same effect as a vote against the proposal. Broker non-votes will have no legal effect on the proposal.
PROPOSAL NO. 1—ELECTION OF DIRECTORS
Pursuant to our Bylaws, our Board is divided into three classes (Classes I, II and III) serving staggered terms. The term of office for each of our Class II directors, Ronald F. Coleman, K. Adam Leight and Thomas M. Souers, expires at our Annual Meeting. The term of office for each of our Class III directors, Walter G. Goodrich and Robert C. Turnham, Jr. expires at our 2019 Annual Meeting. The term of office of each of our Class I directors, Timothy D. Leuliette and Steven J. Pully, expires at the 2020 Annual Meeting. Following election to the Board, each director serves for a term of three years or until a successor is elected and qualified.
Based on the recommendations from the Nominating and Corporate Governance Committee, our Board has nominated its current Class II directors, Messrs. Ronald F. Coleman, K. Adam Leight and Thomas M. Souers, for election to our Board as Class II directors with a term of office expiring at our 2021 Annual Meeting. Our Board has affirmatively determined that Messrs. Coleman, Leight and Souers are independent. Please see "Corporate Governance—Our Board—Board Size; Director Independence." We have no reason to believe that either of Messrs. Coleman, Leight or Souers will be unavailable for election. However, if any nominee becomes unavailable for election, our Board can name a substitute nominee and proxies will be voted for the substitute nominee pursuant to discretionary authority, unless withheld.
The principal occupations and other information about the Board nominees for director and our incumbent Board members are set forth below:
Class II Directors—Terms Expiring at the 2021 Annual Meeting (if re-elected)
Name | Age | Position | |||||
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Ronald F. Coleman | 63 | Director | |||||
K. Adam Leight | 62 | Director | |||||
Thomas M. Souers | 65 | Director |
Ronald F. Coleman is an energy executive with over 37 years of international and domestic oilfield services operations. From 2012 to 2014, Mr. Coleman was president North America and executive vice president of Archer. Prior to that, Mr. Coleman served as chief operating officer and executive vice president of Select Energy Services in 2011. Mr. Coleman spent 33 years at BJ Services Company, serving as vice president of operations in U.S. and Mexico from 1998 to 2007 and Vice President North America Pumping from 2007 to 2010. He has served on numerous boards, including Torqued Up Energy Services, Titan Liner (CWCS Company), Solaris Oil Field Services, and Ranger Energy Services. He has also been appointed by boards to serve in advising roles for CSL Energy Opportunities Fund II, LP, and Matador Resources Company. He was appointed to the Company's Board of Directors in 2016. Mr. Coleman's many years of experience in oilfield service operations and service on the boards of various energy companies has led to his nomination to serve as a director.
K. Adam Leight has spent 35 years building and managing investment research departments, and covering the energy industry for major financial institutions. Mr. Leight is presently a managing member of Ansonia Advisors LLC, which provides independent research, capital markets, and corporate advisory services to various institutions and to the energy industry. Prior to that, Mr. Leight served as a managing director at RBC Capital Markets from 2008 to 2016, managing director at Credit Suisse from 2000 to 2007 and managing director at Donaldson, Lufkin & Jenrette from 1994 to 2000. Before that, Mr. Leight was managing director at Cowen & Company, vice president at Drexel Burnham Lambert, and an analyst at Sutro & Co. Mr. Leight has also served on the boards of Falcon
Capital Management, University of Wisconsin ASAP, Temple Sharley Tefilo-Israel, and Gates of Israel Foundation and currently serves on the board of Warren Resources. Mr. Leight holds an A.B. in economics from Washington University, an M.S. in investment finance from the University of Wisconsin and is a Chartered Financial Analyst. He was appointed to the Company's Board of Directors in 2016. Mr. Leight has held management positions at several investment banks. His finance and business leadership skills from his career in investment banking make him uniquely qualified to be a member of our Board as well as his qualifications as an audit committee financial expert under the SEC guidelines. For these reasons, Mr. Leight has been nominated to serve as a director.
Thomas M. Souers served as petroleum engineering consultant at Netherland, Sewell & Associates, Inc. (NSAI) from 1991 until his retirement in 2016. During that time, Mr. Souers worked on a range of oil and gas reserves estimations, property evaluations for sales and acquisitions, analysis of secondary recovery projects, field studies, deliverability studies, prospect evaluations, and economic evaluations utilizing deterministic methodology for projects in North America, Europe, Africa, South America, and Asia. His areas of expertise are Gulf of Mexico and horizontal drilling in various US basins. Mr. Souers has also served as expert witness on a number of civil cases. Mr. Souers also served as a consulting COO of a private oil and gas company during his employment at NSAI. Prior to that time, Mr. Souers served as an operations engineer with GLG Energy LP, senior staff engineer with Wacker Oil Inc., area manager with Transco Exploration Company, and supervising engineer with Exxon Company, U.S.A. Mr. Souers holds a B.S. in civil engineering from North Carolina State University and an M.S. in civil engineering from the University of Florida. He was appointed to the Company's Board of Directors in 2016. Mr. Souers' extensive experience as a petroleum engineer has led to his nomination to serve as a director.
OUR BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" ALL NOMINATED DIRECTORS
Class III Directors—Terms Expiring at the 2019 Annual Meeting
Name | Age | Position | |||||
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Walter G. Goodrich | 59 | Chairman of the |
60 | President and |
Walter G. "Gil" Goodrich became Chairman of the Board in 2015 and served as Vice Chairman of our Board since 2003. He has served as our Chief Executive Officer since 1995. Mr. Goodrich was Goodrich Oil Company's Vice President of Exploration from 1985 to 1989 and its President from 1989 to 1995. He joined Goodrich Oil Company, which held interests in and served as operator of various properties owned by a predecessor of the Company, as an exploration geologist in 1980. He has served as a director since 1995. Mr. Goodrich's invaluable perspective as our top executive officer on the Board and his experience as a geologist and a businessman make him uniquely qualified to be a member of our Board.
Robert C. Turnham, Jr. has served as our Chief Operating Officer since 1995. He became President and Chief Operating Officer in 2003. He has held various positions in the oil and natural gas business since 1981. From 1981 to 1984, Mr. Turnham served as a financial analyst for Pennzoil. In 1984, he formed Turnham Interests, Inc. to pursue oil and natural gas investment opportunities. From 1993 to 1995, he was a partner in and served as President of Liberty Production Company, an oil and natural gas exploration and production company. He has served as a director since 2006. Mr. Turnham brings invaluable oil and gas operating experience to the Board. Additionally, he has held various executive management positions in the oil and natural gas business since 1981 and is able to assist the Board in creating and evaluating the Company's strategic plan. For these reasons, Mr. Turnham has been an invaluable member of our Board.
Class I Directors—Terms Expiring at the 2020 Annual Meeting
Name | Age | Position | |||||
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Timothy D. Leuliette. |
68 | Director |
Steven J. Pully |
58 | Director |
Timothy D. Leuliette served as the president, chief executive officer and a member of the board of directors of Visteon Corporation from September 2012 to June 2015. Upon assuming his role at Visteon, Mr. Leuliette left FINNEA Group, a firm he had co-founded and where he was a senior managing director. He left the FINNEA Group's predecessor firm to serve as chairman, president and chief executive officer of Dura Automotive LLC, for two years to oversee its emergence from bankruptcy, it's financial and operational restructuring and its successful sale. Prior to that, Mr. Leuliette was co-chief executive officer of Asahi Tec Corporation and chairman and chief executive officer of its subsidiary Metaldyne Corporation, a company he co-founded in 2000. Mr. Leuliette was formerly president and chief operating officer of Penske Corporation, president and chief executive officer of ITT Automotive Group and senior vice president of ITT Industries Inc. Before joining ITT, Mr. Leuliette served as president and chief executive officer of Siemens Automotive L.P and was a member of the Siemens Automotive managing board and a corporate vice president of Siemens AG. Mr. Leuliette has also served on numerous boards and recent directorships, including Visteon Corporation, Business Leaders of Michigan, and The Detroit Economic Club. He is a past chairman of the board of The Detroit Branch of The Federal Reserve Bank of Chicago. Mr. Leuliette holds a B.S. in mechanical engineering and a Master's Degree in business administration from the University of Michigan. He was appointed to the Company's Board of Directors in 2016. Mr. Leuliette has many years of experience serving in leadership roles of publicly traded companies. His invaluable perspective as an executive officer and his experiences as a businessman and director make him uniquely qualified to be a member of our Board.
Steven J. Pully provides consulting and investment banking services for companies and investors focused on the oil and gas sector. From 2008 until 2014, Mr. Pully served as General Counsel and a Partner of the investment firm Carlson Capital, L.P. Mr. Pully was also previously a Senior Managing Director at Bear Stearns and a Managing Director at Bank of America Securities focused on energy investment banking. Mr. Pully is on three other public company boards, Bellatrix Exploration, Titan Energy and VAALCO Energy and has also served on numerous other boards of public and private companies in the oil and gas and other industries, including as a director of EPL Oil & Gas and Energy XXI within the past five years. Mr. Pully is a Chartered Financial Analyst, a Certified Public Accountant in the State of Texas and a member of the State Bar of Texas. Mr. Pully earned his undergraduate degree in Accounting from Georgetown University and is also a graduate of The University of Texas School of Law. He was appointed to the Company's Board in March 2017. Mr. Pully brings his many years of experience as a successful businessman as well as his experience serving on the board of numerous oil and gas companies, including other publicly traded companies. For these reasons, Mr. Pully has been an invaluable member of our Board.
Although stockholder approval is not required for the appointment of Moss Adams LLP, the Board and the Audit Committee have determined that it is desirable as a good corporate governance practice. Ratification requires the affirmative vote of a majority of the shares entitled to vote and represented in person or by proxy at the Annual Meeting. If our stockholders do not ratify the appointment, the Audit Committee may reconsider the appointment. However, even if the appointment is ratified, the Audit Committee, in its discretion, may select different independent auditors if it subsequently determines that such a change would be in the best interest of us and our stockholders. A representative of Ernst & YoungMoss Adams LLP is expected to be present at the SpecialAnnual Meeting and will have an opportunity to make a statement if such representative desires to do so and will be available to respond to appropriate questions from stockholders at the SpecialAnnual Meeting.
BACKGROUND FOR OUR PROPOSALSRecommendation of the Board
OUR BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE RATIFICATION OF THE SELECTION OF MOSS ADAMS LLP FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2018
PROPOSAL NO. 3—ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Board recognizes that executive compensation is an important matter for our stockholders. The Compensation Committee is tasked with the implementation of our executive compensation philosophy, and the core of that philosophy has been and continues to be to pay our executive officers based on our performance. In particular, the Compensation Committee strives to attract, retain and motivate exceptional executives, to reward past performance measured against established goals and provide incentives for future performance, and to align executives' long-term interests with the interests of our stockholders. To do so, the Compensation Committee uses a combination of short- and long-term incentive compensation to reward near-term excellent performance and to encourage executives' commitment to our long-range, strategic business goals.
Stockholder Advisory Vote on Executive Compensation
At our 2017 annual meeting of stockholders, holders of 97% of the shares entitled to vote on the matter voted in favor of the compensation of the named executive officers as described in our 2017 proxy statement. The Compensation Committee believes that the level of support received from our stockholders indicates that they consider our compensation philosophy and our executive compensation policies to be effective and aligned with their interests.
As you consider this Proposal No. 3, we urge you to read this proxy statement for additional details on executive compensation, including tabular disclosures regarding named executive officer compensation together with the accompanying narrative disclosures in the "Executive Compensation" section of this proxy statement.
Summary of 2017 Executive Compensation
As an advisory vote, Proposal No. 3 is not binding on the Board or the Compensation Committee, will not overrule any decisions made by the Board or the Compensation Committee, and will not require the Board or the Compensation Committee to take any action. Although the vote is non-binding, the Board and the Compensation Committee value the opinions of our stockholders, and will carefully consider the outcome of the vote when making future compensation decisions for executive officers.
This vote is required pursuant to Schedule 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act.").
We are asking stockholders to vote "FOR" the following resolution:
"RESOLVED, that the stockholders approve, on an independent oil and natural gas company engagedadvisory basis, the compensation of the named executive officers as disclosed in this Proxy Statement for Goodrich Petroleum Corporation's 2018 Annual Meeting of Stockholders pursuant to the exploration, development and productioncompensation disclosure rules of oil and natural gas properties primarily in (i) Southwest Mississippi and Southeast Louisiana, which includes the Tuscaloosa Marine Shale Trend, (ii) Northwest Louisiana and East Texas, which includes the Haynesville Shale Trend and (iii) South Texas, which includes the Eagle Ford Shale Trend.
Our immediate capital resources to develop our properties come from cash on hand, operating cash flows and borrowings from our Second Amended and Restated Credit Agreement (including all amendments, the “Senior Credit Facility”). Beginning in the second half of 2014, commodity prices, particularly crude oil, began to decline sharply. The decline became precipitous late in the fourth quarter of 2014 and continued throughout 2015. As discussed below, the significant magnitude of this price decline has materially and adversely impacted our results of operations and led to substantial changes in our operating and drilling programs. As a result, we have focused on managing our balance sheet to reduce leverage and preserve liquidity during the current low commodity price environment.
Entering 2016, the market environment has worsened, as commodity prices have further declined. Our situation has been exacerbated by the roll off of our hedging arrangements. As a result, our cash flow from operations has further declined and our stock price declined significantly and, on January 13, 2016, the New York Stock Exchange (the “NYSE”) formally commenced delisting procedures for our Common Stock due to our abnormally low trading price. On January 21, 2016, the NYSE filed a Form 25 with the Securities and Exchange Commission, including the Summary Compensation Table for 2017 and the other related tables and disclosure required by Item 402 of Regulation S-K."
OUR BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS, AS DISCLOSED
IN THIS PROXY STATEMENT.
PROPOSAL NO. 4—APPROVAL OF THE THIRD AMENDMENT TO LTIP TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK OF THE COMPANY AUTHORIZED FOR ISSUANCE THEREUNDER
At the Annual Meeting, stockholders will be asked to approve the Third Amendment to our 2016 Long-Term Incentive Plan (the “SEC”"LTIP"), notifying our removal from listing.
On January 7, 2016,which increases the borrowing basenumber of shares of common stock available under the Senior Credit Facility was reducedLTIP by 1,500,000 shares (from 3,500,000 shares to $47 million from $75 million, thus further limiting our liquidity. While we are currently5,000,000 shares). The increase in compliance with our existing debt arrangements, absent an improvement in commodity prices or a reduction in our indebtedness and cash interest expense, we may not be able to make our March 2016 interest payments and, in such event, would likely need to seek reliefthe number of shares available under the U.S. Bankruptcy Code. In such an event, we expectLTIP is the only change to the LTIP that the holdersThird Amendment would implement. As explained in greater detail below, our Board of our Existing Unsecured Notes, shares of Existing Preferred Stock and shares of our Common Stock would receive little or no consideration.
Since December 31, 2015, representatives of our Company have met with numerous stakeholders concerning our Company and we have devised the Recapitalization Plan in an attempt to restructure our balance sheet and increase the Company’s liquidity to withstand low commodity prices, for a period of time.
The Board has considered the Recapitalization Plan as well as various alternatives, including not engaging in any restructuring transaction. At the directionDirectors believes approval of the Board, management of the Company solicited, initiated and participated in discussions with, and facilitated proposals from, potential parties to any alternativeThird Amendment to the Recapitalization Plan. The Board reviewed and evaluated the terms of the Recapitalization Plan and any alternatives, and evaluated whether the Recapitalization Plan or any alternative wouldLTIP is in the best interests of all stakeholders, including the holders of Common Stock and the holders of each series of Existing Preferred Stock, in their capacity as such.
Analysis of the Recapitalization Plan
Effects of the Recapitalization Plan on the Company’s Capital Structure and Capital Stock.
The following table depicts the pro forma impact the Recapitalization Plan would have on our outstanding debt (dollars in thousands) as of January 20, 2016:
Principal | Pro Forma for the Recapitalization Plan Assuming Minimum Conditions Met(1) | Pro Forma for the Recapitalization Plan Assuming Full Exchange Participation | ||||||||||
Senior Credit Facility | $ | 27,000 | $ | 27,000 | $ | 27,000 | ||||||
8.0% Second Lien Senior Secured Notes due 2018 | $ | 100,000 | $ | 100,000 | $ | 100,000 | ||||||
8.875% Second Lien Senior Secured Notes due 2019 | $ | 75,000 | $ | 75,000 | $ | 75,000 | ||||||
8.875% Senior Notes due 2019 | $ | 116,828 | $ | 5,841 | $ | 0 | ||||||
3.25% Convertible Senior Notes due 2026 | $ | 429 | $ | 21 | $ | 0 | ||||||
5.00% Convertible Senior Notes due 2029 | $ | 6,692 | $ | 335 | $ | 0 | ||||||
5.00% Convertible Senior Notes due 2032 | $ | 94,160 | $ | 4,708 | $ | 0 | ||||||
5.00% Convertible Exchange Senior Notes due 2032 | $ | 6,117 | $ | 306 | $ | 0 | ||||||
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Total Debt | $ | 426,226 | $ | 213,211 | $ | 202,000 | ||||||
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The following table depicts the pro forma impact the Recapitalization Plan would have on our Existing Preferred Stock (dollars in thousands) as of January 20, 2016:
Liquidation Preference | Pro Forma for the Recapitalization Plan Assuming Minimum Conditions Met(1) | Pro Forma for the Recapitalization Plan Assuming Full Exchange Participation | ||||||||||
Series B Preferred Stock | $ | 74,172 | $ | 37,086 | $ | 0 | ||||||
Series C Preferred Stock | $ | 76,510 | $ | 38,255 | $ | 0 | ||||||
Series D Preferred Stock | $ | 90,527 | $ | 45,264 | $ | 0 | ||||||
Series E Preferred Stock | $ | 32,262 | $ | 16,131 | $ | 0 | ||||||
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Total | $ | 273,471 | $ | 136,736 | $ | 0 | ||||||
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The following table depicts the pro forma impact of the Recapitalization Plan on the ownership of our Common Stock (in thousands) as of January 20, 2016:
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| Pro Forma for the Recapitalization Plan Assuming Minimum Conditions Met | Pro Forma for the Recapitalization Plan Assuming Full Exchange Participation | |||||||||||||||||||||
No. of Shares | Percentage of Common | No. of Shares | Percentage of Common | No. of Shares | Percentage of Common | |||||||||||||||||||
Existing Common Stockholders (Fully Diluted)(1) | 90,402 | 100.0 | % | 90,402 | 28.03 | % | 90,402 | 25.0 | % | |||||||||||||||
Holders of Existing Unsecured Notes | — | — | 175,200 | 54.32 | % | 184,421 | 51.00 | % | ||||||||||||||||
Holders of Existing Preferred Stock | — | — | 29,832 | 9.25 | % | 59,665 | 16.50 | % | ||||||||||||||||
Management(2) | — | — | 27,121 | 8.40 | % | 27,121 | 7.50 | % | ||||||||||||||||
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Total | 90,402 | 100.0 | % | 322,555 | 100.0 | % | 361,609 | 100.0 | % | |||||||||||||||
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The Board of Directors has considered the effects the Recapitalization Plan would likely have on our capital structure and the holders of the Company’s Common Stock and each series of Existing Preferred Stock, respectively, including:
the reduction in debt and preferred liquidation preference versus substantial dilution to the Company’s outstanding Common Stock expected to result from the Recapitalization Plan;
the reduction of the Company’s fixed dividend obligations and the increase in the percentage of our capitalization that is Common Stock;
the simplification of the Company’s capital structure and the elimination of the market overhang caused by the outstanding Existing Preferred Stock and the liquidation preferences of the Existing Preferred Stock;
expected improvements in institutional investor interest in the Company’s Common Stock following the Recapitalization Plan due to an improved balance sheet;
the increased ability of the Company to address its near-term liquidity needs, including the material reduction of cash interest expense on the Company’s secured debt obligations and the increased likelihood of attracting new capital due to a significantly improved balance sheet.
Financial Impact of the Recapitalization Plan.The Board of Directors considered the likely impact of the Recapitalization Plan on our future results of operations, including:
The elimination of annual cash interest expense of between $28.9 million (assuming the minimum conditions to the Unsecured Notes Exchange Offers and Second Lien Exchange Offers are met) and $30.4 million (assuming full participation in the Unsecured Notes Exchanges and Second Lien Exchange Offers) thereby preserving liquidity in the near-term.;
The elimination of fixed dividend obligations of between $11.8 million (assuming the minimum conditions to the Preferred Exchanges are met) and $23.7 million (assuming full participation in the Preferred Exchanges) due to the exchange and cancellation of Existing Preferred Stock in the Preferred Exchanges.
Terms of the Preferred Stock and Related Matters.The Board considered the terms of the outstanding Existing Preferred Stock, including that:
the outstanding Existing Preferred Stock has liquidation and dividend rights senior to the liquidation and dividend rights of the Company’s Common Stock;
the total liquidation preference of the outstanding Existing Preferred Stock is approximately $273,471,330 as of January 20, 2016, which would have to be paid to the holders of the Existing Preferred Stock before the holders of the Company’s Common Stock would receive anything in a liquidation or sale of the Company;
the outstanding shares of the Series B Preferred Stock may only be converted by the Company if the price of the Company’s Common Stock equals or exceeds 130% of the current conversion price of $31.36 per share of Common Stock for at least twenty (20) trading days in a period of thirty (30) consecutive trading days;
the outstanding shares of the Series C Preferred Stock may not be converted at the option of the Company and advisable in order to ensure that we have an adequate number of shares available under the LTIP for our compensation programs.
Background and Purpose of the Proposal
At the 2017 Annual Meeting the stockholders approved a second amendment to the LTIP to increase the number of shares of common stock available under the LTIP by 1,500,000 (from 2,000,000 to 3,500,000 shares). Following that amendment, the Company, in December 2017, upon consultation with its compensation consultant, Longnecker & Associates, introduced performance shares into its long-term equity-based incentives. The shares granted from the LTIP in December 2017 were 50% time-vesting shares, with employee shares ratably vesting over three years and director shares vesting in one year, and 50% performance shares which will cliff vest, if at all, on the third anniversary date of the grant, or potentially sooner in the event of a change in control. As more fully described in Long-Term Equity-Based Incentives—Performance Shares, the number of performance shares that will actually vest can range from 0% to 250% of the performance shares granted based upon the Company's total stockholder return measured against the performance of the Russell 2000 Energy Index over a three-year measurement period.
In total, 865,363 shares were granted in December 2017, with 462,684 of those shares being time-vesting shares and 402,679 of those shares being performance shares. As the performance shares which could vest range from 0% to 250%, or no shares up to 1,006,698 shares, the Company needs to reserve 1,469,382 shares from the LTIP, comprising 462,684 of the time-vesting shares plus 1,006,698 of the performance shares, to avoid potentially granting more shares than are available for issuance under a maximum performance award.
If the Third Amendment is approved by our stockholders, we will permanently reduce the number of shares available under the LTIP by the difference between 1,006,698 shares and the number of performance shares granted in December 2017 that actually vest to ensure our stockholders are not redeemable byapproving excess shares that could artificially extend the term of the LTIP to the extent the performance shares actually granted are less than the performance shares reserved for a maximum potential award.
The LTIP is intended to promote the interests of the Company prior to April 10, 2018 absentby providing a change of control (as such term is definedmeans by which directors, officers, and employees may acquire or increase their equity interest in the CertificateCompany and may develop a sense of Designations ofproprietorship and personal involvement in the Series C Preferred Stock);
the outstanding shares of the Series D Preferred Stock may not be converted at the optiondevelopment and financial success of the Company, and are not redeemable byto encourage them to remain with and devote their best efforts to the business of the Company, prior to August 19, 2018 absent a change of control (as such term is defined inthereby advancing the Certificate of Designations of the Series D Preferred Stock);
the outstanding shares of the Series E Preferred Stock may only be converted by the Company if the price of the Company’s Common Stock equals or exceeds 150% of the current conversion price of $2.00 per share of Common Stock for at least twenty (20) trading days in a period of thirty (30) consecutive trading days and outstanding shares of the Series E Preferred Stock are not redeemable by the Company prior to April 10, 2018;
the holders of the Series B Preferred Stock and Series E Preferred Stock have the ability, in their sole discretion, to convert shares of their Series B Preferred Stock and Series E Preferred Stock, respectively into shares of the Company’s Common Stock; and
none of the Existing Preferred Stock is mandatorily convertible.
Alternatives to the Recapitalization Plan.The Board considered possible alternatives to the Recapitalization Plan and the consequences of such alternatives, including seeking relief under the U.S. Bankruptcy Code, in which case we expect that the holders of the Existing Unsecured Notes, the Company’s Common Stock and the Existing Preferred Stock would likely receive little or no consideration for their securities.
Consequences if the Company is Unable to Consummate the Recapitalization Plan:The Board considered the likely impact on the Company if the Company is unable to consummate the Recapitalization Plan or fails to obtain the approval of the Authorized Shares Proposal, including:
the Company is unlikely to be able to address its near-term and longer-term liquidity needs, including making the March 2016 interest payments to service the Company’s secured and unsecured debt obligations; and
it is likely that the Company will be required to seek relief under the Bankruptcy Code, in which case the Company expects that the holders Existing Unsecured Notes, the Company’s Common Stock and the Existing Preferred Stock would likely receive little or no consideration for their securities.
View of Management. The Board of Directors considered the effects that the Recapitalization Plan is expected to have on our Company, and management’s view is that in addition to the simplification of the Company’s capital structure and other expected benefits, the substantial debt reduction contemplated by the Recapitalization Plan is critical to the Company’s continuing viability. If we are unable to complete the Recapitalization Plan, including the Exchange Offers, and address our near-term liquidity needs, we may not be able to make our interest payments on our Existing Unsecured Notes and our Second Lien Notes beginning in March 2016, in case it is likely that time we would seek relief under the U.S. Bankruptcy Code. This relief may include: (i) seeking bankruptcy court approval for the sale or sales of some, most or substantially all of our assets pursuant to section 363(b) of the U.S. Bankruptcy Code and a subsequent liquidation of the remaining assets in the bankruptcy case; (ii) pursuing a plan of reorganization (where votes for the plan may be solicited from certain classes of creditors prior to a bankruptcy filing) that we would seek to confirm (or “cram down”) despite any classes of creditors who reject or are deemed to have rejected such plan; or (iii) seeking another form of bankruptcy relief, all of which involve uncertainties, potential delays and litigation risks.
Consequences if the Company Completes the Proposed Recapitalization Plan. The Board considered management’s view that, based on our current plans, management believes that the Company will be able to continue operations approximately through 2016, giving us more opportunity to take advantage of any future recovery in oil and natural gas prices. The Board also considered the scenario if oil and natural gas prices do not recover or if we are not able to execute our current plan for operations through 2016. In that case, the Board considered that we may need to seek relief under the U.S. Bankruptcy Code notwithstanding the completion of the Exchange Offers, in which case we expect that the holders of the Company’s Common Stock and any Existing Unsecured Notes or Existing Preferred Stock that remain outstanding after the Exchange Offers would likely receive little or no consideration for their securities.
Having considered all of the above factors, the Board of Directors determined that the Recapitalization Plan is in the best interests of the holders of the Company’s Common Stock and the Existing Preferred Stock in their capacity as such and are critical to the Company’s continuing viability. The foregoing discussion of the information and factors considered by the Board of Directors is not intended to be exhaustive and may not include all of the information and factors considered by the Board of Directors. The Board of Directors, in making its determination regarding the Recapitalization Plan, did not find it useful to and did not quantify or assign any relative or specific weights to the various factors that it considered. Rather, the Board of Directors views its determination and recommendation as being based on an overall analysis and on the totality of the information presented to and factors considered by it. In addition, in considering the factors described above, individual members of the Board of Directors may have given differing weights to different factors, and may have viewed some factors relatively more positively or negatively than others.
Recommendation of the Board of Directors
The Board of Directors determined that the Recapitalization Plan is in the best interests of the Company and its stockholders. Accordingly,The LTIP is also intended to enhance the Boardability of Directors determined to (1) approve the Recapitalization Plan, including the Proposals, (2) submit the Proposals to the Company’s stockholders and (3) recommend that the Company’s stockholders adopt the Proposals.
In making such determinations, the Board of Directors considered the following factors:
the substantial dilution to the Company’s outstanding Common Stock expected to result from the Recapitalization Plan was determined to be better for all stakeholders than seeking protection from the U.S. Bankruptcy Code;
the Proposals would allow the Company to proceed withattract and retain the Recapitalization Planservices of individuals who are essential for the growth and thereby preserve cash flowprofitability of the Company.
We believe that approval of the Third Amendment is necessary in order to give us the flexibility to make stock-based awards and liquidity for an additional period of time;
other awards permitted under the likelihood of recovery of oil and natural gas prices andLTIP over the timing thereof;
the Recapitalization Plan would simplify the Company’s capital structure and eliminate the overhang creatednext year in amounts determined appropriate by the Existing Preferred Stock;
Committee; however, this is simply an estimate used to determine the Recapitalization Plan would make it easier for investors to understand and follow the Company, and more accurately value the Company’s Common Stock;
the process followed by the Company in recommending the Recapitalization Plan included a Boardnumber of Directors comprised of a majority independent and disinterested directors;
the critical nature of the Recapitalization Planadditional common shares requested pursuant to the Company’s continuing viability;Third Amendment and future
circumstances may require a change to expected equity grant practices. These circumstances include but are not limited to the future price of our common stock, award levels and amounts provided by our competitors and our hiring activity. The closing market price of our common stock as of April 6, 2018 was $11.19 per share, as reported on the NYSE American.
Consequences of Failing to Approve the Proposal
the likelihoodFailure of our stockholders to approve this Proposal 4 will mean that the Company could avoid seeking protectionwe will not be able to grant equity awards under the U.S. Bankruptcy Code in the eventLTIP; therefore, we may be unable to provide compensation that the Recapitalizationis commensurate with our competitors.
the views of the Company’s advisorsThe following table sets forth certain information with respect to the Recapitalization Plan.
The foregoing discussion of the information and factors considered by the Board is not intended to be exhaustive and may not include all of the information and factors considered by the Board. The Board, in making its determination regarding the Recapitalization Plan, including the Proposals, did not find it useful to, and did not quantify or assign any relative or specific weights to the various factors that it considered. Rather, the Board relied on its advisors and views its determinations as being based on an overall analysis and on the totality of the information presented to and factors considered by it (including specifically the recommendations of the Board). In addition, in considering the factors described above, individual members of the Board may have given differing weights to different factors, and may have viewed some factors relatively more positively or negatively than others.
UPDATE TO FINANCIAL AND RESERVE INFORMATION
The Company has not finalized its fourth quarter numbers, but currently estimates that production totaled approximately 475,829 barrels of oil equivalent (“Boe”), or an average of 5,172 Boe per day, for the three months ended December 31, 2015, compared to 1,047,603 Boe, or an average of 11,387 Boe per day, in the prior year period. Estimated oil production totaled 191,593 barrels of oil (“Bbls”) in the three months ended December 31, 2015 (40% of total production), or an average of approximately 2,083 Bbls per day, versus 530,815 Bbls (51% of total production), or an average of approximately 5,770 Bbls per day, in the prior year period. Estimated natural gas production for the three months ended December 31, 2015 was 1.7 billion cubic feet (“Bcf”) in the three months ended December 31, 2015, or an average of approximately 18,537 thousand cubic feet (“Mcf”) per day, versus 3.1 Bcf, or an average of 33,704 Mcf per day, in the prior year period.
Estimated oil production totaled 1,328,387 Bbls for the year ended December 31, 2015 (50% of total production), or an average of approximately 3,639 Bbls per day, versus 1,691,808 Bbls (40% of total production), or an average of approximately 4,635 Bbls per day, for the year ended December 31, 2014. Estimated natural gas production totaled 8.0 Bcf for the year ended December 31, 2015, or an average of approximately 21,875 Mcf per day, versus 15.0 Bcf, or an average of 41,042 Mcf per day, for the year ended December 31, 2014.
The Company has not finalized its year-end proved reserves but currently estimatesour equity compensation plans as of December 31, 2015, proved reserves totaled 55 billion cubic feet equivalent (“Bcfe”), with future net undiscounted cash flow of $95 million and present value of the future net cash flow before income taxes discounted at 10% (“PV-10”) of $70 million. Proved developed oil reserves declined by approximately 23 million Bbls or 86% from December 31, 2014, which included the removal of all proved undeveloped reserves primarily due to low commodity prices. Year-end 2015 reserves are expected to be comprised of 42% oil and 58% natural gas. The SEC pricing for the year-end 2015 report was $50.28 per barrel of oil, $2.58 per Million British Thermal Units for natural gas. Proved reserves from the Tuscaloosa Marine Shale decreased by 15 million Boe (93 Bcfe) and $328 million of PV-10 compared to the reserves ending December 31, 2014 due primarily to the removal of proved undeveloped reserves due to low oil prices, and now comprises 42% of the Company’s total reserves and 79% of the Company’s total PV-10.
As a result of the sustained depression in oil and natural gas prices, we expect to record a non-cash impairment charge for the three months ended December 31, 2015. The amount of the impairment charge is expected to be material and related to a decline in estimated proved reserves for certain of our oil and natural gas producing properties.
For a more complete description of the risks related to impairments, see “Risk Factors – We may incur substantial impairment writedowns.”
PROPOSAL NO. 1 – APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF DESIGNATION OF THE SERIES B PREFERRED STOCK (PROPOSAL 1)
Our Board recommends the approval of Proposal 1, which relates to an amendment to the Certificate of Designation of the Series B Preferred Stock. The proposed amendment will include a Company conversion option under which the Company shall have the option for 90 days following completion of our offer to exchange any and all shares of our outstanding Series B Preferred Stock for newly issued shares of our Common Stock (the “Series B Exchange Offer”) to cause all of the outstanding shares of Series B Preferred Stock to be automatically converted into that number of shares of the Company’s Common Stock that are issuable at the conversion rate of 8.899 shares of Common Stock per $50.00 liquidation preference, which is equivalent to a conversion price of approximately $5.62 per share of Common Stock. The amendment will also include certain provisions related to the conversion procedures and the adjustment of the conversion rate under certain circumstances.
The higher exchange ratio applicable to the Series B Preferred Stock reflects the higher liquidation preference for the Series B Preferred Stock relative to the lower liquidation preference of the Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock.
The form of the amendment to the Certificate of Designation of the Series B Preferred Stock relating to this Proposal 1 is attached to this Proxy Statement as Appendix A.
Series B Preferred Stock
As of the date of this Proxy Statement, we had 1,483,441 shares issued and outstanding of our Series B Preferred Stock. The liquidation preference is $50.00 per share of Series B Preferred Stock, plus accumulated and unpaid dividends. Dividends are payable quarterly in arrears beginning March 15, 2006. If we fail to pay dividends on our Series B Preferred Stock on any six dividend payment dates, whether or not consecutive, the dividend rate per annum will be increased by 1.0% until we have paid all dividends on our Series B Preferred Stock for all dividend periods up to and including the dividend payment date on which the accumulated and unpaid dividends are paid in full.
Each share is convertible at the option of the holder into our Common Stock at any time at an initial conversion rate of 1.5946 shares of Common Stock per share, which is equivalent to an initial conversion price of approximately $31.36 per share of Common Stock. Upon conversion of the Series B Preferred Stock, we may choose to deliver the conversion value to holders in cash, shares of Common Stock, or a combination of cash and shares of Common Stock.
If a fundamental change occurs, holders may require us in specified circumstances to repurchase all or part of the Series B Preferred Stock. In addition, upon the occurrence of a fundamental change or specified corporate events, we will under certain circumstances increase the conversion rate by a number of additional shares of Common Stock. A “fundamental change” will be deemed to have occurred if any of the following occurs:
April 2, 2018.
We consolidate or merge with or into any person or convey, transfer, sell or otherwise dispose of or lease all or substantially all of our assets to any person, or any person consolidates with or merges into us or with us, in any such event pursuant to a transaction in which our outstanding voting shares are changed into or exchanged for cash, securities, or other property; or
We are liquidated or dissolved or adopt a plan of liquidation or dissolution.
Plan Category | Number of securities to be issued upon vesting of outstanding phantom restricted stock and performance shares | Weighted average exercise price | Number of securities available for future issuance under equity compensation plans (excluding securities reflected in first column) | |||||||
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Equity compensation plans approved by security holders: | ||||||||||
Goodrich Petroleum Corporation 2016 Long-Term Incentive Plan, as amended | 1,983,205 | (1) | n/a | (2) | 0 |
A “fundamental change” will not be deemed to have occurred if at least 90% of the consideration in the case of a merger or consolidation under the first clause above consists of Common Stock traded on a U.S. national securities exchange and the Series B Preferred Stock becomes convertible solely into such Common Stock.
As of December 21, 2010, we have the option to cause the Series B Preferred Stock to be automatically converted into
20 trading days within any period of 30 consecutive trading days ending on the trading day before the announcement of our exercise of the option, the closing price of the Common Stock equals or exceeds 130% of the then-prevailing conversion price of the Series B Preferred Stock. The Series B Preferred Stock is non-redeemable by us. There have been no redemptions or conversions in any periods.
Purpose and Effect of Approving the Amendment to the Certificate of Designation of the Series B Preferred Stock under Proposal 1
The primary purpose of amending the Certificate of Designation of the Series B Preferred Stock is to give the Company the flexibility to convert the outstanding shares of the Series B Preferred Stock into shares of the Company’s Common Stock upon approval of a majority of the shares of Common Stock and 66.67% of the votes entitled to be cast by the holders of the Series B Preferred Stock. Providing the Company with the ability to automatically convert the Series B Preferred Stock into the Company’s Common Stock will enable the Company to conserve cash by reducing its fixed dividend obligations and will increase the percentage of our capitalization that is Common Stock. It will also increase the likelihood of success of the Unsecured Notes Exchange Offers, as holders of the Existing Unsecured Notes are expected to be more willing to convert into Common Stock if all of the Series B Preferred Stock is converted into Common Stock as well. Upon conversion, any holders of our Series B Preferred Stock will forego any dividends currently in arrears. Currently, holders of our Series B Preferred Stock are entitled to receive cash dividend payments of 5.375% per annum if declared by the Board, which the Board does not currently expect to declare in the future.
If Proposal 1 is approved, and the Company’s stockholders approve the Authorized Shares Proposal, we will file an amendment to the Certificate of Designation of the Series B Preferred Stock with the Office of the Secretary of State of the State of Delaware with respect to Proposal 1. If the Company chooses to exercise its conversion option by converting all of the outstanding shares of Series B Preferred into shares of the Company’s Common Stock, the Series B Preferred Stock will no longer be outstanding.
The form of the amendment to our Certificate of Designation of the Series B Preferred Stock with respect to Proposal 1 is attached to this Proxy Statement as Appendix A.
Consequences If Proposal 1 Is Not Approved
We intend to commence an offer to exchange all of our outstanding shares of Series B Preferred Stock for shares of the Company’s Common Stock. If Proposal 1 is not approved, the Company intends to proceed with the Series B Exchange Offer and any Series B Preferred Stock not tendered in the Series B Exchange Offer will remain outstanding.
If Proposal 1 is approved, we intend to file a certificate of amendment to the Certificate of Designation of the Series B Preferred Stock with the Office of the Secretary of State of the State of Delaware with respect to Proposal 1. Such certificate will become effective upon filing. Our Board reserves the right, notwithstanding stockholder approval of any Proposal and without further action by our stockholders, to elect not to proceed with filing the amendment to the Certificate of Designation of the Series B Preferred Stock if, at any time prior to filing the amendment to the Certificate of Designation of the Series B Preferred Stock, our Board of Directors, in its sole discretion, determines that it is no longer in our best interests or the best interests of our stockholders.
The affirmative vote of the holders of (i) a majority of the outstanding shares of Common Stock and (ii) two-thirds of the Series B Preferred Stock, voting separately as a class, is required to approve Proposal 1.
Our Board recommends a vote “FOR” Proposal 1.
PROPOSAL NO. 2 – APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF DESIGNATIONS OF THE SERIES C PREFERRED STOCK (PROPOSAL 2)
Our Board recommends the approval of Proposal 2, which relates to an amendment to the Certificate of Designations of the Series C Preferred Stock. The proposed amendment will include a Company conversion option under which the Company shall have the option for 90 days following completion of our offer to exchange any and all shares of our outstanding Series C Preferred Stock for newly issued shares of our Common Stock (the “Series C Exchange Offer”) to cause all of the outstanding depositary shares of Series C Preferred Stock to be automatically converted into that number of shares of the Company’s Common Stock that are issuable at the conversion rate of 4.449 shares of Common Stock per $25.00 liquidation preference, which is equivalent to a conversion price of approximately $5.62 per share of Common Stock. The amendment will also include certain provisions related to the conversion procedures and the adjustment of the conversion rate under certain circumstances.
The form of the amendment to the Certificate of Designations of the Series C Preferred Stock relating to this Proposal 2 is attached to this Proxy Statement as Appendix B.
Series C Preferred Stock
As of the date of this Proxy Statement, we had 3,060,412 depositary shares issued and outstanding each representing a 1/1000th ownership interest in a share of our Series C Preferred Stock. The liquidation preference is $25,000 per share ($25.00 per depositary share) of Series C Preferred Stock, plus accumulated and unpaid dividends.
The Series C Preferred Stock ranks senior to our Common Stock and on parity with our Series B Preferred Stock and our Series D Preferred Stock with respect to the payment of dividends and distribution of assets upon liquidation, dissolution or winding up. The Series C Preferred Stock has no stated maturity and is not subject to mandatory redemption or any sinking fund and will remain outstanding indefinitely unless repurchased or redeemed by us or converted into our Common Stock in connection with certain changes of control.
At any time on or after April 10, 2018, we may, at our option, redeem the Series C Preferred Stock, in whole at any time or in part from time to time, for cash at a redemption price of $25,000 per preferred share, plus all accumulated and unpaid dividends to, but not including, the date of redemption. We may redeem the Series C Preferred Stock following certain changes of control, if we do not exercise this option, then the holders of the Series C Preferred Stock have the option to convert the shares of Series C Preferred Stock into up to 3,371.54 shares of our Common Stock per share of Series C Preferred Stock, subject to certain adjustments. If we exercise any of our redemption rights relating to shares of Series C Preferred Stock, the holders of Series C Preferred Stock will not have the conversion right describedperformance shares.
Holdersa description of the Series C Preferred Stock have no voting rights except for limited voting rights if we failLTIP.
New Plan Benefits
The benefits that will be granted or paid under the LTIP are the awards to pay dividends for six or more quarterly periods (whether or not consecutive)be made in the future under the LTIP and in certain other limited circumstances or as required by law.
Purpose and Effect of Approvingso cannot currently be determined. Awards granted under the Amendment toLTIP are within the Certificate of Designationsdiscretion of the Series C Preferred Stock under Proposal 2Committee, and the Committee has not determined future awards or who might receive them.
The primary purpose of amending the Certificate of Designations
Recommendation of the Series C Preferred Stock is to give the Company the flexibility to convert the outstanding shares of the Series C Preferred Stock into shares of the Company’s Common Stock upon approval of a majority of the shares of Common Stock and 66.67% of the votes entitled to be cast by the holders of the Series C Preferred Stock. Providing the Company with the ability to automatically convert the Series C Preferred Stock into the Company’s Common Stock will enable the Company to conserve cash by reducing its fixed dividend obligations and will increase the percentage of our capitalization that is Common Stock. It will also increase the likelihood of success of the Unsecured Notes Exchange Offers, as
holders of the Existing Unsecured Notes are expected to be more willing to convert into Common Stock if all of the Series C Preferred Stock is converted into Common Stock as well. Upon conversion, any holders of our Series C Preferred Stock will forego any dividends currently in arrears. Currently, holders of our Series C Preferred Stock are entitled to receive cash dividend payments of 10.00% per annum if declared by the Board which the Board does not currently expect to declare in the future.
If Proposal 2 is approved, and the Company’s stockholders approve the Authorized Shares Proposal, we will file an amendment to the Certificate of Designations of the Series C Preferred Stock with the Office of the Secretary of State of the State of Delaware with respect to Proposal 2. If the Company chooses to exercise its conversion option by converting all of the outstanding shares of Series C Preferred into shares of the Company’s Common Stock, the Series C Preferred Stock will no longer be outstanding.
The form of the amendment to our Certificate of Designations of the Series C Preferred Stock with respect to Proposal 2 is attached to this Proxy Statement as Appendix B.
Consequences If Proposal 2 Is Not Approved
We intend to commence an offer to exchange all of our outstanding shares of Series C Preferred Stock for shares of the Company’s Common Stock. If Proposal 2 is not approved, the Company intends to proceed with the Series C Exchange Offer and any Series C Preferred Stock not tendered in the Series C Exchange Offer will remain outstanding.
If Proposal 2 is approved, we intend to file a certificate of amendment to the Certificate of Designations of the Series C Preferred Stock with the Office of the Secretary of State of the State of Delaware with respect to Proposal 2. Such certificate will become effective upon filing. Our Board reserves the right, notwithstanding stockholder approval of any Proposal and without further action by our stockholders, to elect not to proceed with filing the amendment to the Certificate of Designations of the Series C Preferred Stock if, at any time prior to filing the amendment to the Certificate of Designations of the Series C Preferred Stock, our Board of Directors, in its sole discretion, determines that it is no longer in our best interests or the best interests of our stockholders.
The affirmative vote of the holders of (i) a majority of the outstanding shares of Common Stock and (ii) two-thirds of the Series C Preferred Stock, voting separately as a class, is required to approve Proposal 2.
Our Board recommends a vote “FOR” Proposal 2.
PROPOSAL NO. 3 – APPROVAL OF AN OUR BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE THIRD AMENDMENT TO THE CERTIFICATE OF DESIGNATIONS OF THE SERIES D PREFERRED STOCK (PROPOSAL 3)GOODRICH PETROLEUM CORPORATION 2016 LONG-TERM INCENTIVE PLAN
The form of the amendment to the Certificate of Designations of the Series D Preferred Stock relating to this Proposal 3 is attached to this Proxy Statement as Appendix C.
Series D Preferred StockContents
As of the date of this Proxy Statement, we had 3,621,070 depositary shares issued and outstanding each representing a 1/1000th ownership interest in a share of our Series D Preferred Stock. The liquidation preference is $25,000 per share ($25.00 per depositary share) of Series D Preferred Stock, plus accumulated and unpaid dividends.
The Series D Preferred Stock ranks senior to our Common Stock and on parity with our Series B Preferred Stock and our Series C Preferred Stock with respect to the payment of dividends and distribution of assets upon liquidation, dissolution or winding up. The Series D Preferred Stock has no stated maturity and is not subject to mandatory redemption or any sinking fund and will remain outstanding indefinitely unless repurchased or redeemed by us or converted into our Common Stock in connection with certain changes of control.
At any time on or after August 19, 2018, we may, at our option, redeem the Series D Preferred Stock, in whole at any time or in part from time to time, for cash at a redemption price of $25,000 per preferred share, plus all accumulated and unpaid dividends to, but not including, the date of redemption. We may redeem the Series D Preferred Stock following certain changes of control, if we do not exercise this option, then the holders of the Series D Preferred Stock have the option to convert the shares of preferred stock into up to 2,297.79 shares of our Common Stock per share of Series D Preferred Stock, subject to certain adjustments. If we exercise any of our redemption rights relating to shares of Series D Preferred Stock, the holders of Series D Preferred Stock will not have the conversion right described above with respect to the shares of Series D Preferred Stock called for redemption.
Holders of the Series D Preferred Stock have no voting rights except for limited voting rights if we fail to pay dividends for six or more quarterly periods (whether or not consecutive) and in certain other limited circumstances or as required by law.
Purpose and Effect of Approving the Amendment to the Certificate of Designations of the Series D Preferred Stock under Proposal 3
The primary purpose of amending the Certificate of Designations of the Series D Preferred Stock is to give the Company the flexibility to convert the outstanding shares of the Series D Preferred Stock into shares of the Company’s Common Stock upon approval of a majority of the shares of Common Stock and 66.67% of the votes entitled to be cast by the holders of the Series D Preferred Stock. Providing the Company with the ability to automatically convert the Series D Preferred Stock into the Company’s Common Stock will enable the Company to conserve cash by reducing its fixed dividend obligations and will increase the percentage of our capitalization that is Common Stock. It will also increase the likelihood of success of the Unsecured Notes Exchange Offers, as
holders of the Existing Unsecured Notes are expected to be more willing to convert into Common Stock if all of the Series D Preferred Stock is converted into Common Stock as well. Upon conversion, any holders of our Series D Preferred Stock will forego any dividends currently in arrears. Currently, holders of our Series D Preferred Stock are entitled to receive cash dividend payments of 9.75% per annum if declared by the Board, which the Board does not currently expect to declare in the future.
If Proposal 3 is approved, and the Company’s stockholders approve the Authorized Shares Proposal, we will file an amendment to the Certificate of Designations of the Series D Preferred Stock with the Office of the Secretary of State of the State of Delaware with respect to Proposal 3. If the Company chooses to exercise its conversion option by converting all of the outstanding shares of Series D Preferred into shares of the Company’s Common Stock, the Series D Preferred Stock will no longer be outstanding.
The form of the amendment to our Certificate of Designations of the Series D Preferred Stock with respect to Proposal 3 is attached to this Proxy Statement as Appendix C.
Consequences If Proposal 3 Is Not Approved
We intend to commence an offer to exchange all of our outstanding shares of Series D Preferred Stock for shares of the Company’s Common Stock. If Proposal 3 is not approved, the Company will proceed with the Series D Exchange Offer and any Series D Preferred Stock not tendered in the Series D Exchange Offer will remain outstanding.
If Proposal 3 is approved, we intend to file a certificate of amendment to the Certificate of Designations of the Series D Preferred Stock with the Office of the Secretary of State of the State of Delaware with respect to Proposal 3. Such certificate will become effective upon filing. Our Board reserves the right, notwithstanding stockholder approval of any Proposal and without further action by our stockholders, to elect not to proceed with filing the amendment to the Certificate of Designations of the Series D Preferred Stock if, at any time prior to filing the amendment to the Certificate of Designations of the Series D Preferred Stock, our Board of Directors, in its sole discretion, determines that it is no longer in our best interests or the best interests of our stockholders.
The affirmative vote of the holders of (i) a majority of the outstanding shares of Common Stock and (ii) two-thirds of the Series D Preferred Stock, voting separately as a class, is required to approve Proposal 3.
RecommendationSTOCK OWNERSHIP MATTERS
Our Board recommends a vote “FOR” Proposal 3.
PROPOSAL NO. 4 – APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF DESIGNATION OF THE SERIES E PREFERRED STOCK (PROPOSAL 4)
Our Board recommends the approval of Proposal 4, which relates to an amendment of the Certificate of Designation of the Series E Preferred Stock. The proposed amendment will include a Company conversion option under which the Company shall have the option for 90 days following the termination of our offer to exchange any and all shares of our outstanding Series E Preferred Stock for newly issued shares of our Common Stock (the “Series E Exchange Offer”) to cause all of the outstanding shares of Series E Preferred Stock to be automatically converted into that number of shares of the Company’s Common Stock that are issuable at the conversion rate of 5.188 shares of Common Stock per $10.00 liquidation preference, which is equivalent to a conversion price of approximately $1.93 per share of Common Stock. The amendment will also include certain provisions related to the conversion procedures and the adjustment of the conversion rate under certain circumstances.
The higher exchange ratio applicable to the Series E Preferred Stock relative to the Series C Preferred Stock and Series D Preferred Stock reflects the original liquidation preferences of the Series B Preferred Stock, Series C Preferred Stock and Series D Preferred stock tendered at a discount in exchange for the Series E Preferred Stock on December 18, 2015.
The form of the amendment to the Certificate of Designation of the Series E Preferred Stock relating to this Proposal 4 is attached to this Proxy Statement as Appendix D.
Series E Preferred Stock
As of the date of this Proxy Statement, we had 3,104,073 depositary shares issued and outstanding each representing a 1/1000th ownership interest in a share of our Series E Preferred Stock. The liquidation preference is $10,000 per share ($10.00 per depositary share) of Series E Preferred Stock, plus accumulated and unpaid dividends. Dividends are payable quarterly in arrears beginning March 15, 2016. If we fail to pay dividends on our Series E Preferred Stock on any six dividend payment dates, whether or not consecutive, the dividend rate per annum will be increased by 1.0% until we have paid all dividends on our Series E Preferred Stock for all dividend periods up to and including the dividend payment date on which the accumulated and unpaid dividends are paid in full.
Each share is convertible at the option of the holder into our Common Stock at any time at an initial conversion rate of 5.0 shares of Common Stock per $10.00 liquidation preference, which is equivalent to an initial conversion price of approximately $2.00 per share of Common Stock. Upon conversion of the Series E Preferred Stock, we may choose to deliver the conversion value to holders in cash, shares of Common Stock, or a combination of cash and shares of Common Stock.
If a fundamental change occurs, holders may require us in specified circumstances to repurchase all or part of the Series E Preferred Stock. In addition, upon the occurrence of a fundamental change or specified corporate events, we will under certain circumstances increase the conversion rate by a number of additional shares of Common Stock. A “fundamental change” will be deemed to have occurred if any of the following occurs:
We consolidate or merge with or into any person or convey, transfer, sell or otherwise dispose of or lease all or substantially all of our assets to any person, or any person consolidates with or merges into us or with us, in any such event pursuant to a transaction in which our outstanding voting shares are changed into or exchanged for cash, securities, or other property; or
We are liquidated or dissolved or adopt a plan of liquidation or dissolution.
A “fundamental change” will not be deemed to have occurred if at least 90% of the consideration in the case of a merger or consolidation under the first clause above consists of Common Stock traded on a U.S. national securities exchange and the Series E Preferred Stock becomes convertible solely into such Common Stock.
We have the option to cause the Series B Preferred Stock to be automatically converted into the number of shares of Common Stock that are issuable at the then-prevailing conversion rate, pursuant to a conversion option in favor of the Company. We may exercise our conversion right only if, for 20 trading days within any period of 30 consecutive trading days ending on the trading day before the announcement of our exercise of the option, the closing price of the Common Stock equals or exceeds 150% of the then-prevailing conversion price of the Series E Preferred Stock.
At any time on or after April 10, 2018, we may, at our option, redeem the Series E Preferred Stock, in whole at any time or in part from time to time, for cash at a redemption price of $10,000 per preferred share, plus all accumulated and unpaid dividends to, but not including, the date of redemption. If we exercise our redemption rights relating to shares of Series E Preferred Stock, the holders of Series E Preferred Stock will not have the conversion right described above with respect to the shares of Series E Preferred Stock called for redemption.
Purpose and Effect of Approving the Amendment to the Certificate of Designation of the Series E Preferred Stock under Proposal 4
The primary purpose of amending the Certificate of Designation of the Series E Preferred Stock is to give the Company the flexibility to convert the outstanding shares of the Series E Preferred Stock into shares of the Company’s Common Stock upon approval of a majority of the shares of Common Stock and 66.67% of the votes entitled to be cast by the holders of the Series E Preferred Stock. Providing the Company with the ability to automatically convert the Series E Preferred Stock into the Company’s Common Stock will enable the Company to conserve cash by reducing its fixed dividend obligations and will increase the percentage of our capitalization that is Common Stock. It will also increase the likelihood of success of the Unsecured Notes Exchange Offers, as holders of the Existing Unsecured Notes are expected to be more willing to convert into Common Stock if all of the Series E Preferred Stock is converted into Common Stock as well. Upon conversion, any holders of our Series E Preferred Stock will forego any dividends currently in arrears. Currently, holders of our Series E Preferred Stock are entitled to receive cash dividend payments of 10.00% per annum if declared by the Company’s, which the Board does not currently expect to declare in the future.
If Proposal 4 is approved, and the Company’s stockholders approve the Authorized Shares Proposal, we will file an amendment to the Certificate of Designation of the Series E Preferred Stock with the Office of the Secretary of State of the State of Delaware with respect to Proposal 4. If the Company chooses to exercise its conversion option by converting all of the outstanding shares of Series E Preferred into shares of the Company’s Common Stock, the Series E Preferred Stock will no longer be outstanding.
The form of the amendment to our Certificate of Designation of the Series E Preferred Stock with respect to Proposal 4 is attached to this Proxy Statement as Appendix D.
Consequences If Proposal 4 Is Not Approved
We intend to commence an offer to exchange all of our outstanding shares of Series E Preferred Stock for shares of the Company’s Common Stock. If Proposal 4 is not approved, the Company intends to proceed with the Series E Exchange Offer and any Series E Preferred Stock not tendered in the Series E Exchange Offer will remain outstanding.
If Proposal 4 is approved, we intend to file a certificate of amendment to the Certificate of Designation of the Series E Preferred Stock with the Office of the Secretary of State of the State of Delaware with respect to Proposal 4. Such certificate will become effective upon filing. Our Board reserves the right, notwithstanding stockholder approval of any Proposal and without further action by our stockholders, to elect not to proceed with filing the amendment to the Certificate of Designation of the Series E Preferred Stock if, at any time prior to filing the amendment to the Certificate of Designation of the Series E Preferred Stock, our Board of Directors, in its sole discretion, determines that it is no longer in our best interests or the best interests of our stockholders.
The affirmative vote of the holders of (i) a majority of the outstanding shares of Common Stock and (ii) two-thirds of the Series E Preferred Stock, voting separately as a class, is required to approve Proposal 4.
Our Board recommends a vote “FOR” Proposal 4.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”"Exchange Act") requires our directors and officers, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership on Form 3 and changes in ownership on Forms 4 and 5 with the SEC. Such officers, directors and 10% stockholders are also required to furnish us with copies of all Section 16(a) reports that they file.
To our knowledge, based solely on review of copies of such reports furnished to us and written representations, that no other reports were required, all of our officers, directors and 10% stockholders complied with applicable reporting requirements of Section 16(a), with the exception of the reports on Form 4 for Walter G. Goodrich, Robert C. Turnham, Jr., Mark E. Ferchau and Michael J. Killelea in connection with the grant of phantom stock on March 10, 2015, which were not filed until March 19, 2015..
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of February 5, 2016April 2, 2018 (except as otherwise noted) certain information with respect to the amount of our Common Stockcommon stock beneficially owned (as defined by the SEC’sSEC's rules and regulations) by:
our common stock;
nominees; and
Title of Class | Name and Address of Beneficial Owner(1) | Amount and Nature of | Percent of Class(2) | |||||
Common Stock | Josiah T. Austin | 316,642 | * | |||||
Common Stock | Walter G. Goodrich(3) | 890,577 | 1.2 | |||||
Common Stock | Robert C. Turnham, Jr.(4) | 582,153 | * | |||||
Common Stock | Mark E. Ferchau | 236,229 | * | |||||
Common Stock | Arthur A. Seeligson | 106,257 | * | |||||
Common Stock | Michael J. Killelea | 145,878 | * | |||||
Common Stock | Gene Washington | 75,511 | * | |||||
Common Stock | Michael J. Perdue(5) | 100,000 | * | |||||
Common Stock | Stephen M. Straty | 66,667 | * | |||||
Common Stock | Directors and Executive Officers as a Group (9 persons) | 2,519,914 | 3.3 | |||||
Series E Convertible Preferred Stock | Josiah T. Austin | 13,912 | * | |||||
Series E Convertible Preferred Stock | Walter G. Goodrich | 8,000 | * | |||||
Series E Convertible Preferred Stock | Robert C. Turnham, Jr. | 11,600 | * | |||||
Series E Convertible Preferred Stock | Gene Washington | 2,650 | * | |||||
Series E Convertible Preferred Stock | Directors and Executive Officers as a Group | 36,162 | 1.2 |
The following table sets forth the names, ages and titles of our current executive officers.
Walter G. Goodrich's biographical information may be found under "Proposal No. 1—Election of Directors". Robert C. Turnham, Jr.'s biographical information may be found under "Proposal No. 1—Election of Directors". Mark E. Ferchau became Executive Vice President of the Company in 2004. He had previously served as the Company's Senior Vice President, Engineering and Operations, after initially joining the Company as a Vice President in 2001. Mr. Ferchau previously served as Production Manager for Forcenergy Inc. from 1997 to 2001 and as Vice President, Engineering of Convest Energy Corporation from 1993 to 1997. Prior thereto, Mr. Ferchau held various positions with Wagner & Brown, Ltd. and other independent oil and gas companies. Michael J. Killelea joined the Company as Senior Vice President, General Counsel and Corporate Secretary in 2009. He was named Executive Vice President in December 2016. Mr. Killelea has 30 years of experience in the energy industry. In 2008, he served as interim-Vice President, General Counsel and Corporate Secretary for Maxus Energy Corporation. Prior to that time, Mr. Killelea was Senior Vice President, General Counsel and Corporate Secretary of Pogo Producing Company from 2000 through 2007. Mr. Killelea held various positions within the law department at CMS Energy Corporation from 1988 to 2000, including Chief Counsel at CMS Oil & Gas Company from 1995 to 2000. Robert T. Barker joined the Company in 2007 as Manager, Financial Reporting and has held various positions within the Accounting Department with increasing responsibility, most recently as Vice President, Controller and Principal Accounting Officer. He was named Interim Chief Financial Officer in April 2016 and named Chief Financial Officer in January 2017. Mr. Barker has over 30 years of experience in the energy industry. Prior to joining the Company, Mr. Barker was Controller for Cygnus Oil and Gas Corporation. We are currently considered a "smaller reporting company" for purposes of the SEC's executive compensation and other disclosure rules. In accordance with such rules, we are required to provide a Summary Compensation Table and an Outstanding Equity Awards at Fiscal Year End Table, as well as limited narrative disclosures. Further, our reporting obligations extend only to the individuals serving as our chief executive officer and our two next most highly compensated executive officers. We refer to the aforementioned individuals throughout this discussion as the "Named Executive Officers" and their names, titles and positions are as follows:
The following table summarizes, with respect to our Named Executive Officers, information relating to the compensation earned for services rendered in all capacities:
Narrative Disclosure to Summary Compensation Table The following is a discussion of material factors necessary to an understanding of the information disclosed in the Summary Compensation Table. Non-Equity Incentive Plan Compensation. Incentive bonuses, considered for payment annually, ensure that our executive officers focus on the achievement of near-term goals that are approved by the Board. Bonuses may be earned if the Company achieves its objectives in key performance metrics and executes on strategic achievements as discussed below. Bonus targets as a percentage of base salary have historically been set near the median for similar positions. Bonus targets as a percentage of base salary for 2017 were set at 125% for the CEO and President, 80% for the Executive Vice Presidents, and 60% for the Chief Financial Officer. The total amounts received under our incentive bonus plan are composed of both quantitative performance metrics (with potential bonus payout ranging from zero to 160%, with a target bonus payout of 80% of the overall target bonus) and qualitative subjective evaluation (with potential bonus payout ranging from zero to 40%, with a target bonus payout of 20% of the overall target bonus). The bonuses awarded for the Company's 2017 performance are reflected in the Summary Compensation Table under "Non-Equity Incentive Plan Compensation." Quantitative Performance Metrics. The Compensation Committee selected the following performance metrics as the relevant financial targets, which the Compensation Committee viewed as consistent with the Company's 2017 business plan: (1) production growth with a target of 50%, (2) finding and development costs with a target of $1.15/Mcfe, (3) lease operating expenses (excluding workovers) with a target of $0.80 per Mcfe, (4) cash general and administrative expenses with a target of $9.5 million, and (5) EBITDA with a target of $25 million. The relative weighting target percentages of the five performance metrics were: production growth—25%; finding & development costs—20%; lease operating expenses—5%; cash general & administrative expenses—5%; and EBITDA—25% for a total of 80% of the total target bonus amount. Actual Company performance for 2017 was as follows: (1) production growth of 44.4%, (2) finding and development costs of $0.892 per Mcfe, (3) lease operating expenses (excluding workovers) of $0.72 per Mcfe, (4) cash general and administrative expenses of $8.58 million, and (5) EBITDA of $19.162 million. In general, the Company's performance was at or above the targeted goal for finding and development costs, lease operating expenses, and cash general and administrative expenses, and below the threshold goal for Production Growth and EBITDA. Accordingly, the Compensation Committee approved bonus payouts for the executives at 78.5% of the total target bonus amount for the components tied to quantitative performance metrics. Qualitative Subjective Evaluation. In considering the appropriate discretionary award, the Compensation Committee assessed the impact the decision to delay certain completion activities had on the 2017 performance metrics. Given the overall performance of the Company in 2017, and the cost and efficiency considerations which resulted in delaying these completion activities, the Compensation Committee decided to increase the discretionary award under the incentive bonus from the target of 20% to 25%. The following reflects the calculation of the actual incentive bonus payout amount:
The bonuses awarded for the Company's 2017 performance are reflected in the Summary Compensation Table under the "Non-Equity Incentive Plan Compensation" column. Long-Term Incentive Plan. Restricted Phantom Stock. The restricted phantom stock awards vest in one-third increments on each anniversary of the grant date and will vest earlier upon the grantee's termination of employment due to his death or disability. In addition, the restricted phantom stock will vest on a change in control of the Company (see the "Potential Payments Upon Termination or Change in Control" section below for definitions). Payment of vested restricted phantom stock may be made in cash, shares of our common stock or any combination thereof, as determined by the Committee in its discretion. Any payment to be made in cash will be based on the fair market value of a share of common stock on the payment date. Performance Stock Units. Based on the 2017 target awards, in December 2017, the following number of performance stock units representing a contingent right to receive one share of common stock were awarded to the Named Executive Officers at the time of grant: Mr. Goodrich—102,364; Mr. Turnham—102,364; Mr. Ferchau—37,380. Performance shares will vest and be earned over a three-year period based on the Company's total stockholder return versus the Russell 2000 Energy Index. Relative TSR. The actual number of performance shares that our executives may earn, can range from zero to 250% of target, based on the Company's total stockholder return (TSR) relative to the Russell 2000 Energy Index at the end of a three-year performance period. The actual number of performance shares that may be earned at various levels of relative TSR was approved by the Compensation Committee and is based on the following structure:
Salary in Proportion to Total Compensation. We believe that a significant portion of each Named Executive Officer's compensation should be in the form of equity awards. The percentage of each Named Executive Officer's total compensation that was paid and awarded for 2017 in the form of base salary was approximately 13% for each of Messrs. Goodrich and Turnham and approximately 23% for Mr. Ferchau. Outstanding Equity Awards Value at Fiscal Year-End Table The following table provides information concerning unexercised options, stock that has not vested, and equity incentive plan awards for our Named Executive Officers that were outstanding on December 31, 2017.
Additional Narrative Disclosure Other Benefits In addition to base pay, annual incentive bonuses, long-term equity-based incentives and severance benefits, we provide the following forms of compensation:
Potential Payments Upon Termination or a Change in Control The discussion below discloses the amount of compensation and/or other benefits potentially due to Messrs. Goodrich, Turnham, and Ferchau in the event of a change in control, or a termination of their employment, including, but not limited to, in connection with a change in control of the Company. We believe that change in control protection allows management to focus their attention and energy on the business transaction at hand without any distractions regarding the effects of a change in control. Likewise, post-termination payments allow management to focus their attention and energy on making the best objective business decisions that are in the interest of the company without allowing personal considerations to cloud the decision-making process. Each of Messrs. Goodrich, Turnham, and Ferchau has entered into a severance agreement with the Company providing for a cash lump sum payment to each of them in the event of their termination of employment without "cause" or due to a "change in duties," during the eighteen (18) month period immediately following a "change in control," or the executive is terminated without cause by the Company at any time (each term as defined below). The amount to which each is entitled is equal to two (2) times his then "current annual rate of total compensation," to be paid within a ninety (90) day period following the applicable termination of employment, or in the event the executive is a "specified employee" as defined in Section 409A of the Code at the time of termination, on the first business day following the six (6) month period immediately following the executive's termination of employment. Each severance agreement provides for continued health and life insurance coverage under the Company plans (or the equivalent thereof) for each of them through the second anniversary of their respective termination of employment date, but only to the extent that the continuation of benefits is exempt from Section 409A of the Code. In the event that payments pursuant to the severance agreements create excise taxes for the executive pursuant to Section 4999 of the Code, we will provide the executive with an additional payment solely to compensate him for such excise tax payment. Accelerated vesting of the equity awards is driven by the grant agreements and occurs upon death or disability, or a change in control. The severance agreements define "cause" as (1) a material failure to perform expected duties, (2) the commission of fraud, embezzlement, or misappropriation against us, (3) a material breach by the executive of his fiduciary duty, or (4) a conviction of a felony offense or a crime involving moral turpitude. The executive's "current annual rate of total compensation" is comprised of the executive's annual base salary, the annual cash bonus last awarded to the executive prior to the change of control, and the value of the equity-based compensation awards granted to the executive during the twelve (12) months immediately prior to the change of control. All equity awards to be included in this calculation will be valued as of the date of grant. A "change of control" of the Company will be deemed to have occurred upon the occurrence of the following events: (1) a sale or other transfer of all or substantially all of our assets, (2) our liquidation or dissolution, (3) a person or group becomes the beneficial owner of fifty percent (50%) or more of our voting power, or (4) a merger or consolidation, unless for at least six (6) months after the transaction, we own at least fifty percent (50%) of the total voting power of all the voting securities. The executives may voluntarily resign upon a "change in duties" upon (1) a reduction in the executive's duties or responsibilities, (2) a reduction in the executive's "current annual rate of total compensation" or (3) a change in location of the executive's principal place of business of more than fifty (50) miles. The Audit Committee was established to implement and to support oversight function of the Board of Directors with respect to the financial reporting process, accounting policies, internal controls and independent registered public accounting firm of Goodrich Petroleum Corporation. Each member of the Audit Committee is an "independent" director and "financially literate" as determined by the Board, based on the listing standards of the New York Stock Exchange. Each member of the Audit Committee also satisfies the Securities and Exchange Commission's additional independence requirements for members of audit committees. In addition, the Board has designated Mr. Leight, the Chairman of the Audit Committee, as an "audit committee financial expert," as defined by the Securities and Exchange Commission's rules and regulations. In fulfilling its responsibilities, the Audit Committee:
Based on these reviews and discussions, the Audit Committee recommended to the Board, and the Board approved, that the audited financial statements of Goodrich Petroleum Corporation be included in its Annual Report on Form 10-K for the year ended December 31, 2017 for filing with the Securities and Exchange Commission. The information contained in this Audit Committee Report shall not be deemed to be "soliciting material" to be "filed" with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filings with the Securities and Exchange Commission, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. Respectfully submitted by the Audit Committee of the Board of Directors,
Hein & Associates LLP ("Hein") served as our independent registered public accounting firm and audited our consolidated financial statements beginning with the fiscal year ended December 31, 2016. Effective November 16, 2017, Hein combined with Moss Adams LLP ("Moss Adams"). As a result of this transaction, on November 16, 2017, Hein resigned as the independent registered public accounting firm for the Company. Concurrent with such resignation, the Company's audit committee approved the engagement of Moss Adams as the new independent registered public accounting firm for the Company. The audit report of Hein on the Company's financial statements for the year ended December 31, 2016 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the most recent fiscal year ended December 31, 2016 and through the subsequent interim period preceding Hein's resignation, there were no disagreements between the Company and Hein on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Hein would have caused them to make reference thereto in their report on the Company's financial statements for such years. During the fiscal year ended December 31, 2016 and through the subsequent interim period preceding Hein's resignation, there were no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K. During the two most recent fiscal years and through the subsequent interim period preceding Moss Adam's engagement, the Company did not consult with Moss Adams on either (1) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that may be rendered on the Company's financial statements, and Moss Adams did not provide either a written report or oral advise to the Company that Moss Adams concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (2) any matter that was either the subject of a disagreement, as defined in Item 304(a)(1)(iv) of Regulation S-K, or a reportable event, as defined in Item 304(a)(1)(v) of Regulation S-K. On November 9, 2016 (the "Dismissal Date"), we dismissed Ernst & Young LLP ("E&Y") from serving as our independent registered public accounting firm and engaged Hein & Associates LLP ("Hein") as our new independent registered public accounting firm. Our Audit Committee unanimously approved and authorized the change, directed the process of review of candidate firms to replace E&Y and made the final decision to engage Hein. The E&Y reports on the financial statements of the Company for the years ended December 31, 2015 and 2014 contained no adverse opinion or disclaimer of opinion and were not qualified, except for the 2015 report which included an explanatory paragraph that described conditions that raised substantial doubt about our ability to continue as a going concern as described in Note 1 to the financial statements. In connection with its audits of the years ended December 31, 2015 and 2014 and reviews of our financial statements through the Dismissal Date there were no disagreements with E&Y on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of E&Y, would have caused them to make reference thereto in their reports on the financial statements. During the two most recent fiscal years and through the Dismissal Date, the Company has not consulted with Hein on any matter that (i) involved the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements, in each case where a written report was provided or oral advice was provided that Hein concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) was either the subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K the related instructions to Item 304 of Regulation S-K, or a reportable event, as that term is defined in Item 304(a)(1)(v) of Regulation S-K. The following table shows the fees billed to us related to the audit and other services provided by Hein for 2016 and Moss Adams LLP (both as Moss Adams LLP and as Hein) for 2017.
Audit Committee Pre-Approval Policy All services to be performed for the Company by an auditing firm must be pre-approved by the Audit Committee or a designated member of the Audit Committee, as provided in the committee's charter. All services provided by Moss Adams LLP (both as Moss Adams LLP and as Hein) in fiscal year 2017 were pre-approved by the Audit Committee. General Our Board believes that adherence to sound corporate governance policies and practices is important in ensuring that we are governed and managed with the highest standards of responsibility, ethics and integrity and in the best interests of our stockholders. As a result, our Board has adopted key governance documents, including Corporate Governance Guidelines, Corporate Code of Business Conduct and Ethics and committee charters, which are intended to reflect a set of core values that provide the foundation for our governance and management systems and our interactions with others. Copies of these documents are available on our website athttp://www.goodrichpetroleum.com/about-us/corporate-governance/ and are also available in print, free of charge, to any stockholder who requests them. Corporate Governance Guidelines Our Board has adopted Corporate Governance Guidelines, which can be viewed on our website athttp://www.goodrichpetroleum.com/files/4614/1159/7259/CorporateGovernanceGuidelines.pdf. Among other things, the Corporate Governance Guidelines address the following matters:
Corporate Code of Business Conduct and Ethics Our Corporate Code of Business Conduct and Ethics, which is applicable to our directors, employees, agents and representatives, can be viewed on our website athttp://www.goodrichpetroleum.com/files/5014/1159/7233/CodeofBusinessConductandEthics.pdf. Any change to, or waiver from, our Corporate Code of Business Conduct and Ethics may be made only by our independent directors and will be disclosed as required by applicable securities laws and listing standards. Board Size; Director Independence Our Board consists of seven members. Of the current seven directors, three are currently seeking re-election at the Annual Meeting. In determining director independence, the Nominating and Corporate Governance Committee reviews the relationships between the Company and each director and reports the results of its review to the Board. The Board uses this information to aid it in making its determination of independence. The Board has determined that to be considered independent, an outside director may not have a direct or indirect material relationship with the Company. A material relationship is one which impairs or inhibits—or has the potential to impair or inhibit—a director's exercise of critical and disinterested judgment on behalf of the Company and its stockholders. In determining whether a material relationship exists, the Board considers, for example, any transactions between the Company and an entity with which a director is affiliated (as an executive officer, partner or substantial stockholder) and whether a director is a current or former employee or consultant of the Company. The Board consults with the Company's legal counsel to ensure that the Board's determinations are consistent with all relevant securities and other laws and regulations regarding the definition of "independent director," including but not limited to those set forth in pertinent listing standards of the NYSE American and SEC rules as in effect from time to time. Consistent with these considerations, the Board has reviewed all the relationships between the Company and the members of the Board and has affirmatively determined that all directors are independent directors except Mr. Walter G. Goodrich and Mr. Robert C. Turnham, Jr., who are employees of the Company. The chart below describes the basis for the Board's determination that the director is independent. Although service as a director of another company alone is not a material relationship that would impair a director's independence, those relationships have been reviewed and are set forth below. None of the relationships considered below are relationships that would preclude a finding of independence under the NYSE American bright line rules or would require disclosure pursuant to Item 404 of Regulation S-K. In addition, none of the relationships considered below would cause a director who serves on a Board committee to violate a heightened standard applicable to membership on that committee.
Board Meetings, Annual Meeting Attendance Our Board held eight meetings during the fiscal year ended December 31, 2017. Each director attended 100% of the meetings of the Board and the committees of which each is a member. We do not have a formal policy regarding director attendance at Board meetings. Board members are requested and encouraged to attend the Annual meeting. In 2017, all but one director attended the annual meeting in person. Executive Sessions and Presiding Director To facilitate candid discussion by our non-management directors, the agenda for certain Board and committee meetings provides for a meeting of non-management directors in executive session without any members of management present. Timothy D. Leuliette has been designated as the director to preside over executive sessions of non-management directors. Our independent directors meet separately at least once a year in accordance with the listing standards of the NYSE American. Limitation on Public Company Board Service To ensure that each director is able to devote sufficient time to performing his or her duties, the number of other public company boards on which a director may serve is subject to a case-by-case review by the Nominating and Corporate Governance Committee. In addition, the Audit Committee's Charter prohibits committee members from serving on the audit committee of more than two other public company boards unless our Board determines that such simultaneous service does not impair the ability of the director to effectively serve on the Audit Committee. Chairman and Chief Executive Officer Our Board has determined that a leadership structure consisting of a combined role of Chairman of the Board and Chief Executive Officer, together with a strong Lead Independent Director, is appropriate for our Company. As Mr. Goodrich bears the primary responsibility for managing our day-to-day business, the combination of the role of Chairman and Chief Executive Officer ensures that key business issues and stockholder interests are brought to the attention of our Board. In addition, as a result of his role as the Chief Executive Officer of the Company, Mr. Goodrich has Company-specific experience that can benefit his role as Chairman of the Board in identifying strategic priorities, leading the discussion and execution of strategy, and facilitating the flow of information between management and the Board. To give a significant voice to our independent, non-management directors and to reinforce effective, independent leadership on the Board, and in recognition of his demonstrated leadership skills, the Board has appointed Mr. Leuliette as Lead Independent Director. We believe that the above structure, when combined with the Company's other governance policies and procedures, provide for appropriate oversight, discussion and evaluation of decisions and direction from the Board, and are in the best interest of our stockholders. Our Board's Role in Risk Oversight Our Board generally administers its risk oversight function through the board as a whole. Our Chief Executive Officer, who reports to the Board, and the other executives named in this proxy statement, who report to our Chief Executive Officer, have day-to-day risk management responsibilities. Each of these executives attends the meetings of our Board, where the Board routinely receives reports on our financial results, the status of our operations and our safety performance, and other aspects of implementation of our business strategy, with ample opportunity for specific inquiries of management. The Audit Committee provides additional risk oversight through its quarterly meetings, where it receives a report from our Chief Financial Officer, and reviews our contingencies, significant transactions and subsequent events, among other matters, with management and our independent auditors. In addition, our Hedging Committee assists management in establishing pricing and production guidelines to be used by management in entering into oil and gas hedging contracts in order to manage the commodity price risk for a portion of our oil and gas production. Annual Board Evaluation The Nominating and Corporate Governance Committee is responsible for the Board evaluation process. In December of each fiscal year, the Nominating and Corporate Governance Committee requests that the Chairman of each committee report to the full Board about the committee's annual evaluation of its performance and evaluation of its charter. In addition, the Nominating and Corporate Governance Committee receives comments from all directors and reports to the full Board with an assessment of the Board's and management's performance each fiscal year. Director Orientation and Continuing Education Our Board takes measures as it deems appropriate to ensure that its members may act on a fully informed basis. The Nominating and Corporate Governance Committee evaluates general education and orientation programs for our directors. Newly appointed directors are required to become knowledgeable (if not already) about the responsibilities of directors for publicly traded companies. In addition, we provide our directors with information regarding changes in our business and industry as well as the responsibilities of the directors in fulfilling their duties. Director Qualifications When identifying prospective director nominees, our Board, with assistance from the Nominating and Corporate Governance Committee, considers the following:
Although we do not have a formal policy for the consideration of diversity in identifying director nominees, the Nominating and Corporate Governance Committee believes that the backgrounds and qualifications of the directors, considered as a group, should provide a diverse mix of skills, knowledge, attributes and experiences that cover the spectrum of areas that affect our business. The Nominating and Corporate Governance Committee regularly assesses whether the mix of skills, experience and background of our Board as a whole is appropriate for us. In the case of directors being considered for reelection, our Board also takes into account the director's history of attendance and participation at Board and committee meetings, and the director's tenure as a member of our Board. Director Nominations In connection with its governance function, the Nominating and Corporate Governance Committee identifies individuals qualified to become Board members and recommends those individuals for election as directors, either at the annual meeting of stockholders or to the Board to fill any vacancies. When the need to fill a vacancy arises, the Nominating and Corporate Governance Committee solicits recommendations from existing directors and from senior management. These recommendations are considered along with any recommendations made by stockholders. There have been no material changes to the procedures by which stockholders may nominate director candidates to the Nominating and Corporate Governance Committee since the Company last provided this disclosure. The Board did not retain, and we did not pay a fee to, any third party to assist in the process of identifying or evaluating prospective director nominees for election at the Annual Meeting, nor did we receive any director nominees put forward by a stockholder or group of stockholders who beneficially own more than 5% of our common stock. Communications with our Board Our Board welcomes communications from our stockholders and other interested parties. Stockholders and any other interested parties may send communications to our Board, to any Board committee, to the Chairman of our Board, or to any director in particular, to: c/o Goodrich Petroleum Corporation Any correspondence addressed to our Board, any Board committee, the Chairman of our Board or to any one of the directors in care of us is required to be forwarded to the addressee or addressees without review by any person to whom such correspondence is not addressed. Comments or complaints relating to our accounting, internal accounting controls or auditing matters may be reported by going togoodrichpetroleum.silentwhistle.com or by calling the (toll-free) hotline number 1-877-874-8416. Standing Committees of our Board Committee Composition The following table lists our five Board committees and the directors who currently serve on them.
Executive Committee The Executive Committee is delegated the authority to approve any actions that our Board can approve, except to the extent restricted by law or by our Amended and Restated Certificate of Incorporation or Bylaws, as amended. The Executive Committee held one meeting during the fiscal year ended December 31, 2017, and also took action through unanimous written consent throughout the year. Hedging Committee The Hedging Committee's principle function is to assist management in establishing pricing and production guidelines to be used by management in entering into oil and gas hedging contracts in order to manage the commodity price risk for a portion of our oil and gas production. The Hedging Committee held three meetings during the fiscal year ended December 31, 2017, and also took action through unanimous written consent throughout the year. Audit Committee Pursuant to its charter, our Audit Committee functions in an oversight role and has the following purposes:
A copy of our Audit Committee Charter can be viewed on our website at http://www.goodrichpetroleum.com/files/9114/1159/7219/AuditCommitteeCharter.pdf In connection with these purposes, the Audit Committee recommends to our Board the independent registered public accounting firm to be engaged to audit our financial statements, annually reviews the independent auditor's independence and quality control procedures, meets with the auditors and our financial management to review with them our significant accounting policies and its internal controls, provides opportunities for the auditors to meet with the Audit Committee and management, discusses matters discussed at Audit Committee meetings with the full Board, investigates any matters brought to its attention within the scope of its duties, reviews and assesses the adequacy of the Audit Committee charter on an annual basis, and has general responsibility in connection with related matters. Our Board has determined that each member of the Audit Committee is independent under the SEC's rules and regulations, the listing standards of the NYSE American and our Corporate Governance Guidelines. In addition, our Board has determined that each member of the Audit Committee has the requisite accounting and related financial management expertise under the listing standards of the NYSE American. Based on Mr. Leight's business experience, which is described in more detail under "Proposal No. 1-Election of Directors—Director Nominees," our Board has determined that he qualifies as an "audit committee financial expert" under the SEC's rules and regulations. None of the members of the Audit Committee serve on the audit committee of more than two other public companies. Our Audit Committee held ten meetings during the fiscal year ended December 31, 2017, including quarterly meetings, and also took action through unanimous written consent throughout the year. Compensation Committee Pursuant to its charter, our Compensation Committee's duties include, among other things, the responsibility to:
A copy of our Compensation Committee Charter can be viewed on our website at http://www.goodrichpetroleum.com/files/6714/1159/7247/CompensationCommitteeCharter.pdf In connection with these purposes, the Compensation Committee reviews corporate goals and objectives relevant to our compensation. In addition, the Compensation Committee reviews our compensation and benefit plans to ensure that they meet these corporate goals and objectives. In consultation with our Chief Executive Officer, our Compensation Committee makes recommendations to the Board on compensation of all of our officers, the granting of awards under and administering our long term incentive and other benefit plans, and adopting and changing our major compensation policies and practices. Our Board has determined that each member of the Compensation Committee is independent under the listing standards of the NYSE American (including the heightened requirements applicable to compensation committee members) and our Corporate Governance Guidelines. Our Compensation Committee held four meetings during the fiscal period ended December 31, 2017, including quarterly meetings, and also took action through unanimous written consent throughout the year. Nominating and Corporate Governance Committee Pursuant to its charter, the Nominating and Corporate Governance Committee's duties include, among other things, the responsibility to:
A copy of our Nominating and Corporate Governance Committee Charter can be viewed on our website at http://www.goodrichpetroleum.com/files/7214/1159/7274/NominatingCharter.pdf In connection with these duties, the Nominating and Corporate Governance Committee actively seeks individuals qualified to become members of our Board, seeks to implement the independence standards required by law, applicable listing standards, our Amended and Restated Certificate of Incorporation and Bylaws and our Corporate Governance Guidelines, assesses the adequacy of our Corporate Governance Guidelines and recommends any proposed changes to our Board, and actively involves itself in our succession planning. Our Board has determined that each member of the Nominating and Corporate Governance Committee is independent under the listing standards of the NYSE American and our Corporate Governance Guidelines. Our Nominating and Corporate Governance Committee held one meeting during the fiscal period ended December 31, 2017, and also took action through unanimous written consent during the year.
Our Compensation Committee is comprised of Messrs. Leuliette, Coleman and Leight. During the fiscal year ended December 31, 2017, no member of the Compensation Committee (1) was an officer or employee, (2) was formerly an officer or (3) had any relationship requiring disclosure under the rules and regulations of the SEC. During the fiscal year ended December 31, 2017, none of our executive officers served as a (1) member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on the Compensation Committee of our Board, (2) director of another entity, one of whose executive officers served on the Compensation Committee of our Board, or (3) member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on our Board.
Introduction The Board of Directors recognizes that related person transactions present a heightened risk of conflicts of interest and/or improper valuation (or the perception thereof) and therefore has adopted a policy that requires the following in connection with all related person transactions involving the Company. Any "Related Person Transaction" shall be consummated or shall continue only if:
For these purposes, a "Related Person" is:
For these purposes, a "Related Person Transaction" is a transaction between us and any Related Person (including any transactions requiring disclosure under Item 404 of Regulation S-K), other than:
Audit Committee Approval The Board of Directors has determined that the Audit Committee of the Board is best suited to review and approve Related Person Transactions. Management shall present any proposed Related Person Transactions to the Committee for review prior to consummation of the transaction. After review, the Audit Committee shall approve or disapprove such transactions and at each subsequently scheduled meeting, management shall update the Audit Committee as to any material change to those proposed transactions. Corporate Opportunity The Board recognizes that situations exist where a significant opportunity may be presented to management or a member of the Board of Directors that may equally be available to us, either directly or via referral. An example is a potential property acquisition which could become available to us. Before such opportunity may be consummated by a Related Person (other than an otherwise unaffiliated 5% stockholder), such opportunity shall be presented to the Board of Directors for consideration. The intent is for members of management, directors, or employees who become aware of opportunities (such as potential acquisitions) in an area in which we are currently active to present those opportunities to us before the individual is free to pursue it in his personal capacity. For example, through his/her contacts Director X becomes aware of a land acquisition in the Haynesville Shale, and knows this is something that we might also be interested in buying. Thus, before he/she can buy the land or lease the property, he/she must put it before the Board and we must pass on the opportunity before Director X may take action. Disclosure All Related Person Transactions are to be disclosed in the Company's applicable filings as required by the Securities Act of 1933 and the Securities Exchange Act of 1934 and related rules. Furthermore, all Related Person Transactions shall be disclosed to the Audit Committee of the Board and any material Related Person Transaction shall be disclosed to the full Board of Directors. There were no reportable Related Person Transactions for the fiscal year ended December 31, 2017. Other Agreements Management shall assure that all Related Person Transactions are approved in accordance with any requirements of the Company's financing agreements. The following table sets forth a summary of the compensation paid to or earned by our non-employee directors in 2017. Directors who are our full-time employees receive no compensation for serving as directors.
Each non-employee director received the following compensation in 2017:
Pursuant to the In addition to the
Detailed information for submitting stockholder proposals is available upon written request to our Secretary at Goodrich Petroleum Corporation, 801 Louisiana Street, Suite 700, Houston, Texas 77002. These requirements are separate from, and in addition to, the Our Board does not know of any other matters that are to be presented for action at the The information contained in this proxy statement in the sections entitled "Compensation Committee Report" and "Audit Committee Report" shall not be deemed to be "soliciting material" or to be "filed" with the SEC, nor shall such information be incorporated by reference into any future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act of 1933, as amended, or the Exchange Act.
From time to time, we receive calls from stockholders asking how to obtain additional information about us. If you would like to receive information about us, you may use one of the following methods:
(713) 780-9494 or via our website at www.goodrichpetroleum.com/investor.relations.
The following is a
Key Terms.
Transferability. To the extent specifically approved in writing by the Committee, an award may be transferred to immediate family members or related family trusts, limited partnerships or similar entities or other persons on such terms and conditions as the Committee may establish or approve. Except for the foregoing, each award is exercisable only by the participant in his or her lifetime, and no award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a participant other than by will or by applicable laws. Adjustments. In the event of a stock dividend or stock split with respect to the Company's common stock, the number of shares subject to outstanding awards will automatically be proportionately adjusted, without action by the Committee, provided that such adjustment will be evidenced in the plan documents and in accordance with applicable law. In the event the Committee determines that any distribution, recapitalization, reorganization, merger, spin-off, combination, repurchase, or exchange of shares or securities or similar corporate transaction affects the shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of benefits or potential benefits under the LTIP, then the Committee will adjust any or all of (i) the number and type of shares or other securities with respect to which awards may be granted, (ii) the number and type of shares or other securities subject to outstanding awards, and (iii) the grant or exercise price with respect to any award or, if deemed appropriate, make provision for a cash payment. Change of Control. In the event of any distribution, recapitalization, reorganization, merger, spin-off, combination, repurchase, or exchange of shares or other securities, or other similar corporate transaction or event or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations or accounting principles, or a Change of Control (as defined in the LTIP) and whenever action is appropriate in order to prevent the dilution or enlargement of the benefits or potential benefits, the Committee may take any one or more of the following
Amendment and Termination. The Board or the Committee may amend, alter, suspend, discontinue, or terminate the LTIP without consent, provided that any award that is subject to Section 409A of the Code may not be terminated unless the termination would not result in the award becoming subject to additional tax under Section 409A. The Committee may waive any conditions or rights under, amend any terms of, or alter any award, provided no change in any award shall U.S. Federal Income Tax Consequences The U.S. federal income tax rules applicable to awards granted pursuant to the LTIP are summarized below. This summary does not seek to address the tax laws of any municipality, state, or foreign country in which a participant resides in detail. Section
(i) the amount of cash and the fair market value of the
A recipient of restricted stock or performance award generally will be subject to tax at ordinary income tax rates on the fair market value of the shares of common stock when received, reduced by any amount paid by the
A participant who is an employee will be subject to withholding for federal, and generally for state and local, income taxes at the time he recognizes income under the rules described above. The tax basis in the shares of common stock received by a
- 0 GOODRICH PETROLEUM CORPORATION
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR THE
GOODRICH PETROLEUM CORPORATION
May 23, 2018 GO GREEN e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of are available athttp:// www.astproxyportal.com/ast/21080/ Please sign, date and mail your proxy card in the envelope provided as soon as possible.
20330303000000000000 7 052318 FOR AGAINST ABSTAIN Named Executive Officers. changes to the registered name(s) on the account may not be submitted via Note: 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. THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF “FOR ALL NOMINEES” WITH RESPECT TO PROPOSAL 1, A VOTE OF “FOR” WITH RESPECT TO PROPOSALS 2, 3 AND 4. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x 1. Election of Class II Directors: NOMINEES: FOR ALL NOMINEESO Ronald F. Coleman O K. Adam Leight WITHHOLD AUTHORITYO Thomas M. Souers FOR ALL NOMINEES FOR ALL EXCEPT (See instructions below) INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: FOR AGAINST ABSTAIN 2. Ratify the selection of Moss Adams LLP as the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2018. 3. Approve, on an advisory basis, the compensation of our FOR AGAINST ABSTAIN 4. Approve a third amendment to the Goodrich Petroleum Corporation 2016 Long-Term Incentive Plan, as amended from time to time, to increase the number of shares of Company common stock authorized for issuance thereunder. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that this method. Signature of Stockholder Date: Signature of StockholderDate:
GOODRICH PETROLEUM May 23, 2018 CORPORATION
provided IF you are not voting via telephone or the Internet. 20330303000000000000 7 052318 year ended December 31, 2018. O Ronald F. Coleman FOR ALL NOMINEES 3. Approve, on an advisory basis, the compensation of our changes to the registered name(s) on the account may not be submitted via Note: 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. THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF “FOR ALL NOMINEES” WITH RESPECT TO PROPOSAL 1, A VOTE OF “FOR” WITH RESPECT TO PROPOSALS 2, 3 AND 4. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
Stockholder Date: Signature of StockholderDate: NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of are available athttp://
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