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
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CONTINENTAL RESOURCES, INC.
(Name of Registrant as Specified In Its Charter)
NOT APPLICABLE
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Continental Resources, Inc.
Invitation to 20182020 Annual Meeting of Shareholders
DATE: | Thursday, May | |
TIME: | 10:00 a.m. Central Daylight Time | |
PLACE: |
Suite 2470 – Continental Resources Conference Center Oklahoma City, OK 73102 |
April 5, 20182, 2020
Dear Fellow Shareholder:
Please join me at our Annual Meeting on Thursday, May 17, 2018,14, 2020, where you will be asked to vote on: (i) the election of the twothree Class IIIII members named in this Proxy Statement to the Board of Directors; (ii) ratifyan amendment to our Third Amended and Restated Certificate of Incorporation to declassify our Board of Directors; (iii) the ratification of the selection of the independent auditors; and (iii) approve,(iv) the approval, by anon-binding vote, of the compensation of our named executive officers.
The Company is again taking advantage of the Securities and Exchange Commission rule permitting us to provide proxy materials over the Internetinternet to certain of our shareholders. On or about April 5, 2018,2, 2020, we will begin mailing a Notice of Internet Availability of Proxy Materials to shareholders whose shares are held in an account at a brokerage firm, bank or other nominee record holder, informing you the Notice and Proxy Statement for the 20182020 Annual Meeting, 20172019 Annual Report and voting instructions are available online. As more fully described in that Notice, all shareholders receiving such Notice may choose to access proxy materials on the Internetinternet or may request to receive paper copies of the proxy materials. On or about April 5, 2018,2, 2020, we will also mail paper copies of our Notice and Proxy Statement, 20172019 Annual Report and a proxy card to each shareholder whose shares are registered directly in their name with our transfer agent, American Stock Transfer & Trust Company.
In addition to the formal items of business at the Annual Meeting, you will have an opportunity to ask questions and express your views to the senior management of Continental Resources, Inc. Members of our Board of Directors will also be present.
Whether you are able to attend the 20182020 Annual Meeting in person, it is important your shares be represented. Please vote your shares in accordance with the instructions contained in the materials being sent to you. Please vote as soon as possible.
I hope to see you on May 17th.14th.
Harold G. Hamm
Executive Chairman of the Board and
William B. Berry
Chief Executive Officer
CONTINENTAL RESOURCES, INC.
20 N. Broadway
Oklahoma City, Oklahoma 73102
Notice of Annual Meeting of Shareholders
To Be Held On May 17, 201814, 2020
TO THE HOLDERS OF SHARES OF COMMON STOCK:
The 20182020 Annual Meeting of Shareholders of Continental Resources, Inc. (the “Company,” “we,” “our,” or “us”) will be held at the Skirvin Hilton Hotel, Centennial Ballroom, 1 Park Avenue,BancFirst Tower, 100 North Broadway – South Entrance, Suite 2470 – Continental Resources Conference Center, Oklahoma City, OK 73102 on May 17, 2018,14, 2020, at 10:00 a.m. C.D.T., for the following purposes:
1. | To elect the |
2. | To approve an amendment to our Third Amended and Restated Certificate of Incorporation, as amended, to declassify our Board of Directors so that all directors will be elected on an annual basis, beginning with the Annual Meeting of Shareholders in 2021 (Item 2 on the proxy card); |
3. | To ratify the selection of Grant Thornton LLP as our independent registered public accounting firm (Item |
To approve, by anon-binding vote, the compensation of the named executive officers (Item |
To transact such other business as may properly be brought at the Annual Meeting or any adjournment or postponement thereof. |
The Annual Meeting may be recessed from time to time and, at any reconvened meeting, action on the matters specified in this notice may be taken without further notice to shareholders unless required by the Company’s bylaws. In addition, should it be necessary to change the location or time of the meeting due to the impact of any local or national health related emergency measures, or for any other reason, notice of the changed time and/or location will be given by press release, which will specify the new time and/or location of the Annual Meeting. We intend to hold our Annual Meeting in person, if possible. However, we are actively monitoringCOVID-19 (novel Coronavirus) and we are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold our Annual Meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting “virtually,” i.e. solely by means of Internet enabled remote communication. Please monitor our annual meeting website at www.CLR.com for updated information. If you are planning to attend our meeting, please check the website ten days prior to the meeting date. As always, we encourage you to vote your shares prior to the Annual Meeting.
Shareholders of record, at the close of business on March 22, 2018,18, 2020, of our common stock, par value $0.01 per share, are entitled to notice of and to vote on all proposals at the Annual Meeting. A list of all shareholders entitled to vote at the Annual Meeting will be available for inspection at the Annual Meeting and during normal business hours at least ten days prior thereto at our offices located at 20 N. Broadway, Oklahoma City, Oklahoma 73102.
In accordance with rules adopted by the Securities and Exchange Commission, we are pleased to furnish these proxy materials to certain of our shareholders over the Internetinternet and to certain others by mail.
BY THE ORDER OF THE BOARD OF DIRECTORS
/s/ Eric S. Eissenstat
Eric S. Eissenstat
Secretary
DATED: April 5, 20182, 2020
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 17, 201814, 2020
This Notice and Proxy Statement, the accompanying form proxy card and our Annual Report to shareholders are also available on the Internetinternet athttps://materials.proxyvote.com/212015.
CONTINENTAL RESOURCES, INC.
Proxy Statement Annual Meeting of Shareholders May |
Corporate Governance Guidelines and Communications with the Board | ||||
35 | ||||
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Options Exercised and Restricted Stock Vested During | ||||
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | ||||
43 | ||||
43 | ||||
PROPOSAL 3: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 44 | |||
44 | ||||
44 | ||||
45 | ||||
46 | ||||
PROPOSAL 4: APPROVE, BY ANON-BINDING VOTE, THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS | ||||
What vote is required to approve the election of directors (Item 1 on the proxy card)? | ||||
52 | ||||
What if I do not mark a voting choice for some of the matters listed on my proxy card? | ||||
What happens if the Annual Meeting is postponed, relocated or adjourned? | ||||
Who will serve as the inspector of election at the Annual Meeting? | ||||
How can I find out the results of the voting at the Annual Meeting? |
ANNEX A—NYSE Independence Standards GenerallyApplicable to Directors | ANNEX A | |||
ANNEX B—Text of Proposed Amendment to our Third Amended and Restated Certificate of Incorporation | ANNEX B |
This summary contains highlights about Continental Resources, Inc. and our subsidiaries (the “Company”) and the upcoming 20182020 Annual Meeting of Shareholders (the “Annual Meeting”). This summary does not contain all of the information you should consider in advance of the Annual Meeting and we encourage you to read the entire Proxy Statement before voting. When we refer to “us,” “we,” or “our,” we are referring to the Company.
20182020 Annual Meeting of Shareholders
Date and Time: | Thursday, May | |
Location: | ||
Record Date: | March | |
Mail Date: | We intend to mail a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”), or the Proxy Statement, | |
Voting: | Shareholders as of the record date may vote. Each share of our Common Stock, par value $0.01 per share (“Common Stock”), is entitled to one vote for each director nominee and one vote for each of the proposals to be voted on.Each shareholder’s vote is important. Please complete and return your proxy or voter information form, or submit your vote and proxy online (or by telephone if you received a voter information form). |
Voting Matters and Board Recommendations
Matter | Board Vote Recommendation | |
Election of | FOR | |
Proposed amendment to our Third Amended and Restated Certificate of Incorporation declassifying our Board of Directors so that all directors will be elected on an annual basis, beginning with the Annual Meeting of Shareholders in 2021 (“Declassification Proposal”) (Item 2, page 43) | FOR | |
Ratification of selection of Grant Thornton LLP (“Grant Thornton”) (Item | FOR | |
Approve, by anon-binding vote, the compensation of the named executive officers (Item | FOR |
20172019 Performance Highlights
Initiated cash |
Initiated a share repurchase program and repurchased approximately $190.2 million of Common Stock in 2019. |
Achieved full-year 2019 production growth of |
Net cash provided by |
In 2019, reduced total debt by $442 million. |
Year-end |
Continued to exercise capital discipline, reducingnon-acquisition capital expenditures by |
Maintainedlow-cost operations with production expenses of |
Key Executive and Director Compensation Policies and Practices
Independent compensation |
No individual employment agreements. |
Majority of compensation is in the form of restricted stock awards designed to align interests of executives and shareholders. |
Robust stock ownership requirements – 5x of base salary for the Executive Chairman, Chief Executive Officer and President and 3x of base salary for other executive officers, and |
Use of a relevant peer group in establishing compensation. |
Minimal perquisites. |
Prohibition of hedging of Company securities by executive officers and directors. |
Clawback policy applicable to all executive officers. |
Key Governance Policies and Practices
Voluntary establishment of Compensation and Nominating/Corporate Governance Committees, even though exempt from these requirements as a controlled company under New York Stock Exchange (“NYSE”) rules. |
Audit and Compensation Committees composed entirely of independent directors. |
Lead independent director with clearly established authority and responsibility over the governance of our Board of Directors. |
Four of seven directors are independent. |
Regular executive sessions of the Board without management present. |
Board risk management oversight with a focus on the most significant risks facing the Company. |
Annual evaluation process for the Board and its committees. |
Director in uncontested election that does not receive a majority of “for” votes, must submit his or her resignation for consideration by the Nominating/Corporate Governance Committee and the Board. |
Recommendation of the Declassification Proposal for adoption at the Annual Meeting |
For more detailed information regarding our proxy materials and voting at the Annual Meeting, see “Questions and Answers About This Proxy Material and Voting,” at page 46.49.
Election of Directors
General |
Our Board has sixseven members. Our directors are divided into three classes and serve staggered three year terms. Class I, Class II and Class III directors will serve until our annual meetings of shareholders in 2019,2022, 2020 and 2018,2021, respectively. The Board has nominated Lon McCainWilliam B. Berry, Shelly Lambertz and Mark E. Monroe,Timothy G. Taylor, each of whose term as a director expires as of the Annual Meeting, to bere-elected as a Class IIIII director for a term to continue until the 2021 Annual Meeting of Shareholders in 2023, or if the Declassification Proposal is approved, until the Annual Meeting of Shareholders in 2021, each to serve until their respective successor has been elected and qualified or until their earlier resignation or removal. On March 26, 2018, it was announced that Mr. Gallogly had accepted an appointment as president designate ofIf the University of Oklahoma, starting July 1, 2018. In connection with accepting this appointment, Mr. Gallogly submitted his resignation from the Company’s Board of Directors, effectiveDeclassification Proposal is approved at the conclusion of the Annual Meeting, so that he wouldas recommended by our Board, the entire Board will also stand for election at the 2021 Annual Meeting of Shareholders for aone-year term and any director terms extending beyond such meeting, will be shortened by the Declassification Proposal. The directors currently serving in a positioneach of the classes listed above, have indicated their support for the elimination of the classified Board structure and have agreed to devoteallow shareholders to vote on their election to the necessary time and attentionBoard on the basis described above. Mr. Taylor’s appointment to fulfilling his new position.the Board was recommended by the Nominating/Corporate Governance Committee.
The election of a director requires the affirmative vote of a plurality of the shares of Common Stock voting in person or by proxy at the Annual Meeting. All proxies received will be voted, in the absence of instructions to the contrary, “for” there-election of Messrs. McCainBerry and MonroeTaylor and Ms. Lambertz to the Board. While “withheld” votes will not effectaffect the outcome of the election, our Bylaws provide a nominee for director in an uncontested election who receives a greater number of votes “withheld” from his or her election than votes “for” such election shall submit his or her offer of resignation for consideration by the Nominating/Corporate Governance
Corporate Governance Committee of the Board within ninety (90) days from the date of the election. The Nominating/Corporate Governance Committee of the Board shall consider all relevant facts and circumstances and recommend to the Board the action to be taken with respect to such offer of resignation.
Should a nominee for election to the Board be unable to serve for any reason, the Board may designate a substitute nominee in which event all proxies received without instructions will be voted “for” the election of such substitute nominee. To the best knowledge of our Board, each of the named nominees will serve if elected.
The Board recommends the shareholders vote “for” there-election of Lon McCainWilliam B. Berry, Shelly Lambertz and Mark E. MonroeTimothy G. Taylor, to the Board.
The following table outlines certain information about each of the director nominees as well as our other directors as of April 5, 2018:2, 2020:
Name | Age | Director Since | Existing Term Expires | Age | Director Since | Existing Term Expires† | ||||||
Harold G. Hamm | 72 | 1967 | 2019 | 74
| 1967
| 2022
| ||||||
William B. Berry | 65 | 2014 | 2020 | 67
| 2014
| 2020
| ||||||
James L. Gallogly | 65 | 2017 | 2020 | |||||||||
Shelly Lambertz
| 53
| 2018
| 2020
| |||||||||
Lon McCain | 70 | 2006 | 2018 | 72
| 2006
| 2021
| ||||||
John T. McNabb, II | 73 | 2010 | 2019 | 75
| 2010
| 2022
| ||||||
Mark E. Monroe | 63 | 2001 | 2018 | 65
| 2001
| 2021
| ||||||
Timothy G. Taylor
| 66
| 2019
| 2020
|
† | As discussed above and in the Declassification Proposal, if the Declassification Proposal is approved, all incumbent directors’ terms will expire at the 2021 Annual Meeting. |
| Harold G. Hamm has served as | |
Domestic Oil, Inc., served on the board of directors of the Oklahoma Energy Explorers, Oklahoma Independent Petroleum Association andis co-chairman of the Council for a Secure America. | ||
Mr. Hamm’s role as the founder and majority shareholder of our Company, his extensive experience in the energy industry and leadership of our Company for | ||
| William B. Berry has served as our Chief Executive Officer since January 1, 2020. Mr. Berry has been a director since May 2014. He served as Lead Director from the 2016 Annual Meeting through the 2017 Annual Meeting. Mr. Berry served as Executive Vice President, Exploration and Production, of ConocoPhillips Company (“ConocoPhillips”), a major international integrated energy company, from 2003 until his retirement on January 1, 2008. He has over 30 years of experience with ConocoPhillips and Phillips Petroleum Company, which became a part of ConocoPhillips in August 2002. While with these companies, he served at various times in other executive positions including President, Asia Pacific; Senior Vice President of Exploration and Production, Eurasia-Middle East; Vice President of Exploration and Production, Eurasia; and Vice President of International Exploration and Production, New Ventures. While at ConocoPhillips and Phillips Petroleum Company he served in various locations including London, England; Abidjan, Ivory Coast; Stavanger, Norway; Shekou and Beijing, China; and Singapore. Mr. Berry was recognized by the government of China as one of the 31 outstanding foreign | |
experts in 1996. He has served on the board of directors of Franks International since January 2015 and on the | ||
February 2008 to May 2014, Access Midstream Partners, L.P. from June 2013 to May 2014, and Teekay Corporation from June 2012 to December 2015.
Mr. Berry brings extensive domestic and international experience in the oil and gas exploration and production industry and management expertise to his roles as Chief Executive Officer and as a member of the Board. Mr. Berry also brings considerable experience from his position as a director with several other publicly traded companies involved in the energy industry. We believe Mr. Berry’s extensive industry, management and director expertise qualify him to serve on our Board. | ||
| ||
Staff for Frank Lucas (OK). Ms. Lambertz holds a bachelor’s degree in business administration from Oklahoma State University.
Ms. Lambertz’s financial, management and |
| Ellis L. “Lon” McCain has been a director since February 2006 and serves as Chairman of our | |
of directors of Contango Oil & Gas Company (Mr. McCain served on the board of | ||
directors of Crimson Exploration, Inc. until its merger into Contango Oil & Gas Company in October 2013), a domestic exploration and production company traded on the NYSE, and Cheniere Energy Partners, GP, LLC, the general partner of Cheniere Energy Partners, L.P., a publicly traded partnership. Mr. McCain received a B.A. in business administration and an M.B.A. with a major in finance from the University of Denver.
Mr. McCain brings extensive business, financial and management expertise to the Company from his background as Chief Financial Officer of Ellora and Westport and from his tenure as an investment banker specializing in the oil and gas industry. Mr. McCain also brings considerable experience from his position as a director with several other energy companies. We believe Mr. McCain’s extensive business, financial, management and director expertise qualify him to serve on our Board and as Chairman of our |
| John T. McNabb, II has been a director since May 2010 and serves as Chairman of our | |
2011. He was formerly a Managing Director of Bankers Trust New York Corporation (“Bankers Trust”) and a board member of BT Southwest Inc., a wholly-owned subsidiary of Bankers Trust. Mr. McNabb went to Bankers Trust from The Prudential Insurance-Company of America where he had a six year career, commencing in 1984, in positions with Prudential-Bache Securities, The Prudential Corporate Finance Group and Prudential Capital Corporation, a merchant banking affiliate of The Prudential. He started his career with Mobil Oil Corporation in its exploration and production division. Mr. McNabb holds B.A. and M.B.A. degrees from Duke University. Mr. McNabb has served on the board of directors of eight public companies, including Cypress Energy Partners, L.P., where he serves on the Audit Committee and is Chairman of the Conflicts Committee, Willbros, from 2006 to 2016, where he served as Chairman of the Board and on the Audit, Finance and Executive Committees, and Hiland Partners, GP, LLC, from 2006 to 2009, where he served as Chairman of the Conflicts Committee and as a member of the Compensation Committee. Mr. McNabb has also served on the board of directors of The Institute for the Public Trust, a non-profit organization, since October 2017 and as Vice Chairman of the American Leadership Council since August | ||
Mr. McNabb’s extensive banking and investment company experience and his direct work in the oil and gas production and service segments, including his service as Chief Executive Officer of Willbros, make him well suited to serve on our Board. Mr. McNabb’s leadership skills as Founder and Chairman of the board of directors of Growth Capital Partners, L.P. and his public company experience as an audit and compensation committee member also make him well qualified to serve on our Board. We believe this experience qualifies him to serve on our Board and as the Chairman of our |
| Mark E. Monroe has served as a director since November 2001, | |
Association, served on the Domestic Petroleum Council and the National Petroleum Council, and on the boards of directors of the | ||
Independent Petroleum Association of America, the Oklahoma Energy Explorers, and the Petroleum Club of Oklahoma City. Mr. Monroe is a Certified Public Accountant and received his B.A. in business administration from the University of Texas at Austin.
Mr. Monroe’s extensive executive and financial experience from his service in positions as Chief Executive Officer, President and Chief Financial Officer at various public oil and gas companies |
Timothy G. Taylor has been a director since November 2019. Mr. Taylor served as President of Phillips 66 Company (“Phillips”), an integrated downstream company with refining, chemicals and midstream operations, from June 2014 until his retirement in December 2017. Prior to this, Mr. Taylor was Executive Vice President of Commercial, Marketing, Business Development, and Transportation at Phillips from May 2012 to June 2014. While at Phillips, Mr. Taylor also served as President of Phillips 66 Partners from July 2013 to December 2017. Before joining Phillips, Mr. Taylor served as Chief Operating Officer of ChevronPhillips Chemical Company (“ChevronPhillips Chemical”) from February 2010 to December 2011 and Executive Vice President of Olefins/Polyolefin from July 2001 to February 2010. Prior to this, Mr. Taylor served in various executive and management positions at Phillips Petroleum Company. He started his career as a chemical engineer with Texas Eastman Company. Mr. Taylor served on the Board of Directors of ChevronPhillips Chemical from 2012 to 2017 and Phillips 66 Partners from 2013 to 2017. He serves on the advisory board of Triten Energy Partners and the Board of |
Trustees for Kansas State University. He holds a bachelor’s degree in Chemical Engineering from Kansas State University.
Mr. Taylor brings extensive experience in domestic and international refining, chemicals sales and marketing, energy transportation, business development and process management to the Board. We believe Mr. Taylor’s extensive mid-stream and industry experience and director expertise qualify him to serve on our Board.
We are a “controlled company” within the meaning of the listing standards of the NYSE because a limited liability company owned by our Chairman and Chief Executive Officer,Chairman, Harold G. Hamm, and members of his family own more than 50% of our outstanding shares of Common Stock. Consequently, we are not required to comply with certain NYSE listed company requirements, such as the requirement to have a majority of independent directors on our Board, or the requirement to have compensation and nominating committees comprisedcomposed entirely of independent directors. However, we are required to have an independent Audit Committee, and we have voluntarily established a Compensation Committee comprisedcomposed entirely of independent directors and a Nominating/Corporate Governance Committee. The Board uses the independence standards of the NYSE corporate governance rules generally applicable to directors for determining whether directors are independent. A copy of those standards is attached as Annex A. The Board additionally follows applicable rules of the Securities and Exchange Commission (“SEC”) in determining independence for committee members. The Board has determined Messrs. Berry, Gallogly, McCain, McNabb, Monroe and MonroeTaylor have no relationship with the Company other than as a director and shareholder and are independent under the NYSE and SEC rules for purposes of service on the Board and its committees. Until the time the Board acted to appoint him as Chief Executive Officer in December 2019, Mr. Boren, whose term expired at the 2017 Annual Meeting,Berry was determined to be independent on the same basis as described above, during the time of his service.above. Ms. Lambertz is not an independent director due to her relationship to Mr. Hamm and her current service as our Chief Culture Officer and Senior Vice President, Human Resources. Members of each committee are elected annually by the Board and serve for one year terms, until their successors are elected and qualified or until their earlier resignation or removal.
The Board held 97 meetings and acted by unanimous consent 2 times during the year ended December 31, 2017.2019. Directors are expected to attend all meetings of the Board and the committees on which they serve. To bere-nominated, directors must have attended at least 75% of the Board and applicable committee meetings during their term, and all directors (including those beingre-nominated and those in other classes) did so during 2017.2019. All then incumbent directors attended the 20172019 Annual Meeting of Shareholders and all directors plan to attend the 20182020 Annual Meeting. UnderMeeting.Under our Corporate Governance Guidelines, attendance at the Annual Meeting is listed as an indicator to be considereda consideration when evaluating whether a director is devoting sufficient time to his or her responsibilities.
Board Leadership Structure Harold G. Hamm serves as the Company’s Executive Chairman. Mr. Hamm assumed the role of Executive Chairman as of January 1, 2020, in connection with transitioning the role of Chief Executive Officer to Mr. Berry, who assumed such role as of January 1, 2020. Prior to January 1, 2020, Mr. Hamm served in the combined role of Chairman and Chief Executive Officer. Additionally, through
As Executive Chairman, Mr. Hamm is both an officer and employee of the Company. The role of Executive Chairman has been structured so Mr. Hamm can provide the Company with support regarding Board, strategic and stakeholder matters, as well as business
development opportunities, while allowing Mr. Berry to assume primary responsibility for oversight of all the Company’s activities. The Board believes this leadership structure is appropriate because it allows the Company to take advantage of Mr. Hamm’s considerable Company and industry experience, while expanding the Company’s base of leadership and furthering the Company’s succession planning. Through Harold Hamm Family LLC (the “Family LLC”), a limited liability company owned by Harold G. Hamm, members of his family and trusts established for their benefit and for which Mr. Hamm serves as manager, Mr. Hamm exercises voting and dispositive power over approximately 75.28%77.54% of our outstanding shares of Common Stock as of March 22, 2018.18, 2020. The Board believes this leadership structure is appropriate because of the efficiencies of having the Chief Executive Officer also serve in the role of Chairman of the Board, Mr. Hamm’s role in founding the Company, and Mr. Hamm’s ongoing control of a significant financial interestconsiderable ownership stake in the Company throughalso supports the Family LLC.Board’s view that Mr. Hamm’s leadership role as Executive Chairman is appropriate.
Lead Director The Board has appointed Mr. Monroe to serve as lead director with the following responsibilities similar to those typically performed by an independent Chairman: (i) presides at all meetings of the Board at which the Executive Chairman is not present, including executive sessions of the independent directors; (ii) acts as a key liaison between the Executive Chairman, and Chief Executive Officer and the independent directors; (iii) provides input into the materials to be delivered to the directors in advance of each Board meeting; (iv) provides feedback regarding the quality, quantity, and timeliness of those materials; and (v) communicates Board member feedback to the Executive Chairman and the Chief Executive Officer. At the February 20182020 Board meeting, Mr. MonroeMcNabb wasre-appointed appointed to serve as lead director, effective immediately following the Annual Meeting for a period extending through the 20192021 Annual Meeting.
Risk Oversight The Board is responsible for overseeing our Company’s management of risk. The Board strives to effectively oversee our enterprise-wide risk management in a way that balances managing risks while enhancing the long-term value of our Company for the benefit of our shareholders. The Board understands its focus on effective risk oversight is critical to setting our company’sCompany’s tone and culture towards effective risk management. To administer its oversight function, the Board seeks to understand our Company’s risk philosophy by having regular discussions with management to establish a mutual understanding of our Company’s overall appetite for risk. The Board maintains an active dialogue with management, including the Executive Chairman, Chief Executive Officer, Chief Financial Officer, and Chief Risk Officer, about existing risk management processes and how management identifies, assesses and manages our most significant risk exposures, including commodity price risk, liquidity risk, reputational risk, operational risk, safety risk, cybersecurity risk, compliance risk and legal risk. The Board appointed Eric S. Eissenstat in May 2014 as Chief Risk Officer to further enhance the Company’s enterprise risk management. Mr. Eissenstat is primarily responsible for instituting risk management practices consistent with our overall business strategy and risk profile. The Board expects, and receives, regular updates from Mr. Eissenstat and other members of our management team about our most significant risks so as to enable it to evaluate whether management is responding appropriately. For example, seniorSenior management attends Board meetings and is available to address any questions or concerns raised by our Board on risk management-related and other matters. In addition, our Board receives presentations from senior management on strategic matters.
The Board also relies on each of its committees to help oversee the risk management responsibilities relating to the functions performed by such committees. The Audit Committee considers risks related to financial reporting including overseeing our internal controls and interacting with our independent public accounting firm at least quarterly. The Compensation Committee oversees our compensation practices to ensure they do not encourage unnecessary and excessive risk taking by management. The Nominating/Corporate Governance Committee oversees risks relating to our corporate governance and compliance programs and assists the Board and management in promoting an organizational culture that encourages commitment to ethical conduct and a commitment to compliance with the law. Each of the Board’s committees report regularly to the Board on risk-related matters within its responsibilities. While the Board does not directly consider the Company’s risk profile and management program in assessing its leadership structure, a board member’s ability to oversee the risks associated with the matters supervised by a committee is considered in making committee appointments.
Board CommitteesOur Board has three standing committees: (i) an Audit Committee; (ii) a Compensation Committee; and (iii) a Nominating/ Corporate Governance Committee. Each committee is governed by a written charter approved by the full Board. These charters form an integral part of our corporate governance policies and are available on our website,www.CLR.com.
The tables below provide information regarding the current composition of each standing committee of our Board, the significant responsibilities of each committee as set forth in their respective charters and the number of times each committee met or acted by written consent in 2017:2019:
Name of Committee and Members | Principal Functions of the Committee | Meetings in 2017 | Written Consents in 2017 | |||||||||||
Audit
Mark E. Monroe, Chairman† James L. Gallogly†* Lon McCain† | The Audit Committee is appointed by our Board to perform an oversight function. Pursuant to its Charter, the responsibilities of the Audit Committee are:
| 5 | 1 | |||||||||||
select and oversee our relationship with our independent registered public accounting firm;
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review with our independent registered public accounting firm the scope and results of our annual audit and any other reviews conducted by such firm;
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discuss our earnings releases and guidance with financial management;
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review our financial statements and reports including Forms10-K and Forms10-Q as well as any major issues regarding accounting principles;
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review significant financial reporting issues and practices;
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monitor internal control policies and practices;
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establish procedures for receipt, consideration, and treatment of issues raised regarding accounting, internal accounting control or auditing matters;
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review our major financial risk exposures;
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review proposals of related party transactions;
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review and approve internal audit plan and budget;
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approve decisions regarding appointment and removal of chief audit executive; and
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review the effectiveness and performance of our internal audit function.
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Name of Committee and Members
| Principal Functions of the Committee
| Meetings
| Written Consents in 2019
| |||||
Audit*
Lon McCain, Chairman† John T. McNabb, II† Timothy G. Taylor | The Audit Committee is appointed by our Board to perform an oversight function. Pursuant to its Charter, the responsibilities of the Audit Committee are:
| 6 | 0 | |||||
select and oversee our relationship with our independent registered public accounting firm;
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review with our independent registered public accounting firm the scope and results of our annual audit and any other reviews conducted by such firm;
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discuss our earnings releases and guidance with financial management;
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review our financial statements and reports including Forms10-K and Forms10-Q as well as any major issues regarding accounting principles;
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review significant financial reporting issues and practices;
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monitor internal control policies and practices;
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establish procedures for receipt, consideration, and treatment of issues raised regarding accounting, internal accounting control or auditing matters;
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review our major financial risk exposures;
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review proposals of related party transactions;
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review and approve internal audit plan and budget;
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approve decisions regarding appointment and removal of chief audit executive; and
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review the effectiveness and performance of our internal audit function.
|
Mr. McCain replaced Mr. Monroe as Chairman of the Audit Committee following the 2019 Annual Meeting of Shareholders and Mr. McNabb joined the Audit Committee following such meeting. Mr. Monroe left the Audit Committee following the 2019 Annual Meeting of Shareholders. Mr. Taylor joined the Audit Committee in connection with his appointment to the Board in November 2019. Mr. Berry left the Audit Committee in December 2019, concurrent with the Board action appointing him as Chief Executive Officer. Following the conclusion of the Annual Meeting the Audit Committee will be composed of the same individuals as indicated above. |
† | The Board has determined this individual is an Audit Committee Financial Expert. |
Name of Committee and Members | Principal Functions of the Committee | Meetings in 2017 | Written Consents in 2017 | |||||
Compensation
Lon McCain, Chairman William B. Berry James L. Gallogly* John T. McNabb, II | Pursuant to its Charter, the responsibilities of the Compensation Committee are as follows:
review our compensation philosophy and how our pay programs align with that philosophy;
review whether risks from our compensation policies and practices are reasonably likely to have a material adverse effect;
review and make recommendations in connection with “say on pay” votes and the frequency with which we conduct such votes;
review and administer all compensation plans and provide oversight in connection with grants and awards under such plans;
��� oversee the terms of any employment contract or change of control agreement applicable to our officers;
oversee the drafting of the Compensation Discussion and Analysis portion of our proxy statement;
oversee awards of stock or other equity compensation to employees;
review and approve the individual elements of the total compensation of senior executives, including the Chief Executive Officer;
review and make recommendations to the Board with respect to director compensation; and
oversee our share ownership guidelines applicable tonon-employee directors and senior executives, including the Chief Executive Officer. | 6 | 0 |
Name of Committee and Members | Principal Functions of the Committee | Meetings in 2017 | Written Consents in 2017 | |||||
Nominating/ Corporate Governance
John T. McNabb, II, Chairman William B. Berry* Harold G. Hamm† Mark E. Monroe | Pursuant to its Charter, the responsibilities of the Nominating/Corporate Governance Committee are as follows:
identify individuals qualified to become Board members, recommend those qualified members to the Board, and recommend the director nominees to the Board for each annual meeting of the Company’s shareholders or to fill vacancies on the Board;
recommend nominees to the Board for each committee of the Board and review committee member qualifications;
make recommendations to the Board regarding the composition and size of the Board;
develop and make recommendations to the Board in connection with the director nomination process and other corporate governance matters;
assess the independence of directors and director nominees;
develop and recommend to the Board the Corporate Governance Guidelines applicable to the Company;
lead the Board in its annual review of the Board’s performance;
provide risk oversight with respect to the areas of responsibility of the Nominating/Corporate Governance Committee set forth in its Charter;
review succession plans relating to our Chief Executive Officer and the other executive officer positions;
oversee director continuing education and the orientation program for new directors;
oversee our legislative affairs activities and any political action committees; and
oversee communications between management and shareholders of the Company relating to corporate governance. | 4 | 0 |
Additional Information Regarding the Audit Committee. Pursuant to its Charter, the Audit Committee has the authority to retain outside counsel or other experts to advise the Committee in connection with the exercise of its powers and responsibilities. In discharging its oversight role, the Audit Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company. The Audit Committee meets at least quarterly with our senior management, our director of internal audit and our independent auditors to discuss any matters the Audit Committee or any of these individuals or groups believe should be discussed in private. The Audit Committee makes regular reports to the Board.
In 2017,2019, the Audit Committee discussed the financial information contained in each quarterly and annual SEC filing with the Chief Financial Officer and independent auditors prior to public release.
Name of Committee and Members
| Principal Functions of the Committee
| Meetings in 2019
| Written Consents in 2019
| |||||
Compensation*
John T. McNabb, II, Chairman Lon McCain Mark E. Monroe Timothy G. Taylor | Pursuant to its Charter, the responsibilities of the Compensation Committee are as follows:
review our compensation philosophy and how our pay programs align with that philosophy;
review whether risks from our compensation policies and practices are reasonably likely to have a material adverse effect;
review and make recommendations in connection with “say on pay” votes and the frequency with which we conduct such votes;
review and administer all compensation plans and provide oversight in connection with grants and awards under such plans;
oversee the terms of any employment contract or change of control agreement applicable to our officers;
oversee the drafting of the Compensation Discussion and Analysis portion of our proxy statement;
oversee awards of stock or other equity compensation to employees;
review and determine the individual elements of the total compensation of senior executives, including the Chief Executive Officer and recommend Chief Executive Officer compensation for approval by the Board;
review and make recommendations to the Board with respect to director compensation; and
oversee our share ownership guidelines applicable tonon-employee directors and senior executives, including the Chief Executive Officer.
| 6 | 2 |
* | Mr. Berry replaced Mr. McCain as Chairman of the Compensation Committee following the 2019 Annual Meeting of Shareholders and Mr. Monroe joined the Compensation Committee following such meeting. Mr. McCain continued serving as a member of the Compensation Committee following the 2019 Annual Meeting of Shareholders. Mr. Taylor joined the Compensation Committee in connection with his appointment to the Board in November 2019. Mr. Berry left the Compensation Committee in December 2019, concurrent with the Board action appointing him as Chief Executive Officer and Mr. McNabb replaced Mr. Berry as Chairman at such time. Following the conclusion of the Annual Meeting the Compensation Committee will be composed of the following individuals: Mr. McNabb (Chairman), Mr. Monroe and Mr. Taylor. |
Additional Information Regarding the Compensation Committee. The role the Compensation Committee plays in establishing our executive officer compensation is further described below in “Executive Compensation and Other Information—Compensation Discussion and Analysis.” The Compensation Committee has the authority to retain or terminate consultants, including the authority to approve the consultants’ fees and other retention terms. In 2017,2019, the Compensation Committee employed Longnecker & Associates (“Longnecker”), and Meridian Compensation Partners, LLC (“Meridian”)whose engagement isengagements are described in the Compensation Discussion and Analysis section herein.
Name of Committee and Members
| Principal Functions of the Committee
| Meetings in 2019
| Written Consents in 2019
| |||||
Nominating/ Corporate Governance*
Mark E. Monroe, Chairman John T. McNabb, II Harold G. Hamm† Shelly Lambertz† | Pursuant to its Charter, the responsibilities of the Nominating/Corporate Governance Committee are as follows:
identify individuals qualified to become Board members, recommend those qualified members to the Board, and recommend the director nominees to the Board for each annual meeting of the Company’s shareholders or to fill vacancies on the Board;
recommend nominees to the Board for each committee of the Board and review committee member qualifications;
make recommendations to the Board regarding the composition and size of the Board;
develop and make recommendations to the Board in connection with the director nomination process and other corporate governance matters;
assess the independence of directors and director nominees;
develop and recommend to the Board the Corporate Governance Guidelines applicable to the Company;
lead the Board in its annual review of the Board’s performance;
provide risk oversight with respect to the areas of responsibility of the Nominating/Corporate Governance Committee set forth in its Charter;
review succession plans relating to our Chief Executive Officer and the other executive officer positions;
oversee director continuing education and the orientation program for new directors;
oversee our legislative affairs activities and any political action committees;
oversee communications between management and shareholders of the Company relating to corporate governance and;
review and provide oversight of environmental, social and governance and sustainability issues and risks.
| 5 | 1 |
* | Mr. Berry left the Nominations/Corporate Governance Committee following the 2019 Annual Meeting of Shareholders. Mr. Monroe replaced Mr. McNabb as Chairman of the Nominations/Corporate Governance Committee in December 2019. Mr. McNabb continued serving as a member of the Nominations/Corporate Governance Committee after Mr. Monroe replaced him as Chairman. Following the conclusion of the Annual Meeting the Nominating/Corporate Governance Committee will be composed of the following individuals: Mr. Monroe (Chairman), Mr. McCain, Mr. McNabb, Mr. Hamm, and Ms. Lambertz. |
† | Mr. Hamm and Ms. Lambertz are management directors. |
Corporate Governance Guidelines and Communications with the Board |
We have adopted Corporate Governance Guidelines and a Code of Business Conduct and Ethics in accordance with the rules of the NYSE. We last amended our Corporate Governance Guidelines in March 2017February 2020 and our Code of Business Conduct and Ethics (formerly titled Code of Ethics) in September 2014. The Code of Business Conduct and Ethics is applicable to all employees and directors, including our principal executive, financial, and accounting officers. In addition, each of the standing committees of the Board has a charter which has been approved by the Board. Copies of the Corporate Governance Guidelines, Code of Business Conduct and Ethics, and committee charters are available on our website, www.CLR.com, and a printed copy of any of these documents will be made available to any shareholder requesting one from our Secretary.
Our Corporate Governance Guidelines require theournon-management directors to meet in regularly scheduled executive sessions. As Lead Director, Mr. Monroe was selectedpresided over 4executive sessions in 2019.
Each year, the Board and its committees perform a self-evaluation. As required by the Company’s Corporate Governance Guidelines, the Nominating/Corporate Governance Committee oversees this process. The performance evaluations solicit input from directors regarding the effectiveness of the Board, its committees and individual directors. The input is sought in order to serveprovide the Board as leada whole, as well as individual directors, an opportunity to identify strengths, weaknesses and opportunities for improvement. The Company’s General Counsel has individual conversations with each member of the Board and reviews each director’s responses to questions distributed to the director throughin advance of the 2018 Annual Meetingconversation. The General Counsel then summarizes the results of the interviews and actingpresents this information to the Nominating/Corporate Governance Committee. Subject to limited exceptions, the summary is prepared in a manner that capacity, heassures the content isn’t identifiable as the feedback of any given director. The Nominating/Corporate Governance Committee reviews the summary and Mr. Berry, his predecessor as Lead Director, presided over 3 executive sessions in 2017. Atensures the February 2018 Board meeting, Mr. Monroe wasre-appointedis informed of self-evaluation results and recommendations. If appropriate, the Board evaluates the information presented and adopts any recommended improvements determined to serve as lead director,be necessary or desirable. The Board believes the process described above is effective immediately followingand improves the Annual Meeting for a period extending throughoverall function and effectiveness of the 2019 Annual Meeting.Board.
Any shareholder or interested party desiring to communicate or express concerns to us, directors generally,non-management directors or an individual director may do so only by submission in writing to Continental Resources, Inc., Attn: Secretary, 20 N. Broadway, Oklahoma City, Oklahoma 73102, with information sufficient to identify the person submitting the communication or concern, including the name, address, telephone number, and ane-mail address (if applicable), together with information indicating the relationship of such person to us. Our Secretary is responsible for maintaining a record of any such communications or concerns and submitting them to the appropriate person(s) for potential action or response. We will verify the authenticity of any communication or concern before submission. We are not obligated to investigate or submit any anonymous submissions from persons who are not our employees. We have established robust policies in connection with whistleblower complaints submitted by employees andnon-employeesand we have established procedures designed to ensure we effectively follow such policies.
Although we are a “controlled company” under the listing standards of the NYSE, the Board has voluntarily established a Nominating/Corporate Governance Committee. Our Nominating/Corporate Governance Committee is responsible for assessing the skills and characteristics of Board members and for screening potential Board candidates. While the Nominating/Corporate Governance Committee has no minimum qualifications for candidates, the Committee generally reviews and evaluates both incumbent and potential new directors to achieve diversity of skills and experience among our directors, based on the following criteria set forth in our Corporate Governance Guidelines:
commitment and background to represent shareholder interests; |
moral character and integrity; |
ability to apply sound business judgment; |
independence and freedom from conflicts of interest; |
ability to devote time necessary to understand the Company and carry out the duties of a director, including attendance at meetings and consultation on Company matters; |
ability to function as a team member and communicate effectively; |
professional and personal accomplishments; |
understanding of strategic issues; |
ability to understand financial matters and read financial statements; |
oil and gas exploration and energy experience; and |
experience with risk assessment. |
Qualified candidates for nomination to the Board are considered without regard to race, color, religion, gender or national origin. The process used by the Nominating/Corporate Governance Committee for identifying and evaluating nominees for the Board consists of reviewing qualifications of candidates suggested by management, other Board members, shareholders, or other sources. In evaluating nominees, the Nominating/Corporate Governance Committee considers whether it has been successful in achieving the desired diversity of skills and experience based on the then current composition of the Board. The Nominating/Corporate Governance Committee will consider recommendations for nomination as a Board member by any shareholder of the Company who is a shareholder of record at the time of giving notice to the Company as provided in the Company bylaws (the “Bylaws”), is entitled to vote on the election of directors at the meeting, and complies with the notice procedures set forth in our Bylaws. Such nominations shall be made pursuant to timely notice in writing to Continental Resources, Inc., Attn: Secretary, 20 N. Broadway, Oklahoma City, Oklahoma 73102. The Nominating/Corporate Governance Committee will identify a replacement for Mr. Gallogly and make a recommendation for approval by the Board as soon as practicable following Mr. Gallogly’s departure from the Board after the conclusion of the Annual Meeting.
To be timely, a shareholder’s notice shall be delivered to or mailed and received at our principal executive office (i) with respect to an election of directors to be held at the annual meeting of the shareholders of the Company, not later than ninety (90) days or more than one hundred twenty (120) days prior to the one year anniversary date of the preceding year’s annual meeting of shareholders of the Company; provided, however, if the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, to be timely, a shareholder’s notice must be so delivered not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made; and (ii) with respect to a special meeting of shareholders called for the purpose of electing one or more directors to the Board, not earlier than the ninetieth (90th) day prior to such special meeting and not later than the close of business on the later of the seventieth (70th) day prior to such special meeting or the tenth (10th) day following the day on which public announcement of the date of the special meeting is first made. Such shareholder’s notice to the Secretary shall set forth (a) as to each person whom the shareholder proposes to nominate for election orre-election as a director, all information relating to the person required to be disclosed in solicitations for proxies for election of directors, or is otherwise required, pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including the written consent of such person to be named in the proxy statement as a nominee and to serve as a director if elected), and (b) as to the shareholder giving the notice (i) the name and address, as they appear on the Company’s books, of such shareholder, and (ii) the class and number of shares of capital stock of the Company that are beneficially owned by the shareholder.
There are no specific minimum qualifications for shareholder nominees. The Company has not previously received nominees from shareholders. All nominees, regardless of source, will be evaluated by the Nominating/Corporate Governance Committee in the same manner and using the same criteria as is used for nominees recommended by the committee.
The Compensation Committee consists of Messrs. Berry, Gallogly, McCain, McNabb, Monroe and McNabb. Mr. Gallogly joined the Committee after the 2017 Annual MeetingTaylor. For a discussion of Shareholders. There were no other changes to the composition of the Compensation Committee during 20172019, please see the footnote to the table regarding the Compensation Committee appearing on page 13 above.During 2017,2019, there were no interlocking relationships as defined by the SEC.
Certain Relationships and Related
Party Transactions
Our Audit Committee Charter provides the Audit Committee shall review all related party transactions (as defined below) and recommend approval or disapproval to the Board of any such transaction.
The Charter defines a “related party transaction” as a transaction, proposed transaction, or series of similar transactions, in which (a) we are a participant, (b) the amount involved exceeds $120,000 annually and (c) a related person (as defined below) has or will have a direct or indirect material interest. A “related person” is (a) any person who is, or at any time since the beginning of our last fiscal year was, a director, executive officer, or nominee to become a director, (b) a person known to beneficially own 5% or more of any class of our voting securities, (c) an immediate family member of any of the foregoing persons (which means any child, stepchild, parent, stepparent, spouse, sibling,mother-in-law,father-in-law,son-in-law,daughter-in-law,brother-in-law, orsister-in-law), and (d) any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee for director or greater than 5% beneficial owner. The Audit Committee considers the adequacy of disclosure and fairness to us of the matters considered.
The Audit Committee has adopted a written policy which includes factors for committee members to consider in exercising their business judgment including (a) terms of the transaction with the related party, (b) availability of comparable products or services from unrelated third parties, (c) terms available from unrelated third parties and (d) the benefits to us. The Audit Committee recommends for approval only those related party transactions that are, in its business judgment, in our best interests and on terms no less favorable to us than we could have achieved with an unaffiliated party.
In 2017,2019, we participated in the related party transactions described below.below, except for certain compensation related matters for Ms. Lambertz and Justin Rangel, which occurred in 2020. Based upon the review and recommendations of our Audit Committee, or of our Board, or other committee thereof in the case of the transactions described in the following sentence, we believe the transactions described below are in our best interests and are on terms no less favorable to us than we could have achieved with an unaffiliated party. Our Audit Committee reviewed and recommended each of the transactions described below except that a Special Committee of the Board reviewed and recommended the registration rights agreement described below under “Registration Rights Agreements—Wheatland Transaction Registration Rights Agreement;” and the full Board reviewed and recommended the registration rights agreement described below under “Registration Rights Agreements—Initial Public Offering Registration Rights Agreement.”
Royalty and Common Ownership
In 2017,2019, we received approximately $302,000 from$300,000from the Harold G. Hamm Trust (the “Hamm Revocable Trust”), a trust of which Harold G. Hamm, our Chief Executive Officer and Chairman, of the Board, is the trustee and sole beneficiary, for billings on interests owned in various oil and gas wells which we operate. We also disbursed to the Hamm Revocable Trust approximately $458,000$400,000 in 20172019 for the Hamm Revocable Trust’s share of oil and gas sales attributed to these interests which were received from the purchasers of production. At December 31, 2017,2019, approximately $47,000$123,000 was due from the Hamm Revocable Trust and approximately $46,000$32,000 was due to the Hamm Revocable Trust.
Aircraft Related Matters
From time to time, we have used the aircraft of Transwestern Transports, LLC (“Transwestern”), an entity owned by Mr. Hamm, to facilitate efficient transportation of personnel. The rates charged vary by type of aircraft used. In 2017,2019, we paid Transwestern approximately $368,000 for$426,000for use of its aircraft and reimbursement of expenses and owed approximately $92,000 to$38,000to Transwestern at December 31, 2017.2019.
Registration Rights Agreements
Initial Public Offering Registration Rights Agreement. In connection with the closing of our initial public offering in May 2007, we entered into a registration rights agreement with the Hamm Revocable Trust and the two irrevocable trusts established for the benefit of Mr. Hamm’s children pursuant to which we granted to the trusts certain demand and “piggyback” registration rights. The Hamm Revocable Trust and the two irrevocable trusts identified above transferred the securities subject to this registration rights agreement to the Family LLC in September 2015 (the “September Transfer”). As a result, the rights of the Hamm Revocable Trust and the two irrevocable trusts under this registration rights agreement may be assigned to the Family LLC at the direction of these entities. Under the registration rights agreement, each holder of securities covered by the registration rights agreement has the one time right to require us to file a registration statement for the public sale of all or part of the shares of Common Stock owned by it at any time if at least six months have passed since the last demand registration statement. In connection with a demand by any such holder, thenon-demanding parties have the right to participate in such registration process. However, in the event securities are to be sold in an underwritten offering pursuant to such demand registration statement and the managing underwriter thereof advises the participants the amount of securities to be offered thereby should be limited, such limitation shall be satisfied first from the securities allocated to participants other than the demanding party.
If we sell any shares of our Common Stock in a registered underwritten offering, each holder of securities covered by the registration rights agreement has the right to include its shares in that offering. The underwriters of any such offering have the right to limit the number of shares to be included in such sale. We will pay all expenses relating to any demand or piggyback registration, except for underwriters’ or brokers’ commissions or discounts. The securities covered by the registration rights agreement will no longer be registrable under the registration rights agreement if they have been sold to the public either pursuant to a registration statement or under Rule 144 promulgated under the Securities Act of 1933, as amended.
Wheatland Transaction Registration Rights Agreement. In March 2012, the Company entered into a Reorganization and Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with Wheatland Oil Inc. (“Wheatland”) and the shareholders of Wheatland. Wheatland iswas owned 75% by the Hamm Revocable Trust and 25% by Jeffrey B. Hume, the Company’s Vice Chairman of Strategic Growth Initiatives.
Pursuant to the Purchase and Sale Agreement, we entered into a registration rights agreement granting the Hamm Revocable Trust and Mr. Hume registration rights for the shares of Common Stock they received, at the direction of Wheatland, upon the closing of the acquisition (the “Registrable Securities”). The Hamm Revocable Trust transferred the Registrable Securities held by it to the Family LLC as part of the September Transfer. As a result, the rights of the Hamm Revocable Trust under this registration rights agreement may be assigned to the Family LLC at the direction of the Hamm Revocable Trust and Family LLC. Under the registration rights agreement, each holder of Registrable Securities has demand and “piggyback” registration rights. The demand rights enable each of the holders of Registrable Securities to require us to register their respective shares of Registrable Securities with the SEC at any time, subject to certain limited exceptions, including the requirement that the aggregate proceeds from the demand registration exceed $40 million (net of underwriting discounts and commissions) and the Company is not required to effect more than four demand registrations in any three yearthree-year period. The piggyback rights allow each of the holders of Registrable Securities to register their Registrable Securities along with any shares we register with the SEC. These registration rights are subject to customary conditions and limitations, including the right of the underwriters of an offering to limit the number of shares.
Enid Building SaleShelly Lambertz Compensation
During 2019, in connection with her service as the Company’s Vice President, Human Resources, Ms. Lambertz received the following compensation: (i) annual base pay of approximately $267,000, with an annual cash incentive bonus target of 40% of her annual base pay; (ii) a target annual stock grant value of $300,000; and (iii) participation in the Company’s benefits programs on terms consistent with the Company’s standard practices for employees hired at Ms. Lambertz’s level. When employees are hired they typically receive a stock grant equivalent to three years of their annual target value, vesting ratably over a three-year period. The value of the stock awarded to Ms. Lambertz in connection with her employment, in 2018, was consistent with the Company’s typical practice. In February of 2019, Ms. Lambertz received an award of 2,193 shares of restricted Common Stock, vesting February 2022. The total number of shares of restricted Common Stock held by Ms. Lambertz at December 31, 2019 was 12,439 shares.Ms. Lambertz is the daughter of Mr. Hamm.
In February, 2020, Ms. Lambertz was promoted to Chief Culture Officer and Senior Vice President, Human Resources. In connection with her promotion, Ms. Lambertz received the following compensation: (i) annual base pay of $308,000, with an annual cash incentive bonus target of 50% of her annual base pay; (ii) a target annual stock grant value of $550,000; and (iii) participation in the Company’s benefits programs on terms consistent with the Company’s standard practices for employees hired at Ms. Lambertz’s level. Ms. Lambertz also received an additional aggregate amount of $180,375 added to existing restricted stock awards vesting from 2020 to 2022, with $18,000, $13,500, $90,000, $31,500 and $27,375 in value being added to the shares vesting in each of May 2020, November 2020, May 2021, November 2021, and February 2022, respectively. The grant related to the additional amount described above was made in February 2020. Due to the current economic environment, Ms. Lambertz has elected to forego any increase in her base salary resulting from her promotion effective March 8, 2020, for an indefinite period.
Justin Rangel Compensation
In July 2017, HTH Enterprises, LLC, an entity 100% owned by Harold Thomas Hamm,January 2020, Justin Rangel, the son of Mr. Hamm,Ramiro Rangel, one of our Chairman and Chief Executive Officer, purchased a building located in Enid, Oklahoma fromexecutive officers, joined the Company as a crude oil scheduler. The compensation package awarded to Mr. Rangel in connection with his employment is as follows: (i) annual base pay of $84,500, with an annual cash incentive bonus target of 15% of his annual base pay; (ii) a target annual stock grant value of $14,000; and (iii) participation in the Company’s benefits programs on terms consistent with the Company’s standard practices for employees hired at Mr. Rangel’s level. When employees are hired they typically receive a gross sales pricestock grant equivalent to three years of $565,000.their annual target value, vesting ratably over a three-year period. Mr. Rangel has received such a grant. The gross sales price forvalue of the building representsstock awarded to Mr. Rangel in connection with his employment was consistent with the average of two independent appraisals.Company’s typical practice.
Non-Employee Director Compensation
General |
The Compensation Committee reviews annually the total compensation paid to ournon-employee directors. The purpose of the review is to ensure the level of compensation is appropriate to attract and retain a diverse group of directors with the breadth of experience necessary to perform our Board’s duties, and to fairly compensate our directors for their service. This review includes consideration of qualitative and quantitative factors. To ensure directors are compensated relative to the scope of their responsibilities, the Compensation Committee considers: (a) the time and effort involved in preparing for Board, committee and management meetings and the additional duties assumed by committee chairs; (b) the risks associated with serving on the Board; and (c) the compensation paid to directors at a peer group of companies as reported by the Compensation Committee’s compensation consultant.
The following table summarizes the compensation ofnon-employee directors for the year ended December 31, 2017:2019:
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2) | Other ($) | Total ($) | ||||||||||||||||||||||||
Name(1) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(2)(3) | Total ($) | |||||||||||||||||||||||||
William B. Berry | $ | 91,824 | $ | 223,738 | $ | — | $ | 315,562 | $ | 100,188 | — | $ | 100,188 | |||||||||||||||
David L. Boren | 27,214 | — | (3) | — | 27,214 | |||||||||||||||||||||||
James L. Gallogly | 58,450 | 671,215 | (4) | — | 729,665 | |||||||||||||||||||||||
Lon McCain | 97,375 | 223,738 | — | 321,113 | 97,306 | — | 97,306 | |||||||||||||||||||||
John T. McNabb, II | 88,265 | 223,738 | 232 | (5) | 312,235 | 94,598 | — | 94,598 | ||||||||||||||||||||
Mark E. Monroe | 103,683 | 223,738 | 312 | (5) | 327,733 | 99,975 | — | 99,975 | ||||||||||||||||||||
Timothy G. Taylor(4) | 10,744 | $ | 120,186 | 130,930 |
(1) | This table lists the individuals who served asnon-employee directors during 2019. Mr. Berry served as anon-employee director through December 31, 2019. On January 1, 2020, Mr. Berry commenced service as the Company’s Chief Executive Officer and his status as anon-employee director terminated and he continues to serve as an employee director. Directors who are also full-time employees receive no compensation for serving as directors. As a result, the compensation information for Mr. Hamm and Ms. Lambertz is not reported in the table above. Mr. Hamm’s compensation for his service as an employee during 2019 is fully reported within the Summary Compensation Table at page 36. A summary of Ms. Lambertz’s compensation as our Vice President, Human Resources during 2019 and the compensation package associated with her promotion to Chief Culture Officer and Senior Vice President, Human Resources in February 2020 appears in “Certain Relationships and Related Party Transactions—Shelly Lambertz Compensation” at page 18. |
(2) | The amounts in this column represent the aggregate grant date fair value for grants in fiscal year |
The following restricted stock awards were outstanding as of December 31, |
rate as other shareholders and allnon-employee directors receive |
(4) | Mr. |
Directors who are also full-time employees receive no compensation for serving as directors. Mr. Hamm’s compensation for his services as an employee is fully reported within the Summary Compensation Table on pages 32 and 33. We reimburse all directors for reasonableout-of-pocket expenses incurred in connection with their services as directors in accordance with our general expense reimbursement policies.Non-employee directors may participate in our medical and dental benefit programs, which are available to all full-time employees, as well as the Company’snon-qualified deferred compensation program (“DCP”).
During 2017,2019, the amount of the base annual retainer was $60,500. The amount of the annual retainer paid to the chair of the Audit Committee was $25,000; the amount of the annual retainer paid to the chair of the Compensation Committee was $15,000; and the amount of the annual retainer paid to the chair of the Nominating/Corporate Governance Committee was $16,000. During 2017,2019, the annual retainer for Audit Committee members was $21,875; the annual retainer for Compensation Committee members was $11,765; and the annual retainer for Nominating/Corporate Governance Committee members (except for Mr. Hamm)Hamm and Ms. Lambertz) was $10,765. The retainer structure described in this paragraph remains in effect as of the date of this filing.April 2, 2020.
Any applicable annual retainer was paid quarterly on apro-rata basis and the amounts appearing in the table above reflect the retainer rate applicable to the quarter in which it was paid. None of thenon-employee directors elected to participate in the DCP during 2017.
During 2017,2019, the amount of the annual retainer for the position of Lead Director was $12,000 and this rate remains in effect as of the date of this filing.April 2, 2020.
Equity-Based Compensation |
In addition to cash compensation, we have awarded and intend to continue to award restricted Common Stock to each of ournon-employee directors.directors, as described in Footnote 2 to the 2019 Director Compensation Table on page 20. On May 18, 2017, each of ournon-employee directors, other thanNovember 20, 2019, Mr. Boren and Mr. Gallogly, was granted 5,403 shares of restricted Common Stock which vest on May 15, 2020. On May 18, 2017, Mr. GalloglyTaylor received a grant of 16,2093,887 shares; which vests in increments of 5,403 shares on each of May 15, 2018; May 15, 2019; and May 15, 2020. It is expected Mr. Gallogly will forfeit the shares associated with the May 15, 2019 and May 15, 2020 vestings2020; in connection with his resignation fromappointment to the Board effective after the Annual Meeting. Mr. Boren did not receiveas a restricted Common Stock grant since he did not serve past the expiration of his term at the 2017 Annual Meeting. Our general practice has been to grant tonon-employee director. Historically, we have granted eachnon-employee director shares of restricted stock annually, with such shares vesting three years after the date of grant. The Board is transitioning stock awards tonon-employee directors away from shares which vest three years from the grant date to shares which vest one year from the grant date. The Board made the decision to transition away from stock awards with three year vesting, in order to align director compensation with year-long terms, in anticipation of shareholder approval of the Declassification Proposal. The number of shares of any future award maywill be impacted by the value of our stock at the time of the award and other relevant factors. Through the grant of such equity-based compensation, we are able to align a portion of ournon-employee directors’ compensation with the performance of our Common Stock.
We have adopted a Common Stock ownership requirement fornon-employee directors. Eachnon-employee director is required to own shares of our Common Stock with a market value equal to at least threefive times the base annual retainer. In addition, we have a policy which prohibits certain employees and directors from holding our securities in a margin account or pledging our securities as collateral, unless permission is received from our General Counsel in writing, orwriting. We also have a policy that prohibitsnon-employee directors from engaging in certain transactions which may hedge the value of our securities held by them. For a more detailed discussion of the policy described in the prior sentence, see “Hedging Policy” on page 35 below.
Until the stock ownership guideline is achieved, eachnon-employee director is required to retain 100% of the shares received as a result of restricted shares granted under our 2005 Long-Term Incentive Plan (the “2005 Plan”) and/or 2013 Long-Term Incentive Plan (the “2013 Plan”). The stock ownership calculation is determined as of December 31 each year based upon the average closing price of the Common Stock for the year compared to thenon-employee director’s base annual retainer as of such date. Shares owned directly by, or held in trust for, thenon-employee director or his or her immediate family members residing in the same household and unvested restricted shares are included in the calculation. The Compensation Committee reviewed thenon-employee directors’ stock ownership and determined as of December 31, 2017,2019, eachnon-employee director was in compliance with the stock ownership guidelines.guidelines.The Compensation Committee also determined as of December 31, 2019, Mr. Berry held sufficient shares to satisfy the ownership requirement applicable tonon-employee directors.
Executive Compensation and Other
Information
Information About Our Executive Officers |
Our current executive officers are named below:
Name | Age | Position | ||
Harold G. Hamm | Executive Chairman | |||
William B. Berry | 67 | Chief Executive Officer | ||
Jack H. Stark | President and Chief Operating Officer | |||
Jeffrey B. Hume | Vice-Chairman, Strategic Growth Initiatives | |||
John D. Hart | Senior Vice President, Chief Financial Officer and Treasurer | |||
Steven K. Owen | Senior Vice President, Land | |||
Eric S. Eissenstat | Senior Vice President, General Counsel, Chief Risk Officer and Secretary | |||
| ||||
Patrick W. Bent | Senior Vice President, | |||
Ramiro F. Rangel | Senior Vice President, Marketing |
The information appearing in the table above is as of April 5, 2018.2, 2020.
For a description of the business background and other information concerning Mr.Messrs. Hamm and Berry see “Proposal 1: Election of Directors—General” above.
Jack H. Stark | has served as our President and Chief Operating Officer since January 2020. Prior to his appointment as President | |
and Chief Operating Officer, he served as our President from September | ||
September 2014 to May 2017. Prior to his appointment as President and Chief Operating Officer, Mr. Stark served as our Senior Vice President of Exploration from May 1998 to September 2014. He joined the Company in June 1992 as Vice President of Exploration and served on the Board from May 1998 until his term expired in May 2008. Prior to joining us, Mr. Stark was Exploration Manager for the WesternMid-Continent Region for Pacific Enterprises from 1988 to 1992 and held various staff and middle management positions with Cities Service Company, Texas Oil and Gas and Western Nuclear from 1978 to 1988. Mr. Stark holds a Master of Science in Geology from Colorado State University and is a member of the American Association of Petroleum Geologists, |
Jeffrey B. Hume | became our Vice Chairman of Strategic Growth Initiatives in June 2012. He previously served as our President | |
from November 3, 2009 until June 2012. From November 2008 to June 2012, Mr. Hume also served as our Chief Operating Officer after serving as our Senior Vice President of Operations since November 2006. He was previously appointed as Senior Vice President of Resource and Business Development in October 2005, Senior Vice President of Resource Development in July 2002, and served as Vice President of Drilling Operations from 1996 to 2002. Prior to joining us in May 1983 as Vice President of Engineering and Operations, Mr. Hume held various engineering positions with Sun Oil Company, Monsanto Company, and FCD Oil Corporation. Mr. Hume is a Registered Professional Engineer and member of the Society of Petroleum Engineers, |
John D. Hart | joined us as Vice President, Chief Financial Officer and Treasurer in November 2005. He was promoted to Senior Vice | |
President in May 2009. Prior to joining us, he was a Senior Audit Manager with Ernst & Young LLP. Mr. Hart was employed by Ernst & Young LLP from April 1998 to November 2005 and by Arthur Andersen LLP from December 1991 to April 1998, working with numerous public companies in a wide variety of securities and exchange matters and capital markets activities. He is a member of the American Institute of Certified Public Accountants and |
Steven K. Owen | joined us as Senior Vice President, Land in September 2010. He came with three decades of experience in land | |
management, including exploration, exploitation, acquisition and maintenance of oil and gas assets. He has worked extensively in many oil and gas plays across the United States. Prior to joining the Company, Mr. Owen served as Land Manager for Pioneer Natural Resources USA, Inc. from 1987 to 2010 where he managed the Permian Basin andMid-Continent Divisions. He is a member of the American Association of Petroleum Landmen. Mr. Owen earned his Bachelor of Arts from Emporia State University in Kansas with concentrations in Business Law, Oil and Gas Law and Biology. |
Eric S. Eissenstat | joined us as Senior Vice President and Chief Legal Officer in December 2010. In August 2011, his title was | |
changed to Senior Vice President, General Counsel and Secretary and in May 2014 his role was expanded to include the position of Chief Risk Officer. He joined the Company with 27 years of experience in complex business and commercial matters, oil and gas, and litigation. Prior to joining the Company, he served as director with Fellers, Snider, Blankenship, Bailey & Tippens, P.C. in Oklahoma City from 1983 to 2010. Mr. Eissenstat is a Fellow of the Litigation Counsel of America, has received numerous awards and honors for his work in the legal profession, has held leadership positions in the Oklahoma Bar Association and Oklahoma County Bar Association, and is a |
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| |
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Patrick W. Bent | is Senior Vice President, | |
served as Senior Vice President, Drilling, from November 2015 to June 2019 and as Vice President, Northern Region Drilling and Completions from March 2014 to November 2015. Mr. Bent joined Continental as Vice President, Drilling and served in this capacity from August 2012 to March 2014. From 2006 until he joined Continental in August 2012, Mr. Bent served as the General Manager of Implementation for Burlington Resources and subsequently as Manager of Implementation for ConocoPhillips’ San Juan Basin Unit in New Mexico, one of ConocoPhillips’ largest business units. Mr. Bent has more than 37 years of industry experience in petroleum engineering and operations. Mr. Bent earned his B.S. degree in Petroleum Engineering from the University of Wyoming in 1980. |
Ramiro F. Rangel | is Senior Vice President, Marketing, a position he has held since | |
Senior Vice President, Marketing and Human Resources, from August 2018 to February 2020 and as Senior Vice President, Marketing from March 2016 to August 2018. Before his promotion to Senior Vice President, he served as Vice President, Gas Marketing from August 2015 to March 2016. Prior to joining the Company, Mr. Rangel was Senior Vice President, Gathering & Processing from April 2014 until May 2015 with Enable Midstream Partners, LP (“Enable”) and was Vice President of Commercial Operations from October 2007 to April 2014 with Enogex LLC, Enable’s predecessor company. Mr. Rangel has more than 35 years of experience with operations, finance, strategy and other areas in the energy industry. Mr. Rangel holds a BBA in Finance, with Honors, from The University of Texas at Austin, and an MBA, with Honors, from The University of Tulsa. Mr. Rangel is on the Board of Oklahoma Energy Explorers and a member of Oklahoma Independent Producers’ Association. |
Compensation Discussion and Analysis |
The purpose of this Compensation Discussion and Analysis is to explain the Company’s and Compensation Committee’s approach to determining the compensation program for the Company’s Chief Executive Officer, Chief Financial Officer and the other named executive officers and former executive officer appearing in the tables following this discussion (“NEOs”) and to discuss how the 20172019 compensation package for these executives was determined. Following this discussion are tables that include compensation information for the NEOs. The NEOs for 20172019 are as follows:
Harold G. Hamm, Executive Chairman (During 2019 Mr. Hamm was Chairman of the Board and Chief Executive |
Jack H. Stark, |
John D. Hart, Senior Vice President, Chief Financial Officer and Treasurer; |
Eric |
Patrick W. Bent, Senior Vice President, Operations |
Although Mr. Berry is currently serving as our Chief Executive Officer, he did not assume that role until the 2020 year, therefore he not deemed to be a “named executive officer” pursuant to SEC rules for the 2019 year.
Executive Summary
Company Compensation Philosophy and Components | Because we operate in a highly competitive environment, we have designed | |
our executive compensation program to attract, retain and motivate experienced, talented individuals. We also designed our executive compensation program to reward our executives for achieving the strategic and business objectives determined to be important to help the Company create and maintain advantage in a competitive environment. |
In determining individual compensation, we consider the performance of the Company against specific operational and financial factors determined to be relevant for the period in question. We consider competitive market compensation paid by other companies comparable to us in size, geographic location and operations. We maintain and incorporate flexibility into our compensation programs and in the assessment process, which we believe is particularly important in the current commodity price environment, which has improved, but remains volatile. As such, we do not apply rigid formulas in determining the amount and mix of compensation elements.
In 2017,2019, the Compensation Committee evaluated how the following elements (collectively, the “Primary Compensation Elements”) of our compensation program compare to similar compensation awarded by the then current compensation survey group, with the Compensation Committee considering how the elements of our compensation compare to the target percentiles indicated below. Subsequent to setting 2017 compensation levels for Executive Officers, the Committee conducted a review ofThe 2019 target levels among the current survey peer group of companies, and requested input and recommendation from its executive compensation consultant, Longnecker, as part of a processwere designed to evaluate existing target levels. Based on this review and the recommendation from Longnecker, the Committee approved the revised target levels for 2018 as noted below. The 2018 target levels, which did not play a role in compensation awarded with respect to 2017, further emphasize compensation elements whose value depends on Company performance, with the opportunity for compensation between the 50th and 75th percentiles, while aligning the fixed compensation element, base salary, with the 50th percentile.
Base salary – fixed cash component – generally |
Cash bonus – short-term, variable cash component based on Company and individual performance—individual targets generally set |
Long-term incentive equity awards – equity component with vesting periods designed to align the interests of executive and shareholders – generally set between the 50th and 75th |
Based on the strength of 2016’s2018’s accomplishments, an improving commodity price environment, the need to ensure the Company’s compensation remains competitive with its industry peers and a review of the information customarily provided in connection with the compensation process, the Compensation Committee determined it was appropriate to adjust salaries in 2017.2019. Bonus payments were also made with respect to 20172019 based on the Company’s strong financial and operational performance. In determining the final Company performance factors to be used in the bonus calculation, the Compensation Committee considered the Company’s performance with respect to the fourseven bonus pool metrics and the additional factors described below in the discussion of the 20172019 bonus. After considering these items, the Compensation Committee determined a Company performance factor of 150%123% appropriately reflected a balance of (x) the strong results achieved in connection with five of the fourseven bonus pool metrics and (y) the Committee’s assessment of the Company’s performance with respect to the additional factors.factors described below.
In setting Mr. Maranto’s compensation as a new employee, the Compensation Committee set his compensation at a level commensurate with his role and responsibilities at the Company. It also considered internal pay equity and whether the components of his compensation package were consistent with targeted percentiles described above. As a result of his departure in June 2017, Mr. Maranto forfeited all stock awards made in connection with his employment and he did not receive a cash bonus with respect to the 2017 year.
Company Performance | Highlights of the Company’s |
Initiated cash |
Initiated a share repurchase program and repurchased approximately $190.2 million of Common Stock in 2019. |
Achieved full-year 2019 production growth of |
Net cash provided by |
In 2019, reduced total debt by $442 million. |
Year-end |
Continued to exercise capital discipline, reducingnon-acquisition capital expenditures by |
Maintainedlow-cost operations with production expenses of |
A discussion of the Company’s performance with respect to the metrics used for the Company’s 20172019 annual cash bonus plan appears under the heading, “Annual Cash Bonus” below.
Compensation Actions | The following is a summary of the material compensation decisions made by the Compensation Committee | |
for |
Base Salary – The base salaries of our NEOs |
Cash Bonus – For |
Name | 2019 Bonus Target | |
Harold G. Hamm | 150% | |
Jack H. Stark | 100% | |
John D. Hart | ||
| 100% | |
Eric S. Eissenstat | ||
| 80% | |
Patrick W. Bent | 80% |
Long-term incentive equity awards – In February |
In addition, awards made to each of the NEOs also reflected the Compensation Committee’s evaluation of the performance of each of the NEOs with respect to the 20172019 Performance Factors (as defined below) and other factors described below in connection with the discussion of each of the Primary Compensation Elements.
The following charts illustrate the various components of total annual compensation for our Chief Executive Officer and the other NEOs as a group, excluding Mr. Maranto, and reflect the following: (i) annual base salary paid for 2017;2019; (ii) the cash bonus for 20172019 paid in February 2018;2020; (iii) the grant date fair value of the long-term equity incentive awards granted in 20172019 (which is the value of the awards based on accounting principles on the date of grant, and not necessarily reflective of the amounts the NEOs may receive at the time of settlement); and (iv) the other compensation for each NEO included in the Summary Compensation Table below.
Key Executive Compensation Policies and Practices | Key executive compensation policies and practices include: |
Independent compensation |
No individual employment agreements; |
Majority of compensation is restricted stock awards with vesting periods designed to align interests of executives and shareholders; |
Clawback policy applies to all executive officers; |
Robust stock ownership requirements – 5x of base salary for the Executive Chairman, Chief Executive Officer and President and 3x of base salary for the other executive officers; |
Industry-related peer compensation data considered in establishing compensation; |
Minimal perquisites; and |
Hedging of Company securities by executive officers is not allowed. |
Executive Compensation Philosophy
We operate in a highly competitive environment for securing trained and qualified personnel. We believe the loss of the services of members of our senior management could have a material adverse impact on our operations. Accordingly, we have designed our executive compensation program to attract, retain and motivate experienced, talented individuals to achieve our primary business goals, using the business strategies discussed in greater detail in our Annual Report on Form10-K. We have also designed our executive compensation program to reward our executives for achieving the strategic and business objectives determined to be important to help the Company create and maintain an advantage in a competitive environment. Specifically, the Primary Compensation Elements of our executive compensation program are designed to reward the achievement of these objectives by:
providing objective-driven compensation opportunities that incentivize executives to achieve |
aligning compensation with the Company’s short- and long-term business objectives; and |
emphasizing the use of equity-based compensation to motivate the long-term retention of executives and align their interests with those of shareholders. |
We do not apply rigid formulas in determining the amount and mix of compensation elements. For 20172019 cash bonuses paid in February 2018,2020, we considered the achievement of financial and operational goals only as part of establishing the aggregate bonus pool from which bonuses were paid to the NEOs and in connection with the determination of the Company multiplier described below in the
discussion of the annual cash bonus. In connection with establishing the size of the aggregate bonus pool and determining the final Company multiplier, the Compensation Committee considered the Company’s performance with respect to the fourseven bonus pool metrics and the additional factors described below in the discussion of the 20172019 bonus. After considering these items, the Compensation Committee determined a Company performance factor of 150%123% appropriately reflected a balance of (x) the strong results achieved in connection with five of the fourseven bonus pool metrics and (y) the Committee’s assessment of the Company’s performance with respect to the additional factors.During 2017,factors. During 2019, in determining individual compensation, we considered the performance of the Company against the following specific financial and operational and financial factors: production growth, net cash provided by operating activities, return on capital employed, production growth, relative total shareholder return, reserve growth, health, safety and environmental performance, and proved developed finding and development cost per barrel of oil equivalent, reserve growth, safetyas well as the Company’s performance against the key strategic and environmental performance, and shareholder returnother initiatives described below in the discussion of the annual cash bonus, which were determined to be consistent with the Committee’s expectations (the “2017“2019 Performance Factors”). We consider competitive market compensation paid by other companies comparable to us in size, geographic location and operations, but do not exclusively rely on such data to determine compensation for the NEOs. We maintain flexibility with respect to our compensation programs and the assessment process. This approach allows us to adjust to an evolving business environment and account for individual performance, which we believe is particularly important in the current dynamic commodity price environment. The total compensation of the Chief Executive Officer, which is significantly higher than our other NEOs, is commensurate with his role in the founding and development of the Company as well as leading the future success of the Company.
Compensation Setting Process
Role of Compensation Committee | The Compensation Committee is responsible for overseeing and administering all aspects of our | |
benefit and compensation plans, and programs for our executive officers. The Compensation Committee annually reviews and determines the individual elements of total compensation of the NEOs who appear in the compensation tables of this Proxy Statement as well as our other executive officers. Because our compensation programs are relatively simple, and we do not have complex equity plans or significant change in control or severance obligations, the Compensation Committee does not use tally sheets in analyzing the compensation of our NEOs, but does review each element of compensation as described in this Proxy Statement in evaluating and approving the total compensation of each of our NEOs. When making awards with respect to each element of our compensation program, the Compensation Committee considers how the award of that particular element will impact the overall compensation package awarded to each NEO. As a result, the award made with respect to each element of our compensation program may be impacted by the awards made with respect to the other elements of our compensation program. |
In general, the Compensation Committee evaluates how the Primary Compensation Elements of our compensation program compare to similar compensation awarded by the then current compensation survey group. Although the Compensation Committee’s general approach is to award each element of compensation to align as closely as possible to the percentiles indicated above, the Compensation Committee considers an individual executive officer’s performance and the external business environment, and any final compensation reflects the Compensation Committee’s discretion. The Compensation Committee believes targeting total cash (basebase salary at the 50th percentile and cash bonus)bonus between the 50th and 75th percentile results in competitive cash compensation while preserving considerable upside potential in connection with cash bonus awards should Company and individual executive performance merit a higher bonus. The Committee believes targeting long-term incentive equity awards between the 50th and 75th percentile helps align overall pay with shareholder interests, by putting greater weight on an element of compensation which directly reflects the performance of the Company. Additional detail regarding the actions of the Compensation Committee with respect to each of the Primary Compensation Elements appears in the discussion of “Elements of Compensation” below.
At the 20172019 Annual Meeting, shareholders approved through anon-binding advisory vote, the compensation of our named executive officers. Following the 2017 Annual Meeting, the Board determined to hold an advisory shareholder vote on the compensation of the Company’s named executive officers annually. This pattern will continue until the next required advisory vote on the frequency of shareholder votes on the compensation of executives, which will occur no later than our Annual Meeting of Shareholders in 2023. The Compensation Committee views the 98% vote in favor of approving the compensation of the Company’s named executive officers received in 20172019 as a validation of the Company’s approach to executive compensation and determined, subject to the modifications discussed below, it was appropriate to continue structuring the compensation of the Company’s NEOs consistent with its compensation philosophy. Anon-binding advisory vote will be conducted again in connection with the Annual Meeting.
During 2017,2019, the Compensation Committee primarily considered the individual performance of our NEOs with regard to 20172019 Performance Factors in the determination of each officer’s compensation. Variations in individual awards made to each of the NEOs are
impacted by the Compensation Committee’s evaluation of a given NEO’s performance with respect to such factors. In addition, in 2019, with respect to all elements of compensation other than the bonus for 2019 paid in February 2020, the Compensation Committee considersconsidered input provided by our Chief Executive Officer and President as described under “Role of Management” below and this process also drives variation in individual awards made to each of the NEOs.NEOs, with respect to such compensation. Starting January 1, 2020, Mr. Hamm assumed the role of Executive Chairman. As a result, the Committee considered input provided by the Executive Chairman, in addition to the input provided by our Chief Executive Officer and President and Chief Operating Officer with respect to the bonus for 2019 paid in February 2020. It is expected that in 2020, the Executive Chairman will provide input regarding the compensation to be paid to our executive officers by reviewing the recommendations made by our Chief Executive Officer and President and providing feedback with respect to such recommendations.
Role of Management | Since the Family LLC which is managed by Mr. Hamm, and in which he has a substantial interest, beneficially | |
owns a substantial majority of our outstanding shares of Common Stock and since Mr. Hamm For 2019 related compensation, the Compensation Committee, as well as our Chief Executive Officer and our President, |
the overall performance of the Company; |
the executive’s contribution to the overall performance of the Company; |
the executive’s business responsibilities; |
the executive’s compensation relative to other executives; |
the executive’s current compensation arrangements; and |
the executive’s contribution to enhancing the ability of the Company to generate long-term shareholder value. |
OnceDuring 2019, once our Executive Chairman, Chief Executive Officer and our President have made their compensation recommendations as described above, the Compensation Committee reviewsreviewed their recommendations and makesdecided whether to make any changes it feels are appropriatein order to adequately meet our compensation objectives and approach on an individual basis. No adjustments were made to our Executive Chairman’s compensation (for service as our Chief Executive Officer’s compensationOfficer during 2019) by the Board after his compensation was set by the members of the Compensation Committee. The independent members of our Board with Mr. Hamm abstaining, unanimously affirmed the cash bonus award and other compensation set by the Compensation Committee for our Executive Chairman, in respect of his service as our Chief Executive Officer for services rendered during 2017.
Role of the Compensation Consultants |
| |
independent compensation consulting firm, Longnecker. Longnecker |
Management” and was used by the Compensation Committee, our then Chief Executive Officer and President as described in that discussion. During |
Starting October 2019, the Compensation Committee also retained the services of an independent compensation consulting firm, Meridian. Meridian reports directly to the Compensation Committee. During 2019, Meridian provided analysis regarding executive officer compensation. The results of the analysis were summarized for the Compensation Committee in order to provide ayear-end market assessment. Since the purpose of Meridian’s engagement was to provide compensation recommendations for 2020 and beyond, none of the information communicated to the Compensation Committee impacted the bonus program or any individual awards relevant to 2019 executive officer compensation. During 2019, Meridian provided no services other than the executive officer compensation studies requested by the Compensation Committee, resulting in total fees of less than $120,000.
The Compensation Committee has assessed the independence of Longnecker in accordance with standards set forth in rules established by the NYSE and promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and concluded no conflict of interest exists that would preventprevented Longnecker from independently representing the Compensation Committee. The Compensation Committee also assessed the independence of Meridian based on the same standards and concluded there was no conflict of interest that prevented Meridian from independently representing the Compensation Committee in connection with work it performed during 2019.
Compensation Survey Group |
| |
| ||
Committee for evaluating the 2019 compensation of the NEOs (the “2019 Survey |
Original 2019 Survey Group Companies | ||
Anadarko Petroleum Corporation | Merit Energy Co. | |
Cabot Oil & Gas Corporation | Newfield Exploration Co. | |
Chesapeake Energy Corporation | Noble Energy, Inc. | |
Cimarex Energy | Pioneer Natural Resources Company | |
Concho Resources, Inc. | QEP Resources, Inc. | |
Continental Resources, Inc. | Range Resources Corporation | |
Devon Energy Corporation | SandRidge Energy, Inc. | |
EOG Resources, Inc. | SM Energy | |
EP Energy Corporation | Southwestern Energy Company | |
Hess Corporation | WPX Energy, | |
Hunt Oil Company |
In selecting the 20172019 Survey Group, the Compensation Committee considered the location of operations, market capitalization, revenue, assets, net income, production profile of oil versus gas, as well as other factors to determine the most relevant subset of the E27 Survey Group member companies for comparison purposes. AtThe E27 Survey Group is a group of energy companies assembled for the purpose of providing industry participants survey information to be used in making compensation decisions. In February 2019, the time described inwhen the introduction tomajority of each NEO’s compensation for 2019 was determined, the table above, the 20172019 Survey Group consisted of 20 independent, publicly traded and privately held energy exploration and production companies, other than the Company, with a median revenue of approximately $1.7$4.1 billion as ofyear-end 2016,2018, which is comparable to the Company’s revenue of approximately $2.0$4.7 billion for 2016.2018. In May 2019, the following companies were removed from the 2019 Survey Group: Anadarko Petroleum Corporation, EP Energy Corporation, Hunt Oil Company, Newfield Exploration Co. (due to acquisition), Merit Energy Co., QEP Resources, Inc., Range Resources Corporation, SandRidge Energy, Inc., SM Energy Company, and Southwestern Energy Company. The following companies were added in May 2019: Apache Corporation, Marathon Oil Company, and Oasis Petroleum Inc. The changes occurring in May resulted from the Compensation Committee’s determination the changes were needed to eliminate companies whose scale of operations were no longer comparable to those of the Company and to add companies whose operations are similar in scope. Due to the timing of these changes, they had minimal impact on 2019 compensation.
Elements of Compensation
The table below describes each of our Primary Compensation Elements, the purpose of each element, and how each element fits within the Company’s compensation philosophy and objectives.
Compensation Element | Description | Purpose and Philosophy | ||
Base Salary | Fixed cash compensation | Provides a stable, fixed element of cash compensation.
Attract and retain executive officers by paying a wage commensurate with such officer’s experience, skills and responsibilities. It also recognizes and considers the internal value of the position within the Company, the officer’s leadership potential and demonstrated performance. | ||
Annual Cash Bonus | Annual cash bonus related to individual contribution toward achievement of annual financial and operating results | Rewards executives for the achievement of specific annual financial, operating and strategic goals and individual performance.
Allows the Compensation Committee to evaluate both objective and subjective considerations when exercising discretion to determine final payout amounts.
Important to the Company’s ability to attract, motivate and retain the Company’s executive officers. | ||
Long-term Incentive Equity Awards | Restricted Stock | Aligns the executive’s long-term interests with those of shareholders.
Important to the Company’s ability to attract, motivate and retain the Company’s executive officers. |
Role of Discretion in Determining Primary Compensation Elements | All base salary adjustments and long-term incentive awards | |
for NEOs have been determined on a discretionary basis and while not linked to specific corporate goals or objectives, the overall performance of the Company as well as individual performance was considered in determining pay. The Compensation Committee retains discretion over all aspects of the CLR Bonus Plan (defined below) and awards made thereunder. For |
Base Salary | Base salary is intended to provide each NEO a regular source of income and compensate him for performing the | |
responsibilities associated with his position. It also serves the purposes listed in the table above. Base salary also impacts annual cash bonus awards in that the target size of these awards is expressed as a percentage of base earnings, which is primarily comprised of salary. The table below shows the salary set by the Compensation Committee applicable to each of the NEOs during |
| Salary During 2019 | |||||
| $1,320,113 | |||||
| 730,952 | |||||
| 600,000 | |||||
Eric S. Eissenstat | 490,196 | |||||
| 530,000 |
Except forWith the exception of Mr. Maranto,Bent, the salaries listed above went into effect in February 2017,2019, and remained in effect for the remainder of the year. Mr. Maranto’s salary was set in connection with his joining the Company in April 2017, and remained in effect until his departure in June 2017. In the future, we expect the base salaries of the NEOs will be reviewed on an annual basis and adjusted as necessary to remain competitive. Mr. Bent’s salary was set at $490,196 in February 2019, but was adjusted to the amount shown in the table in June 2019, in connection with the change in his title and responsibilities discussed above.
Annual Cash Bonus | Our NEOs may earn annual cash bonuses as a reward for their individual contribution to the achievement of | |
annual financial and operating results as determined by the Compensation Committee. On February 22, 2013, the Compensation Committee approved a cash bonus plan that applies to certain employees of the Company, including the Company’s executive officers (the “CLR Bonus Plan”). The CLR Bonus Plan is designed to reward the Company’s employees and executive officers for achieving annual performance and strategic goals. The CLR Bonus Plan provides for the annual payment of cash bonuses, subject to the discretion of the Compensation Committee. The individual cash bonuses paid to NEOs for |
Under the CLR Bonus Plan, the bonus pool is initially set based on the aggregate target bonus amount of all employees participating in the CLR Bonus Plan (referred to herein as the “Target Pool Size”). For 2017,2019, the size of the bonus pool was initially set within a range based on the following factors: Production growth (weighted at 40%); net cash provided by operating activities (weighted at 30%(25%); return on capital employed (25%); production growth (15%); relative total shareholder return (10%); reserve growth (10%); health, safety and environmental performance (10%); and proved developed finding and development cost per barrel of oil equivalent (weighted at 15%); and reserve growth (weighted at 15%(5%). With respect to the bonuses paid for 2017,2019, the Compensation Committee evaluated the factors of the CLR Bonus Plan described above as presented by management and determined the factors and their respective weightings to be appropriate.
The Compensation Committee has complete discretion to increase, decrease or leave the size of the pool unchanged. In making the determination whether to adjust the size of the pool, the Compensation Committee considered such matters as it deemed relevant, including the Company’s performance against key strategic and other initiatives identified by the Compensation Committee in areas such as shareholder return, health, safety and environmental, production costs and cycle times, maintenance of financial and other ratios, budget compliance and business process improvements and achievement of cash neutral operations.improvements. The size of the bonus pool as determined by the Compensation Committee is referred to herein as the “Final Pool Size.” The ratio of the TargetFinal Pool Size to the FinalTarget Pool Size is used to determine the Company multiplier in the calculation of an individual’s bonus amount under the CLR Bonus Plan.
For 2017, production growth was 12%,2019, the Compensation Committee set the Company performance factor based on the following estimates provided to the Committee in connection with the seven metrics: net cash provided by operating activities was approximately $2.1activities—$3.116 billion; return on capital employed—11.1%; production growth—14.2%; relative total shareholder return – 25th percentile relative to the peer group listed below;reserve growth—6.4%; health, safety and environmental performance of 137% of target; and proved developed finding and development cost per barrel of oil equivalent was $9.80,equivalent—$11.46. Except for the fourth and reserve growth was 6% (adjusted for 2017 divestitures). Theseventh metrics described above, the Company’s aggregate performance in these areas was above internal expectations and resulted in an initial performance factor of 154% 123%for the Company multiplier portion of the CLR Bonus Plan. The Compensation Committee also reviewed Company performance against the key strategic and other initiatives described in the paragraph above. After consideration, the Committee exercised discretion to determinedetermined a final Company performance factor of 150%123% appropriately reflected Company performance for 2017,2019, and struck the appropriate balance between (x) the strong results achieved in connection with five of the fourseven bonus pool metrics described above, and (y) the Committee’s assessment of the Company’s performance with respect to the additional matters described above. In assessing the additional matters, theThe Compensation Committee gave particular weightdetermined the Company’s performance with respect to safetythe key strategic and environmentalother initiatives was consistent with its expectations for 2019, and shareholder return performance.determined it was not necessary to adjust the initial performance factor of 123%. Proved developed finding and development cost per barrel of oil equivalent represents the Company’s net exploration and development costs incurred for operated wells having first production in 20172019 divided by the net estimated recoverable reserves for those wells expressed in barrels of oil equivalent. Return on capital employed represents net income attributable to the Company beforenon-cash gains and losses on derivatives, income taxes,non-cash equity compensation expense, interest expense, and losses on extinguishment of debt, the result of which is divided by average capital employed for the year, with capital employed representing the sum of total debt and total shareholders’ equity attributable to the Company. Relative total shareholder return represents the percentage change in the Company’s stock price as compared to the companies listed in the table below. For 2019, we compared the 60 day moving average price at 2019year-end to the 60 day moving average price at 2018year-end. The table below lists the companies other than the Company used to determine relative total shareholder return for the bonus for 2019 paid in February 2020:
2019 Relative Total Shareholder Return Companies | ||
Cimarex Energy Co. | Hess Corporation | |
Concho Resources, Inc. | Marathon Oil Corporation | |
ConocoPhillips | Noble Energy, Inc. | |
Devon Energy Corporation | Pioneer Natural Resources Company | |
EOG Resources, Inc. |
Individual awards for participants in the CLR Bonus Plan in connection with the bonuses for 20172019 which were paid in February 2018,2020, were calculated utilizing the following formula:
Base Earnings x Target Bonus x Company Multiplier x Individual Multiplier = Initial Bonus Amount
For purposes of this formula, “base earnings” refers to the actual amount paid in respect of salary during 2017.2019. Except for Mr. Hamm, the individual multiplier for the 20172019 bonuses was based on the Compensation Committee’s review of the 20172019 Survey Group and the subjective evaluation of each of the NEOs’NEO’s supervisor or supervisors. Mr. Hamm’s individual multiplier was determined based on the subjective evaluation of the Compensation Committee. The subjective evaluation of each NEO was primarily based on an evaluation of each NEO’s contributions to the Company’s performance with respect to the 20172019 Performance Factors relevant to that NEO. For 2017,2019, after calculating the Company multiplier based on the measures and methodology described above, individual differences resulted from the subjective evaluation of performance that determined each NEOsNEO’s individual multiplier. In making its evaluation, where applicable, the Compensation Committee places significant weight on input provided by our Executive Chairman, Chief Executive Officer and our President.President, as described above.
Once the NEOs’ Initial Bonus Amounts were calculated, they were presented by Mr.Messrs. Hamm, Berry and Stark to the Compensation Committee for review, and in the case of Mr. Hamm also presented to the Board, both of which had the discretion to increase or decrease individual Initial
Bonus Amounts and determine final awards. awards.Using the factors described previously, the Compensation Committee determined the final awards were appropriate and approved the bonuses for 20172019 as presented by management. Mr. Maranto did not receive a bonus for 2017 due to his departure from the Company in June 2017.
The following table shows target annual cash bonus amounts as a percentage of base earnings for each of the NEOs in connection with the bonuses for 20172019 which were paid in February 20182020 under the CLR Bonus Plan:
NEO | | |
Harold G. Hamm | 150 | |
Jack H. Stark | 100 | |
John D. Hart | ||
| 100 | |
Eric S. Eissenstat | ||
| 80 | |
Patrick W. Bent | 80 |
For 2018 compensation, the Compensation Committee has added two new bonus metrics to those used for 2017 and adjusted the weighting of the metrics. As a result of these changes, the 2018 metrics will be 70% focused on financial returns and 30% focused on operational performance. The 2018 metrics and relative weighting are as follows: net cash provided by operating activities (30%); return on capital employed (25%); relative total shareholder return (15%); production growth (15%); reserve growth (10%); and proved developed finding and development cost per barrel of oil equivalent (5%). The addition of return on capital employed and relative total shareholder return in combination with the continued use of net cash provided by operating activities and the weights assigned to these items highlights the Company’s strong focus on financial and shareholder returns.
Annual cash bonuses for the NEOs are determined after completion ofconcurrently with theyear-end audited financial statements and reserve report. We have not adopted a clawback policy that is applicable to the bonus for 2019 paid in February 2020 and to future awards under the CLR Cash Bonus Plan. For more information regarding the adjustment or recovery of previously paid annual cash bonuses in the event a relevant metric is restated or otherwise adjusted in a manner that would have the effect of reducing the size of a previously paid annual cash bonus. The Compensation Committee has the discretion to take such an event into account in determining future compensation.clawback policy, please see “CLR Clawback Policy” on page 34 below.
Long-Term Incentive Awards | The objective of our long-term incentive awards is to retain and motivate our executives over the long- | |
term and to align their interests with those of our shareholders. In February |
NEO | 2019 Restricted Stock Award (shares) | |
Harold G. Hamm | 186,363 | |
Jack H. Stark | 87,701 | |
John D. Hart | ||
| 63,583 | |
Eric S. Eissenstat | 32,888 | |
Patrick W. Bent | 46,911 |
In May 2017, in connection with the start of his employment, Mr. Maranto received an initial award of 189,105 shares of restricted Common Stock, with shares intended to vest in equal increments of 63,035 shares on each of May 15, 2018, May 15, 2019 and May 15, 2020. Mr. Maranto forfeited all of these shares in connection with the termination of his employment. The Compensation Committee considered the following in setting the size of Mr. Maranto’s initial award: (i) the scope of his role and responsibilities; (ii) internal equity; and (iii) whether the award was consistent with the targeted percentiles for long-term equity awards.
The awards for each of the NEOs other than Mr. Hamm were approved by the Compensation Committee. Mr. Hamm’s award was approved by the Compensation Committee and by the full Board based on the recommendation of the Compensation Committee, with Mr. Hamm abstaining.
EachThe long-term incentive award for each NEO is determined at the discretion of the Compensation Committee using the approach described above under “Executive Summary—Compensation Philosophy and Components.” Differences in long-term incentive awards are based on the Compensation Committee’s subjective evaluation of the expected relative individual contribution to the achievement of our long-term financial and operating results. The value of unvested equity awards held by an individual is expected to be a factor considered in future awards.
The vesting provisions of the awards encourage our officers to remain in our employ in order to realize these forms of compensation. Our current equity programs consist of restricted stock awards, which we believe are stronger motivational tools for employees when compared to alternatives such as stock options. Restricted shares provide some value to an employee during periods of stock market volatility, while stock options may have limited perceived value and may do little to retain and motivate employees when the current value of our stock is less than the option price. Although our 2013 Plan allows for various equity instruments, we intend to make future grants primarily in the form of restricted stock.
The restricted stock awards provide for immediate vesting upon a change in control, as defined by the 2013 Plan. We would likely need the assistance of several key employees to successfully conclude a transaction resulting in a change in control. We believe immediately vesting the awards may serve to reduce concerns, other than continued employment, such employees may have with respect to any potential change in control transaction and may motivate them to complete the transaction.
We have a policy which prohibits our directors and certain employees, including our executive officers, from holding our securities in a margin account or pledging our securities as collateral, unless permission is received from our General Counsel in writing, orwriting. We also have a policy that prohibits the same group from engaging in certain transactions which may hedge the value of ourhedging any Company securities held by them. For a discussion of our hedging policy, see “Hedging Policy” on page 35 below.
The Company has a Common Stock ownership requirement for our executive officers. Each such officer is required to own shares of our Common Stock at least equal to a specified multiple of such officer’s base salary. The table below lists base salary multiples applicable to the different positions within this group:
Officer | Required Stock Ownership – Multiple of Annual Base Salary | |
Executive Chairman | 5x | |
Chief Executive Officer | 5x | |
President | 5x | |
Other Executive Officers | 3x |
Until the stock ownership guideline is achieved, each such officer is required to retain 100% of the “net shares” received as a result of restricted shares granted under our 2013 Plan. “Net shares” are the number of shares that remain after shares are sold or withheld to pay withholding taxes. The calculation is determined as of December 31 each year based upon the average closing price of the Common Stock for the year compared to the officer’s base salary as of such date. Shares owned directly by, or held in trust for, the officer or his or her immediate family members residing in the same household and unvested restricted shares are included in the calculation.
The Compensation Committee reviews the compliance of each executive officer with the stock ownership guidelines each year and reduces or eliminates future restricted stock grants under the 2013 Plan for any executive officer not in compliance with the stock ownership guidelines. The Compensation Committee reviewed the NEOs’ and other applicable officers’ stock ownership as of December 31, 20172019 and determined each NEO and other applicable officers were in compliance with the guidelines.
The restricted stock awards provide for immediate vesting upon a change of control, as defined by the 2013 Plan. We would likely need the assistance of several key employees to successfully conclude a transaction resulting in a change in control. We believe immediately vesting the awards may serve to reduce concerns, other than continued employment, such employees may have with respect to any potential change in control transaction and may motivate them to complete the transaction.
Deferred Compensation Plan | On September 20, 2013, the Board, based upon the recommendation of the Compensation Committee, | |
established the DCP. The Board appointed the Compensation Committee to act as Plan Administrator of the DCP (the “DCP Administrator”). |
The purpose of the DCP is to (i) give DCP participants, including the NEOs, an additional tool to use in planning their savings and for retirement; and (ii) provide a vehicle to allow employee DCP participants, all of whom are limited in their participation in the Company’s 401(k) (as defined below) due to limits imposed under federal tax rules (“Limits”), to receive similar benefits in connection with Company matching contributions as employees whose ability to receive Company matching contributions is not impacted by the Limits. The DCP permits the Company to make discretionary matching and other contributions to a participant’s account, although the Company did not make any such contributions to the NEOs’ accounts within the DCP during the 20172019 year. For a description of the material features of the DCP see the narrative “Description of Deferred Compensation Plan” on pages 3539 and 3640 below.
Other | Compensation and benefits that are outside of our three main compensation elements are designed to attract and retain | |
employees by enhancing our overall compensation package. During |
In 2017,2019, we allowed Mr. Hamm and Mr. Stark to use the corporate aircraft for personal trips. The value of such trips is calculated according to IRS guidelines and reported as taxable income to him. On occasion the spouses and guests of NEOs may accompany them on business-related trips. Aircraft usage and travel by spouses and guests are valued for disclosure in our proxy statement based on the aggregate incremental cost to us.
We have a defined contribution retirement plan (“401(k)”) covering all full-time employees. Our contributions to the plan are discretionary and based on a percentage of eligible compensation. On July 1, 2014, theThe 401(k) provides for Company elected to increase the contribution level in the plandollar for dollar matching of up to a maximum of 10% of a covered employee’s eligible compensation, effective January 1, 2015, depending on the employee’s level of contribution into the employee’s account. This change was made in order to enhance the competitiveness of the compensation associated with the 401(k). Due to the commodity price environment in 2016, the 10% contribution level was reduced to 2% effective March 1, 2016. Beginning December 1, 2016, the Company reinstated the 10% contribution level based on dollar for dollar matching,account and subject to IRS limits.
All full-time employees may participate in our health and welfare benefit programs, including medical, dental, vision care, life insurance and disability insurance. We provide all full-time employees with life insurance coverage of the lesser of two times base salary or $1,000,000 and allow them to purchase supplemental coverage. Wecoverage.We do not sponsor any qualified ornon-qualified defined benefit plans.
On August 3, 2018 the Board approved a clawback policy pursuant to which cash and equity-based incentive | ||
compensation awards to executive officers granted after August 3,2018 may be recovered if the Company is required to restate all or a portion of its publicly reported financial statements and it is determined such restatement was proximately caused by the fraud, gross negligence, intentional misconduct, embezzlement, theft or breach of fiduciary duty committed by or attributable to any current or former executive officer of the Company (such conduct is referred to herein as “wrongful conduct”). The policy also applies if an executive has knowledge of wrongful conduct and fails to take reasonable steps to prevent it. |
In order to be subject to recovery, an award must have been based in whole or in part on measures impacted by the restatement. The amount to be recovered is any excess value received by the executive officer as a result of the measures impacted by the restatement. Any matching award under the Company’s DCP impacted by the measures subject to restatement is also subject to recovery. The Compensation Committee has discretion to determine how recovery is to be achieved, which may include, among other things, seeking reimbursement, cancelling other outstanding equity awards or reducing future compensation. Simple interest will be applied to any recovery amount.
Since all current outstanding equity awards are restricted stock awards subject to time-based vesting, and we have not made matching awards under the DCP since 2015, the only compensation that may be subject to the policy as of the date of this proxy statement are awards made under the CLR Bonus Plan. In order to receive a CLR Bonus Plan award, each executive officer must execute an agreement agreeing to abide by the terms of the clawback policy. Each executive officer executed such an agreement in connection with the bonus for 2019, paid in February 2020.
The clawback policy is administered by the Compensation Committee. The Compensation Committee has discretion to waive or limit the amount to be recovered under the clawback policy if it determines such action is justified in its business judgment. Among others, circumstances that may be considered by the Compensation Committee in exercising discretion to waive or limit recovery are the passage of time, whether the cost of recovery outweighs the benefit to the Company, and whether the recovery will remedy the wrongful conduct or aid in preventing its recurrence.
Impact of Accounting and Tax Treatment
We believe it is important to have flexibility in designing the compensation program in a manner to achieve the objectives described above under “Compensation Objectives.” Therefore, while we consider the accounting and tax treatment of certain forms of compensation in the design of our compensation program, the accounting and tax treatment is not a determinative factor.
With respectPrior to the 2017 year,2018, under Section 162(m) of the Internal Revenue Code, a publicly-held company could deduct for federal tax purposes no more than $1,000,000 of annual compensation paid to its principal executive officer and each of its three other most highly-paid officers other than the principal financial officer, unless the compensation was “performance-based compensation.” These Section 162(m) restrictions applied to salary, bonuses, and other compensation not directly tied to performance conditions. Our compensation program for the 2017 year did not meet the requirements for tax deductibility of annual compensation in excess of $1,000,000 because the relevant compensation is not payable solely on account of the attainment of one or more performance goals. Beginning with the 2018, year, Section 162(m) of the Code will generally does not contain an exception for “performance-based compensation.” Therefore, we do not expect the restrictions of Section 162(m) of the Code to play a significantany role in our compensation decisions for 2018.going forward.
Insider Trading Policy |
Our insider trading policy provides that certain of our employees and all directors may not purchase or sell puts or calls to sell or buy our securities or engage in short sales with respect to our securities. Certainsecurities.Certain employees and all directors are also prohibited from holding our securities in a margin account or pledging our securities as collateral for a loan, unless permission is received from our General Counsel in writing. The purchase or sale of stock by our officers, directors and certain employees may only be made during a window of time described in our policy and after approval by our General Counsel.
Hedging Policy |
We have a policy that prohibits our directors and certain employees, including our executive officers, from engaging in transactions which may hedge the value of our securities, including, without limitation, buying or selling puts and calls for, or engaging in short sales of, our securities. While the policy does not specifically address prepaid variable forward contracts, equity swaps, collars and exchange funds, in applying the policy, the Company would consider these transactions to be hedging transactions. This policy applies to all types of awards under our 2013 Plan, including awards of restricted Common Stock, which are the only types of awards currently outstanding under our 2013 Plan and also applies to Company securities otherwise acquired by our directors, executive officers and certain other employees. Employees, including our executive officers, are selected to be subject to this policy based on their access to material information about our Company, as part of theirday-to-day responsibilities. Directors are also included in this policy based on their access to material information about the Company. The purpose of the prohibition against hedging is to align the interests of our directors and the employees described above with the performance and prospects of the Company.
Compensation Committee Report |
In accordance with its written charter adopted by the Board, the Compensation Committee of the Board is responsible for overseeing awards to employees of stock or other equity compensation and reviewingdetermining and approving the individual elements of the total compensation of the Chief Executive Officer, the other NEOs and other senior executive officers.officers and recommending the compensation of the Chief Executive Officer for approval by the Board. The Compensation Committee is also obligated to communicate to shareholders information regarding the factors and criteria on which the Chief Executive Officer’s compensation was based, including the relationship of the Company’s performance to the Chief Executive Officer’s compensation, and the specific relationship of corporate performance to executive compensation overall.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) above with management. Based on this review and discussion, the Compensation Committee recommended to the Board that this CD&A be included in this Proxy Statement.
The preceding report is presented by the members of the Compensation Committee.
/s/ John T. McNabb, II | /s/ Lon McCain | /s/ | /s/ |
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|
|
| John T. McNabb, II Committee Chairman | Lon McCain Committee Member | Mark E. Monroe Committee Member | Timothy G. Taylor Committee Member |
Summary Compensation Table |
The following table sets forth the compensation of our Principal Executive Officer, Principal Financial Officer, and the three other most highly compensated executive officers. It also includes information for Tony Maranto, our former Chief Operating Officer, who left the Company in June 2017. Mr. Maranto is included since the compensation he received would have required him to be listed in the table but for the fact he was not serving as an executive officer of the Company at the end of the last completed fiscal year.officers during 2019. We refer to these sixfive individuals collectively as the “NEOs” for 2017.2019. Mr. Hamm served as our Chief Executive Officer during 2019, and assumed his current role as our Executive Chairman on January 1, 2020. As result, Mr. Hamm appears in the table below as our Principal Executive Officer. The title appearing in the table below, and the tables that follow, is his current title. Compensation is shown for years 2015, 20162017, 2018 and 2017,2019, as applicable.
Name and Principal Position | Year | Salary ($) (1) | Bonus ($) (1) | Stock Awards ($) (2) | All Other Compensation ($) (3) | Total ($) | ||||||||||||||||||
Harold G. Hamm Chairman of the Board and Chief Executive Officer | | 2017 2016 2015 |
| $
| 1,210,589 827,121 1,027,111 |
| $
| 3,404,829 2,482,900 1,982,900 |
| $
| 7,593,904 5,505,865 8,384,927 |
| $
| 60,077 66,213 145,781 |
| $
| 12,269,399 8,882,099 11,540,719 |
| ||||||
Jack H. Stark President | | 2017 2016 2015 |
| | 668,269 640,000 632,308 |
| | 1,253,022 720,001 711,400 |
| | 3,597,674 2,496,633 3,900,000 |
| | 37,213 24,212 94,023 |
| | 5,556,178 3,880,846 5,337,731 |
| ||||||
John D. Hart Senior Vice President, Chief | | 2017 2016 2015 |
| | 551,404 530,000 509,807 |
| | 1,030,000 520,000 500,000 |
| | 2,518,372 1,803,136 2,800,032 |
| | 29,156 22,805 82,370 |
| | 4,128,932 2,875,941 3,892,209 |
| ||||||
Gary E. Gould Senior Vice President, Production and Resource Development | | 2017 2016 2015 |
| | 468,173 450,000 440,385 |
| | 690,000 410,000 400,000 |
| | 1,641,442 1,178,982 1,850,016 |
| | 28,956 20,422 74,254 |
| | 2,828,571 2,059,404 2,764,655 |
| ||||||
Eric S. Eissenstat Senior Vice President, General Counsel, Chief Risk Officer and Secretary | 2017 | 453,327 | 680,000 | 1,349,163 | 24,434 | 2,506,924 | ||||||||||||||||||
Tony Maranto Former Chief Operating Officer(4) | 2017 | 54,519 | (4) | — | (4) | 7,917,826 | (4) | 207,193 | 8,179,538 |
Name and Principal Position
| Year
| Salary
| Bonus
| Stock ($)(2)
| All Other
| Total
| ||||||||||||||||||
Harold G. Hamm | 2019 | $ | 1,309,472 | $ | 3,019,970 | $ | 8,349,062 | $ | 67,584 | $ | 12,746,088 | |||||||||||||
Executive Chairman | 2018 | 1,255,987 | 3,442,974 | 8,556,833 | 76,618 | 13,332,412 | ||||||||||||||||||
| 2017
|
|
| 1,210,589
|
|
| 3,404,829
|
|
| 7,593,904
|
|
| 60,077
|
|
| 12,269,399
|
| |||||||
Jack H. Stark | 2019 | 725,060 | 1,114,780 | 3,879,015 | 38,237 | 5,757,092 | ||||||||||||||||||
President and Chief Operating Officer | 2018 | 695,445 | 1,270,927 | 4,040,112 | 33,819 | 6,040,303 | ||||||||||||||||||
| 2017
|
|
| 668,269
|
|
| 1,253,022
|
|
| 3,597,674
|
|
| 37,213
|
|
| 5,556,178
|
| |||||||
John D. Hart | 2019 | 595,673 | 915,848 | 2,812,276 | 25,489 | 4,349,286 | ||||||||||||||||||
Senior Vice President, Chief | 2018 | 573,462 | 1,040,000 | 2,929,122 | 29,233 | 4,571,817 | ||||||||||||||||||
Financial Officer and Treasurer
|
| 2017
|
|
| 551,404
|
|
| 1,030,000
|
|
| 2,518,372
|
|
| 29,156
|
|
| 4,128,932
|
| ||||||
Eric S. Eissenstat | 2019 | 487,008 | 551,099 | 1,454,636 | 25,489 | 2,518,232 | ||||||||||||||||||
Senior Vice President, General Counsel, Chief Risk Officer and Secretary
| | 2018 2017 |
| | 470,327 453,327 |
| | 550,095 680,000 |
| | 1,515,042 1,349,163 |
| | 24,989 24,434 |
| | 2,560,453 2,506,924 |
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Patrick W. Bent | 2019 | 509,825 | 610,000 | 1,935,204 | 25,489 | 3,080,518 | ||||||||||||||||||
Senior Vice President, Operations(4)
|
| 2018
|
|
| 471,482
|
|
| 650,000
|
|
| 1,515,042
|
|
| 24,989
|
|
| 2,661,513
|
|
(1) | None of the NEOs elected to participate in the Company’s DCP with respect to |
(2) | The amounts under “Stock Awards” reflect the aggregate grant date fair value computed in accordance with ASC Topic 718, disregarding any estimate for forfeitures, for awards granted during the indicated year. A discussion of the grant date fair value calculation can be found in Note |
(3) | All Other Compensation for |
Name | Year | Personal Use of Company Aircraft ($)(a) | Personal Use of ($)(b) | Contributions to 401(k) Plan ($) | Other ($)(c) | Total ($) | Year | Personal Use of Company Aircraft ($)(a) | Personal Use of ($)(b) | Contributions to 401(k) Plan ($) | Total ($)(c) | |||||||||||||||||||||||||||||||||
Harold G. Hamm | 2017 | $ | 33,426 | $ | 513 | $ | 24,000 | $ | 2,138 | (d) | $ | 60,077 | 2019 | $ | 34,941 | $ | 7,154 | $ | 25,000 | $ | 67,584 | |||||||||||||||||||||||
Jack H. Stark | 2017 | 216 | 12,751 | 24,000 | 246 | (d) | 37,213 | 2019 | 7,397 | 5,351 | 25,000 | 38,237 | ||||||||||||||||||||||||||||||||
John D. Hart | 2017 | 66 | 4,539 | 24,000 | 551 | (d) | 29,156 | 2019 | — | — | 25,000 | 25,489 | ||||||||||||||||||||||||||||||||
Gary E. Gould | 2017 | 84 | 4,474 | 24,000 | 398 | (d) | 28,956 | |||||||||||||||||||||||||||||||||||||
Eric S. Eissenstat | 2017 | 148 | — | 24,000 | 286 | (d) | 24,434 | 2019 | — | — | 25,000 | 25,489 | ||||||||||||||||||||||||||||||||
Tony Maranto | 2017 | — | — | 162 | 207,031 | (e) | 207,193 | |||||||||||||||||||||||||||||||||||||
Patrick W. Bent | 2019 | — | — | 25,000 | 25,489 |
(a) | We calculate the incremental cost to the Company of any personal use of corporate aircraft based on the cost of fuel, trip-related maintenance, crew travel expenses,on-board catering, landing fees, trip-related hangar and parking costs, and other variable costs. Occasionally, spouses and guests of NEOs ride along when an aircraft is already going to a destination for a business purpose. This use has minimal costs to the Company and, where applicable, only the direct variable costs associated with the |
additional passenger (for example fuel and catering) are included in determining the aggregate incremental cost to the Company. Since Company-owned aircraft are used primarily for business travel, we do not include the fixed costs that do not change based on usage, such as pilots’ salaries and the purchase costs of Company-owned aircraft. |
(b) | We calculate the incremental cost to the Company of any personal use of Company vehicles, including fuel, maintenance, insurance, lease payments and depreciation. |
(c) | Total amount includes nominal cost of |
(4) | Mr. |
The following table reflects information concerning awards of restricted stock granted to our NEOs during the fiscal year ending December 31, 20172019 under the Company’s 2013 Plan:
Name | Grant Date | Stock Awards: Number of Shares (1) | Grant Date Fair Value of Stock Awards ($) (2) | Grant Date | Stock Awards: Number of Shares (1) | Grant Date Fair Value of Stock Awards ($) (2) | ||||||||||||||||||
Harold G. Hamm | 2/16/2017 | 165,049 | (3) | $ | 7,593,904 | 2/12/2019 | 186,363 | (3) | $ | 8,349,062 | ||||||||||||||
Jack H. Stark | 2/15/2017 | 77,670 | (3) | 3,597,674 | 2/11/2019 | 87,701 | (3) | 3,879,015 | ||||||||||||||||
John D. Hart | 2/15/2017 | 54,369 | (3) | 2,518,372 | 2/11/2019 | 63,583 | (3) | 2,812,276 | ||||||||||||||||
Gary E. Gould | 2/15/2017 | 35,437 | (3) | 1,641,442 | ||||||||||||||||||||
Eric S. Eissenstat | 2/15/2017 | 29,127 | (3) | 1,349,163 | 2/11/2019 | 32,888 | (3) | 1,454,636 | ||||||||||||||||
Tony Maranto | 5/17/2017 | 189,105 | (4) | 7,917,826 | ||||||||||||||||||||
Patrick W. Bent | 2/11/2019 | 32,888 | (3) | 1,454,636 | ||||||||||||||||||||
8/01/2019 | 14,023 | (4) | 480,568 |
(1) | All awards will vest on an accelerated basis in the event of a change in control. |
(2) | The aggregate grant date fair value of each equity award is computed in accordance with ASC Topic 718, disregarding any estimate for forfeitures. |
(3) | The shares underlying this award vest on February 15, |
(4) | Represents a supplemental award of 14,023 shares |
The following table shows the percentage of base salary and bonus that each NEO other than Mr. Maranto, received or earned with respect to 20172019 as compared to that NEO’sNEOs total compensation for 2017:2019:
Name | Percentage of Salary and Bonus to Total | |
Harold G. Hamm | ||
Jack H. Stark | ||
John D. Hart | ||
| ||
Eric S. Eissenstat | ||
Patrick W. Bent | 36% |
Mr. Maranto is not included in the table due to the brief duration of his service with the Company and its impact on the comparability of his 2017 information to the other NEOs.
Outstanding Equity Awards as of December 31, |
The following table reflects unvested restricted stock held by our NEOs as of December 31, 2017:2019:
Stock Awards | ||||||||||||
Stock Awards | ||||||||||||
Name | Number of Shares of Stock that Have Not Vested (1) | Market Value of Shares of Stock that Have Not Vested ($) (2) | Number of Shares of Stock that Have Not Vested (1) | Market Value of Shares of Stock that Have Not Vested ($) (2) | ||||||||
Harold G. Hamm | 643,659 | $ 34,094,617 | 518,505 | $ | 17,784,722 | |||||||
Jack H. Stark | 286,625 | 15,182,526 | 244,003 | 8,369,303 | ||||||||
John D. Hart | 204,935 | 10,855,407 | 174,961 | 6,001,162 | ||||||||
Gary E. Gould | 134,285 | 7,113,076 | ||||||||||
Eric S. Eissenstat | 114,630 | 6,071,951 | 91,502 | 3,138,519 | ||||||||
Patrick W. Bent | 101,641 | 3,486,286 |
(1) | These shares represent restricted stock awards. Unvested shares will vest as follows: (i) |
(2) | Market value is based on the closing price of |
Options Exercised and Restricted Stock Vested During |
The following table reflects information concerning shares of restricted stock held by NEOs that vested during 2017:2019:
Stock Awards | ||||||||||||||||
Stock Awards | ||||||||||||||||
Name | Number of Shares Acquired on Vesting | Value Realized on Vesting ($) (1) | Number of Shares Acquired on Vesting | Value Realized on Vesting ($) (1) | ||||||||||||
Harold G. Hamm | 124,000 | $ | 5,743,680 | 301,526 | $ | 14,150,615 | ||||||||||
Jack H. Stark | 50,000 | 2,316,000 | 127,705 | 5,993,196 | ||||||||||||
John D. Hart | 38,000 | 1,760,160 | 92,232 | 4,328,448 | ||||||||||||
Gary E. Gould | 8,836 | 409,284 | ||||||||||||||
Eric S. Eissenstat | 25,000 | 1,158,000 | 53,211 | 2,497,192 | ||||||||||||
Patrick W. Bent | 39,021 | 1,831,256 |
(1) | Value realized on vesting is calculated by multiplying the number of shares by the closing price upon day of vesting. |
The following table sets forth our NEOs’ information regarding the DCP, including, with respect to each officer: (i) the aggregate contributions made by the officer; (ii) the employer contribution; (iii) the aggregate interest or other earnings accrued; (iv) aggregate withdrawals and distributions; and (v) the total balance of the officer’s account. Mr. Maranto did not participate in the DCP during his time with the Company and so does not appear in the table below.
Name | Executive Contributions in 2017 ($) (1) | Registrant in 2017 ($) (2) | Aggregate Earnings in 2017 ($) | Aggregate Withdrawals/ Distributions in 2017 ($) | Aggregate Balance at End of 2017 ($) (3) | Executive Contributions in 2019 ($) (1) | Registrant in 2019 ($) (2) | Aggregate Earnings in 2019 ($) | Aggregate Withdrawals/ Distributions in 2019 ($) | Aggregate Balance at End of 2019 ($) (3) | ||||||||||||||||||||||||||||||
Harold G. Hamm | $ | — | $ | — | $ | 107,702 | $ | — | $ | 450,500 | — | — | $ | 104,562 | — | $ | 536,925 | |||||||||||||||||||||||
Jack H. Stark | — | — | 50,119 | — | 265,515 | — | — | 72,161 | — | 325,714 | ||||||||||||||||||||||||||||||
John D. Hart | — | — | 59,597 | — | 294,553 | — | — | 63,610 | — | 343,810 | ||||||||||||||||||||||||||||||
Gary E. Gould | — | — | 21,391 | 82,986 | 107,461 | |||||||||||||||||||||||||||||||||||
Eric S. Eissenstat | — | — | 33,711 | — | 200,453 | — | — | 49,273 | — | 237,843 | ||||||||||||||||||||||||||||||
Patrick W. Bent | — | — | 41,885 | — | 187,310 |
(1) | None of the NEOs listed above elected to participate in the DCP with respect to |
(2) | The Company suspended all matching under the DCP for |
(3) | Includes the following aggregate amounts previously reported, as applicable, as compensation for 2014, 2015, 2016, 2017 and |
Description of Deferred Compensation Plan |
On September 20, 2013, the Board, based upon the recommendation of the Compensation Committee, established the DCP.
The purpose of the DCP is to (i) give DCP participants andnon-employee directors an additional tool to use in planning their savings and for retirement;personal financial planning; and (ii) provide a vehicle to allow employee DCP participants, all of whom are limited in their participation in the Company’s 401(k) plan due to the Limits, to receive similar benefits in connection with Company matching contributions as employees whose ability to receive Company matching contributions is not impacted by the Limits. The DCP permits the Company to make discretionary matching and other contributions to a participant’s account and the matching and discretionary contributions approved in connection with the DCP are intended to facilitate the purpose described in (ii) above.
The DCP is not intended to constitute a “qualified plan” subject to the limitations of Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”), nor is it a “funded plan” for purposes of the Code. Benefits under the DCP constitute an unfunded general obligation of the Company. The DCP is designed to provide directors and select management or highly compensated employees of the Company the opportunity to defer the payment of all or a portion of their base pay and cash incentive awards (to the extent a participant is eligible to receive such awards).
Each year the DCP permits participants to elect to defer: (i) up to 100% of base pay (cash fees in the case of directors) for a calendar year and (ii) up to 100% of any cash incentive award received by the employee participant for a performance year. DCP participants are 100% vested in any amounts they deferred pursuant to the alternatives described in the prior sentence. The DCP permits discretionary contributions by the Company, which are subject to a vesting schedule, as described below, at the discretion of the DCP Administrator.
As permitted by the DCP, matching contributions have been approved enabling employee participants to receive matching under the DCP for up to 10% of their total cash compensation, including salary and bonus deferrals. The approved match was intended to align with the amount employee participants would have received under the 401(k) plan, but for the Limits and is given subject to terms and conditions applicable to matching contributions under the 401(k) plan. As a result of the continued volatile commodity price environment, experienced by the Company during 2014, 2015 and 2016, the Company suspended the match described above for 2017,2019, and the suspension was applicable to any bonus paid in February 20182020 for 20172019 under CLR’s Cash Bonus Plan. All matching has been suspended since 2016.
Distribution of DCP amounts deferred in connection with 2014 will occur upon a participant’s separation from service with the Company. The Company will requirerequires a six month delay in the payment of DCP benefits if the participant is a “specified employee” pursuant to Section 409A of the Code at the time of his or her separation from service with the Company, and an earlier payment would result in the imposition of an excise tax on the participant if the amounts were received at the time of his or her separation (the “Specified Employee Delay”). In addition, in connection with amounts deferred in respect of 2014, distribution of DCP accounts and vesting of any Company contributions will result from any of the following events: (i) Change of Control (as defined in the DCP); (ii) a participant’s death or Disability (as defined in the DCP); (iii) a participant’s Normal Retirement (as defined in the DCP); and (iv) a participant’s Involuntary Termination (as defined in the DCP).
Distribution of DCP amounts deferred after 2014 will occur, subject to limited exceptions, based on the election of the participant to receive a distribution upon a fixed date chosen by the DCP participant, the participant’s Termination of Employment (as defined in the DCP), or a Change inof Control. In addition, distribution of DCP amounts deferred after 2014 will occur in the event of the participant’s death or Disability. In connection with these distribution events, participants can choose, except in the case of death or Disability, to receive distributions in a lump sum or installments. In the case of death or Disability, the distribution will be made in a lump sum. Participants also have the ability to elect a lump sum distribution if a Change of Control or Involuntary Termination occurs after a participant has started to receive distributions after a fixed date. Distributions described above are also subject to the Specified
Employee Delay. Finally, vesting restrictions on any amounts deferred after 2014 will lapse in connection with any of the following events: (i) Change of Control; (ii) participant’s death or Disability; and (iii) a participant’s achievement of Normal Retirement Age (as defined in the DCP).
Earnings reflect the returns produced by the investments selected by the applicable named executive officer. The investment options available to the NEOs are asub-set of the investment options available under the Company’s 401K Plan. As of December 31, 2017,2019, investment options consisted of the following (returns for 20172019 noted in parentheses): Fidelity® High Income (8.58%(14.25%), Oakmark Equity & Income I (14.46%(19.31%), TRP Retirement 2005 (10.64%(15.17%), TRP Retirement 2010 (11.59%(16.22%), TRP Retirement 2015 (13.41%(17.53%), TRP Retirement 2020 (15.74%(19.47%), TRP Retirement 2025 (17.75%(21.2%), TRP Retirement 2030 (19.58%(22.7%), TRP Retirement 2035 (21.00%(23.99%), TRP Retirement 2040 (22.13%(24.95%), TRP Retirement 2045 (22.54%(25.59%), TRP Retirement 2050 (22.54%(25.67%), TRP Retirement 2055 (22.67%(25.65%), TRP Retirement 2060 (22.52%(25.7%), Fidelity® Contrafund® K (32.34%(30.17%), Fidelity Spartan® 500 Index Advtg® (21.79%(31.47%), Fidelity®Low-Priced Stock (20.79%(25.81%), MFSMid-Cap Value Equity I (13.84%(31.08%), Fidelity Spartan® Extnd Mkt Idx Advtg (18.18%(28.0%), Driehaus Emrg Mkts (42.52%(25.34%), Eagle Mid CP Grth R6 (30.44%(35.02%), Metwest Total Return Bond (3.49%(9.23%), Fidelity Spartan® Intl Idx Advtg (25.35%(22.0%), American Beacon Small Cp Val Inst (8.67%(23.51%), American Funds EuroPacific Growth Fund (31.17%(27.4%), JH Disciplined Value Fund R6 (19.33%(22.79%), and Wells Fargo SM Co Growth IS (20.61%(26.46%). The Company does not guarantee a level of investment return.
Potential Payments Upon Termination or Change in Control |
We do not maintain employment, severance or change in control agreements with our NEOs outside of the potential acceleration provisions described below with respect to our equity awards. We discussed our rationale for providing change in control equity vesting above under “Compensation Discussion and Analysis.”
Vesting of Restricted Stock on Change in Control. All of our employees’ and directors’ unvested shares of restricted stock will vest if a change in control occurs as defined in their respective stock award agreements. Employees and directorsThese agreements are subject to the following definitionsprovisions of the 2013 Plan. The 2013 Plan contains customary change in control in connection with outstanding awards under the 2013 Plan.
For purposes of the 2013 Plan, a “change in control” means the occurrence of any of the following:
For purposes of the discussion above in connection with the meaning of “change in control” under the 2013 Plan, references to “Incumbent Board” means the portion of the Board constituted of the individuals who are members of the Board as of May 23, 2013 and any other individual who becomes a director of the Company after May 23, 2013 and whose election or appointment by the Board or nomination for election by the Company’s shareholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Incumbent Board.
For purposes of the discussion above in connection with the meaning of “change in control” under the 2013 Plan, a reference to an “Excluded Person” means (i) Harold G. Hamm (“Hamm”), (ii) Hamm’s spouse (including anyex-spouse of Hamm pursuant to the terms of a domestic relations order), (iii) any of Hamm’s lineal descendants, (iv) Hamm’s guardian or other legal representative of Hamm or Hamm’s estate, (v) any trust of which at least one of the trustees is Hamm, or the principal beneficiaries of which are any one or more of the persons or entities described in clause (i) through (iv) above, (vi) any person or entity that is controlled by any one or more of the
persons or entities described in clause (i) through (v) above, (vii) any group (within the meaning of the Exchange Act and the rules of the SEC thereunder) that includes one or more of the persons or entities described in clauses (i) through (vi) above, provided that such persons and entities described in clauses (i) through (vi) above control more than 50% of the voting power of such group.provisions.
Listed in the following table is the value of unvested shares of restricted stock held by our NEOs (other than Mr. Maranto who left the Company) as of December 31, 2017,2019, which would fully vest and be immediately available in the event of a change in control as described above in connection withunder the 2013 Plan. The table assumes a change in control occurred on December 31, 20172019 and theper-share value is $52.97,$34.30, the closing price of our Common Stock as of December 29, 2017 (the last trading day of 2017):31, 2019:
Name | Early Vesting of Restricted Stock ($) | Termination Payment ($) | Total ($) | Change in Control Vesting of Restricted Stock ($) | Termination Payment ($) | Total ($) | ||||||||||||||||||
Harold G. Hamm | $34,094,617 | — | $34,094,617 | $17,784,722 | — | $ 17,784,722 | ||||||||||||||||||
Jack H. Stark | 15,182,526 | — | 15,182,526 | 8,369,303 | — | 8,369,303 | ||||||||||||||||||
John D. Hart | 10,855,407 | — | 10,855,407 | 6,001,162 | — | 6,001,162 | ||||||||||||||||||
Gary E. Gould | 7,113,076 | — | 7,113,076 | |||||||||||||||||||||
Eric S. Eissenstat | 6,071,951 | — | 6,071,951 | 3,138,519 | — | 3,138,519 | ||||||||||||||||||
Patrick W. Bent | 3,486,286 | — | 3,486,286 |
Distributions in Connection with DCP.Under the terms of our DCP, distributions of deferred compensation and accelerated vesting of Company contributions may occur in connection with change of control or a participant’s termination. A description of such distributions and accelerated vesting, as well as the circumstances triggering these events with respect to Messrs. Hamm, Stark, Hart, GouldEissenstat and EissenstatBent appear above on pages 35 and 36page 39 in the description of our DCP appearing under the heading “Description of Deferred Compensation Plan.” Mr. Maranto did not participate in the DCP during his time with the Company.
Maranto Departure from the Company. In connection with his separation from the Company, the Company and Mr. Maranto entered into an agreement in June 2017 pursuant to which Mr. Maranto received a lump sum payment of $201,923 (20 weeks of base salary) and the option to participate in the Company’s medical and dental plans at employee rates for up to 20 weeks. In connection with the agreement, Mr. Maranto agreed to, among other things, a general release of claims against the Company.
Indemnification Agreements |
Our officers, directors, and directorscertain other employees have entered into customary indemnification agreements with us, pursuant to which we have agreed to indemnify our officers and directors to the fullest extent permitted by law.
Risk Assessment Related to our Compensation Structure |
We believe our executive compensation program is appropriately structured and not reasonably likely to result in risks that could have a material adverse effect on us. We believe our approach of subjectively evaluating performance results of each executive assists in mitigating excessive risk-taking that could harm our value or reward poor judgment by our executives. Several features of our programs reflect sound risk management practices. We believe we have allocated our compensation among base salary and short and long-term compensation opportunities in such a way as to not encouragediscourage excessive risk-taking. Further, one of the primary factors we take into consideration in setting compensation is the performance of the Company as a whole. This is based on our belief that applying Company-wide metrics encourages decision-making that is in the best long-term interests of the Company and our shareholders as a whole. Finally, the time-based vesting over a multi-year period for our long-term incentive awards ensures our employees’ interests align with those of our shareholders for the long-term performance of our Company.
Pay Ratio Disclosure |
The 20172019 compensation disclosure ratio of the median total compensation of all Company employees to the annual total compensation of Mr. Hamm, our then Chief Executive Officer, who iswas our principal executive officer at December 31, 2019, is as follows:
2019 median employee total annual compensation: |
2019 Chief Executive Officer total annual compensation: |
2019 ratio of total annual compensation of Chief Executive Officer to median employee: |
With respect to the ratio calculation, we identified the median employee by examining the 20172019 compensation reported on FormW-2 for all individuals, excluding our Chief Executive Officer, who were employed by us (whether on a full-time, part time, seasonal or temporary basis) on December 31, 2017,2019, the last day of our previous fiscal year. For such employees we did not make any annualizations, assumptions, adjustments (includingcost-of-living adjustments) or estimates with respect to the compensation reflected on the FormW-2s.
After identifying the median employee, we calculated the total annual compensation for such employee using the same methodology we use for our named executive officers as set forth in the Summary Compensation Table appearing on page 3236 of this proxy statement.
Given the different methodologies that various public companies will use to determine an estimate of their pay ratio, the ratio reported above should not be used as a basis for comparison between companies.
Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners |
The following table sets forth certain information concerning the beneficial ownership of our shares of Common Stock, as of March 22, 2018,18, 2020, by each person (other than our directors and executive officers) known by us to be the beneficial owner of more than 5% of the issued and outstanding Common Stock.
Beneficial Ownership | ||||||||||||
Beneficial Ownership | ||||||||||||
Name and Address of Beneficial Owner | Number of Shares | Percent of Class (1) | Number of Shares | Percent of Class (1) | ||||||||
Harold Hamm Family LLC (2) | 283,116,538 | 75.28% | 283,116,538 | 77.54% |
(1) | Based on total shares outstanding of |
(2) | The Family LLC acting through its manager, Mr. Hamm, our |
Security Ownership of Directors and Executive Officers |
The following table sets forth certain information concerning the beneficial ownership of our shares of Common Stock as of March 22, 201818, 2020 by (a) each of our directors and director nominees, (b) each of the executive officers, and Mr. Maranto, and (c) all of our directors, director nominees and executive officers and Mr. Maranto as a group. Each of the aforementioned persons has sole voting and dispositive power with respect to the shares listed in the table, except as otherwise indicated below.
Beneficial Ownership | ||||||||||||||||
Beneficial Ownership | ||||||||||||||||
Name of Director or Executive Officer | Number of Shares (1) | Percent of Class (2) | Number of Shares (1) | Percent of Class (2) | ||||||||||||
Patrick W. Bent | 152,547 | * | 235,530 | * | ||||||||||||
William B. Berry | 54,617 | * | 1,041,301 | * | ||||||||||||
Eric S. Eissenstat | 169,896 | * | 197,465 | * | ||||||||||||
James L. Gallogly | 16,209 | * | ||||||||||||||
Gary E. Gould | 178,876 | * | ||||||||||||||
Harold G. Hamm (3) | 284,572,849 | 75.66 | % | 284,923,121 | 78.04 | % | ||||||||||
John D. Hart | 324,649 | * | 416,541 | * | ||||||||||||
Jeffrey B. Hume (4) | 2,218,150 | * | 2,233,139 | * | ||||||||||||
Tony Maranto | 0 | * | ||||||||||||||
Shelly Lambertz (5) | 118,412 | * | ||||||||||||||
Lon McCain | 61,395 | * | 58,912 | * | ||||||||||||
John T. McNabb, II | 42,617 | * | 44,800 | * | ||||||||||||
Mark E. Monroe | 248,563 | * | 252,746 | * | ||||||||||||
Steven K. Owen | 120,877 | * | 157,560 | * | ||||||||||||
Ramiro F. Rangel | 66,830 | * | 90,705 | * | ||||||||||||
Jack H. Stark | 716,260 | * | 824,687 | * | ||||||||||||
All Directors, executive officers and NEOs as a group (15 persons) | 288,944,335 | 76.83 | % | |||||||||||||
Timothy G. Taylor | 17,273 | * | ||||||||||||||
All Directors, executive officers and NEOs as a group (14 persons) | 290,612,192 | 79.60 | % |
* | Less than 1% |
(1) | Beneficial ownership is determined in accordance with the SEC’s rules and regulations and generally includes voting or dispositive power with respect to securities. The following persons have sole voting and dispositive power with respect to the restricted stock included in the number of shares listed opposite each person’s name in the table above, subject to the terms of the documents relevant to each restricted stock award: Mr. Bent – |
(2) | Based on total shares outstanding of |
(3) | Includes 283,116,538 shares held by the Family LLC for which Mr. Hamm is the sole manager and as such has sole voting and dispositive power over the shares held by the Family LLC. The shares held by the Family LLC and included in Mr. Hamm’s total are also reported as owned by the Family LLC in the table above. Also includes |
(4) | Includes 2,021,839 shares held by a limited liability company owned by Mr. Hume and his wife. |
(5) | Includes |
(6) | Includes 2,000 shares held by a charitable foundation qualified under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, of which Mr. McNabb and his wife are officers and with respect to which Mr. McNabb and his wife share voting and dispositive power. Mr. McNabb and his wife have no pecuniary interest in the shares held by the charitable foundation. |
Includes |
(8) | Includes 32,065 shares held through a trust. |
(9) | Includes 486,003 shares held by a limited liability company owned by Mr. Stark and his wife. |
Section 16(a) Beneficial Ownership
Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, Section 16 officers and persons who beneficially own more than 10% of our Common Stock to file reports of ownership and changes in ownership of our Common Stock with the SEC. We are required to disclose delinquent filings of reports by such persons during the year ended December 31, 2017.
Based on a review of the copies of such reports and amendments thereto received by us, or written representations that no filings were required, we believe that during the year ended December 31, 2017, all Section 16(a) filing requirements applicable to our Section 16 officers, directors and 10% shareholders were met.
Approve an Amendment to Our Third
Amended and Restated Certificate
of Incorporation that Declassifies
Our Board of Directors
Summary |
We are asking shareholders to approve an amendment to our Third Amended and Restated Certificate of Incorporation, as amended (the “Certificate”), to effect the declassification of our Board of Directors. If approved at the Annual Meeting, the declassification of our Board will give shareholders the ability to elect the entire Board on an annual basis starting with the 2021 Annual Meeting of Shareholders. The Board believes the Declassification Proposal is in the best interest of shareholders since it brings the Company’s corporate governance into greater alignment with best governance practices, by enhancing the accountability of the Board to shareholders.
Proposed Amendment to Third Amended and Restated Certification of Incorporation, As Amended |
Currently, our Certificate provides our Board is divided into three classes, with members of each class holding office for staggered three-year terms. One class of directors, representingapproximately one-third of our directors, stands for election at each annual meeting of shareholders. We are asking shareholders to approve an amendment to our Certificate to eliminate the three-year classified terms of our directors and provide instead for the annual election of all directors elected at our 2021 Annual Meeting of Shareholders, forone-year terms expiring at the next succeeding annual meeting, subject to a director’s earlier death, resignation, retirement, disqualification or removal from office. Further, in connection with the proposed declassification of the Board, we are also proposing to amend our Certificate so that a director elected or appointed by the Board to fill any vacancy on our Board will hold office for a term expiring at the annual meeting of shareholders following such appointment. If the Declassification Proposal is approved, the Class II directors elected at the Annual Meeting will be elected to serve until the 2021 Annual Meeting of Shareholders, and all directors
will be up forre-election by shareholders at the 2021 Annual Meeting of Shareholders and will be elected forone-year terms to expire at the annual shareholders meeting in 2022. The proposed amendment will thus have the effect of shortening the existing terms of certain directors whose terms currently extend beyond the 2021 Annual Meeting of Shareholders. See “Proposal 1: Election of Directors” for a description of the terms of each class of our directors. If the Declassification Proposal is not approved at the Annual Meeting, then the classified Board structure described in the first two sentences of this paragraph will continue beyond the Annual Meeting and the Class II directors elected at the Annual Meeting will have terms that will continue until the 2023 Annual Meeting of Shareholders.
The description of the proposed amendment to the Certificate is qualified in its entirety by reference to the text of the proposed amendment, which is attached as Annex B to this proxy statement.
The Board recommends the shareholders vote “for” the Declassification Proposal.
Ratification of Selection of
Independent Registered Public
Accounting Firm
General |
The Audit Committee has directed us to submit the selection of our independent registered public accounting firm for ratification by the shareholders at the Annual Meeting. The Audit Committee evaluates the selection of our independent registered public accounting firm each year, and has reappointed Grant Thornton as the Company’s independent registered public accounting firm to audit the consolidated financial statements of the Company for the year ended December 31, 2018.2020. In determining to reappoint Grant Thornton as the Company’s independent auditor, the Audit Committee took into consideration a number of factors, including, but not limited to: Grant Thornton’s performance on prior Company audits; the quality and timeliness of the services and informative communications provided by Grant Thornton; the results of regulatory inspections performed on Grant Thornton audits; an assessment of Grant Thornton’s resources and expertise; Grant Thornton’s knowledge of the Company’s business and industry; Grant Thornton’s
independence, objectivity and adherence to professional and ethical standards; the appropriateness of Grant Thornton’s fees relative to the services provided; and the frequency and quality of Grant Thornton’s interactions with the Audit Committee and the Company’s management. Grant Thornton has served as our independent registered public accounting firm since 2004.
Our Bylaws and other governing documents or law do not require shareholder ratification of the selection of Grant Thornton as our independent registered public accounting firm. However, the Audit Committee is submitting the selection of Grant Thornton to the shareholders for ratification as a matter of good corporate practice. If the shareholders fail to ratify the selection, the Audit Committee will reconsider whether to retain that firm.Grant Thornton. Even if the selection is ratified, the Audit Committee may in its discretion direct the appointment of a different independent registered public accounting firm at any time during the year if it determines such a change would be in our and our shareholders’ best interest.
The Board recommends the shareholders vote “for” the ratification of the selection of Grant Thornton as our independent registered public accounting firm for the year ending December 31, 2018.2020.
Audit Committee Report |
In accordance with its written charter adopted by the Board, the Audit Committee of the Board assists the Board in fulfilling its responsibility for oversight of the quality and integrity of our accounting, auditing, and financial reporting practices. In addition to overseeing the audit of our financials by our independent registered public accounting firm, the Audit Committee reviews our unaudited quarterly financials with management. The Audit Committee is also responsible for oversight of the Company’s internal audit function
and the Audit Committee meets periodically with the Company’s Director of Internal Audit to review the effectiveness of the internal audit function, internal audit plan and related internal audit activities. Lastly, the Audit Committee is tasked with overseeing the Company’s major financial risk exposures.
The Audit Committee is composed entirely of independent directors. All members of the Audit CommitteeMessrs. McCain and McNabb have been determined by the Board to be financial experts. The Audit Committee’s charter can be found in the Corporate Governance section of our website at www.CLR.com. A printed copy of the charter will be made available to any shareholder who requests it from our Secretary.
The Audit Committee reviewed and discussed our audited financial statements as of and for the fiscal year ended December 31, 2017,2019, with Grant Thornton, our independent auditor, with and without management present. Management has the primary responsibility for our financial statements and the overall reporting process, including assuring we develop and maintain adequate financial controls and procedures for monitoring and assessing compliance with those controls and procedures, including internal control over financial reporting. Our independent auditor is responsible for auditing the annual financial statements prepared by management, expressing an opinion as to whether those financial statements fairly present our financial position, results of operations and cash flows in conformity with generally accepted accounting principles, and discussing with the Audit Committee any issues it believes should be raised. Grant Thornton also audited our internal control over financial reporting as of December 31, 2019 and issued a separate report thereon.
The Audit Committee is responsible for the appointment, compensation and oversight of our independent auditor. In discharging its oversight responsibility as to the audit process, the Audit Committee obtained from the independent auditor a formal written statement describing all relationships between the auditor and us that might bear on the auditor’s independence consistent with applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) regarding the independent auditor’s communications with the Audit Committee concerning independence. The Audit Committee also discussed with the auditor any relationships that may impact its objectivity and independence, and satisfied itself as to the auditor’s independence. The independent auditor reviewed its audit plans, audit scope, and identification of audit risks with the Audit Committee. The Audit Committee also discussed with management and the independent auditor the quality and adequacy of our internal controls. Further, the Audit Committee discussed and reviewed with the independent auditor all applicable communications required by the PCAOB Auditing Standard No. 1301,Communications with Audit Committees.and the SEC.
Based on the above-mentioned review and discussions with management and the independent auditor, the Audit Committee recommended to the Board and the Board approved the Audit Committee’s recommendation that the audited financial statements of the Company be included in its Annual Report on Form10-K for the fiscal year ended December 31, 2017,2019, for filing with the SEC. The Audit Committee also approved and recommended to the Board, and the Board ratified the reappointment of the independent auditor for 2018.2020.
The preceding report is presented by the members of the Audit Committee.
/s/ |
| /s/ | /s/ Timothy G. Taylor | |||
Committee Chairman |
Committee Member |
Committee Member |
Audit and Other Fees |
Grant Thornton served as our independent registered public accounting firm during 20172019 and 2016.2018. The aggregate fees for various services performed by Grant Thornton for the years ended December 31, 20172019 and 20162018 are set forth below:
2017 | 2016 | 2019 | 2018 | |||||||||||||
Audit Fees | $ | 1,021,015 | $ | 777,171 | $ | 1,290,756 | $ | 991,088 | ||||||||
Audit-Related Fees | — | — | ||||||||||||||
Tax Fees | — | — | ||||||||||||||
All Other Fees | — | 31,500 | ||||||||||||||
Total Fees | $ | 1,021,015 | $ | 777,171 | $ | 1,290,756 | $ | 1,022,588 |
Fees for audit services include fees associated with our annual consolidated and subsidiary audits, the review of our quarterly reports on Form10-Q, Sarbanes Oxley Act compliance review, accounting consultations and services normally provided by the accounting firm in connection with statutory or regulatory filings. AuditAll Other Fees for 2018 represent fees paid to Grant Thornton for 2016 include amounts incurred for services associated withcomparative analysis of the review of a shelf registration statement filed with the SEC. Audit fees for 2017 include amounts incurred in connection with our December 2017 issuance of 4.375% Senior Notes due 2028, for services associated with the preparation of comfort letters and consents, and assistance with and review of documentsCompany’s bonus pool metrics relative to be filed with the SEC.comparable peer companies.
As necessary, the Audit Committee considers whether the provision ofnon-audit services by Grant Thornton is compatible with maintaining auditor independence and has adopted a policy that requirespre-approval of all audit andnon-audit services. Such policy requires the Audit Committee to approve services and fees in advance and requires documentation regarding the specific services to be performed. All 20172019 audit fees were approved in advance in accordance with the Audit Committee’s policies.
Attendance at Annual Meeting |
Representatives of Grant Thornton are expected to be present at the Annual Meeting, with the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions.
Approve, by aNon-Binding Vote,
The Compensation of the
Named Executive Officers
The Company is providing shareholders an advisory vote on the compensation of our named executive officers as required by Section 14A(a)(1) of the Exchange Act. Section 14A(a)(1) was added to the Exchange Act by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). In January 2011, the SEC issued final rules to implement the requirements of Exchange Act Section 14A(a)(1).
The Company’s last advisory vote was held at the 2019 Annual Meeting of Shareholders. Following the 2017 Annual Meeting of Shareholders, (the “2017 Annual Meeting”). Following the 2017 Annual Meeting, our Board determined to hold an advisory vote on the compensation of our named executive officers on an annual basis. This pattern will continue until the next required advisory vote on the frequency of shareholder votes on the compensation of executives, which will occur no later than our Annual Meeting of Shareholders in 2023. As a result, this proposal is being submitted for anon-binding vote at the Annual Meeting.
The advisory vote on compensation of our named executive officers is anon-binding vote on the compensation of the Company’s NEOs, as described in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation, and the accompanying narrative disclosure set forth in this Proxy Statement. The advisory vote on executive compensation is not a vote on the Company’s general compensation policies, compensation of the Company’s Board, or the Company’s compensation policies as they relate to risk management, as described under “Risk Assessment Related to our Compensation Structure” on page 38.page41. The Dodd-Frank Act and related SEC regulations and guidance require the Company to hold the advisory vote on compensation of our NEOs at least once every three years.
The Company’s executive compensation programs are designed to attract, retain, and motivate experienced, talented individuals to increase shareholder value by finding and developing crude oil and natural gas reserves at costs that provide an attractive rate of return on our investment. During 2017,2019, the Company: (i) increasedinitiated cash dividend to shareholders; (ii) initiated a share repurchase program and repurchased approximately $190.2 million of Common Stock in 2019; (iii) achieved full-year 2019 production growth of 14% compared to 2018; (iv) generated net cash provided by operating activities for 2019 of $3.1 billion; (v) reduced total debt by 85%; (ii) increased 2017 average fourth quarter production by 37% compared to 2016 average fourth quarter production; (iii) increased production growth by 12%; (iv) improved crude oil and natural gas differentials relative to benchmark prices by 25% and 74%, respectively; (v) completed the steps necessary for transition to full field development of key assets;$442 million; (vi) increasedyear-end 2019 proved reserves by 6% (adjusted for 20172019 divestitures); compared toyear-end 2018; (vii) continued to exercise capital discipline and (vii) reduced total debtnon-acquisition capital expenditures by $226 million.6% in 2019 compared to 2018; and (viii) maintainedlow-cost operations with production expenses of $3.58 per Boe and G&A expenses of $1.57 per Boe. The Compensation Committee believes the Company’s executive compensation programs reflect a strongpay-for-performance philosophy and are well aligned with the shareholders’ long-term interests. The Compensation Discussion and Analysis section starting on page 2124 provides a more detailed discussion of our executive compensation program.
This advisory vote on executive compensation is not binding on the Company’s Board. However, the Board will take into account the result of the vote when determining future executive compensation arrangements.
Accordingly, the Board recommends the shareholders approve the compensation of our named executive officers by voting “for” the following advisory resolution:
“RESOLVED, that the shareholders of Continental Resources, Inc. approve, on an advisory basis, the compensation of the individuals identified in the Summary Compensation Table, as disclosed in the Continental Resources, Inc. proxy statement for the 20182020 annual meeting of shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, which disclosure includes the Compensation Discussion and Analysis section, the compensation tables and the accompanying footnotes and narrative within the Executive Compensation and Other Information section of such proxy statement.”
Our Annual Report to Shareholders for the year ended December 31, 2017,2019, including audited financial statements, accompanies this Proxy Statement. The Annual Report is not incorporated by reference into this Proxy Statement or deemed to be a part of the materials for the solicitation of proxies.
Copies of the exhibits omitted from the Annual Report on Form10-K accompanying this Proxy Statement are available to shareholders without charge upon written request to our Secretary at 20 N. Broadway, Oklahoma City, Oklahoma 73102.
the Same Address
Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our Notice and Proxy Statement, Annual Report or Notice of Internet Availability may have been sent to multiple shareholders in your household. We will promptly deliver a separate copy of our Annual Report, Notice and Proxy Statement and/or Notice of Internet Availability to you if you call or write us at the following address or phone number: Continental Resources, Inc., 20 N. Broadway, Oklahoma City, Oklahoma 73102, Attn: Secretary,(405) 234-9000. If you would like to receive separate copies of the Annual Report and Notice and Proxy Statement in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact us at the above address and phone number.
The Board will consider properly presented proposals of shareholders intended to be presented for action at the Annual Meeting. Such proposals must comply with the applicable requirements of the SEC and our Bylaws. Under our Bylaws a matter can properly be brought before an annual meeting by a shareholder of the Company who is a shareholder of record at the time notice of the proposal is given and who is entitled to vote at such annual meeting. The proposing shareholder must give timely notice of his or her proposal in writing to the Secretary of the Company and satisfy the other requirements set forth in the Bylaws. To be timely, a shareholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Company at 20 N. Broadway, Oklahoma City, Oklahoma 73102 not later than ninety (90) days or more than one hundred twenty (120) days prior to the one year anniversary date of the preceding year’s annual meeting of shareholders of the Company (which for our 20192021 Annual Meeting will be February 16, 2019,13, 2021, and January 17, 2019,14, 2021, respectively); provided, however, that if the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, to be timely, a shareholder’s notice must be so delivered not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. A shareholder’s notice to the Secretary must comply with all applicable requirements set forth in our Bylaws, and shall set forth as to each matter: (a) a brief description of the business desired to be brought before the annual meeting (which, if the proposal is for any alteration, amendment, rescission or repeal of the Company’s Certificate of Incorporation or Bylaws, shall include the text of the resolution which will be proposed to implement the same); (b) the reasons for conducting such business at the annual meeting; (c) the identity of any beneficial owner or owners on whose behalf the proposal is being made; (d) the name and address, as they appear on the Company’s books, of the shareholder proposing such business and the name and address of any beneficial owner on whose behalf he or she may by acting; (e) the acquisition date, the class and the number of shares of voting stock of the Company which are owned beneficially by the shareholder and by any beneficial owner on whose behalf he or she may be acting; (f) any material interest of the shareholder in such business; (g) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such shareholder or any beneficial owner on whose behalf he or she may be acting, or any other agreement, arrangement or
understanding (including any derivative or short positions, profit interests, options or borrowed or loaned shares) has been made, the
effect or intent of which is to manage the risk or benefit of share price changes in the stock price of the Company for such shareholder or beneficial owner, to mitigate loss with respect to any share of stock of the Company, or to increase or decrease the voting power of such shareholder or beneficial owner with respect to any share of the stock of the Company; (h) a description of all arrangements or understandings between such shareholder and any other person or persons (including their names) in connection with the proposal of such business by such shareholder; (i) a representation such shareholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting; and (j) an undertaking by the shareholder giving the notice to update the information required pursuant to this paragraph as of the record date for the meeting promptly following the later of the record date for the meeting or the date notice of the record date is first publicly disclosed.
A shareholder proposal submitted pursuant to Rule14a-8 under the Exchange Act and intended to be included in our proxy statement relating to the 20192021 Annual Meeting must be received no later than December 6, 2018.3, 2020. For a proposal to be considered for presentation at the 20192021 Annual Meeting, although not included in the proxy statement for such meeting, it must be received within the time period set forth in our Bylaws as described above. In addition, the proxy solicited by the Board for the 20192021 Annual Meeting will confer discretionary authority to vote on any such shareholder proposal presented at the 20192021 Annual Meeting unless we are provided with notice of such proposal no later than ninety days prior to the date of the 20192021 Annual Meeting.
Questions and Answers About This
Proxy Material and Voting
Why am I receiving these materials? |
This Proxy Statement, the accompanying Notice of annual meetingAnnual Meeting and proxy card and our Annual Report are provided to you because our Board is soliciting your proxy to vote at the Annual Meeting. You are invited to attend the Annual Meeting to vote on the proposals described in this Proxy Statement. However, you do not need to attend the Annual Meeting to vote your shares. Under rules adopted by the SEC, we are furnishing proxy materials to our shareholders primarily via the Internet.internet. On or about April 5, 2018,2, 2020, we plan to mail to beneficial owners of shares registered in the name of a Broker (who constitute the majority of our shareholders), a Notice of Internet Availability containing instructions on how to access our proxy materials and to shareholders of record, printed copies of our proxy materials. The Notice of Internet Availability also instructs shareholders on how to vote online. This process is designed to expedite shareholders’ receipt of proxy materials, help conserve natural resources and lower the cost of the Annual Meeting. However, if you prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability.
Who can vote at the Annual Meeting? |
Shareholders on March 22, 201818, 2020 (the record date for the Annual Meeting) are eligible to vote their shares at the Annual Meeting. On that date, we had 376,096,982had365,110,896 shares of our Common Stock outstanding and eligible to vote.
What am I voting on? |
There are threefour proposals scheduled for a vote:
Election of |
To approve an amendment to our Third Amended and Restated Certificate of Incorporation, as amended, to declassify our Board of Directors so that all directors will be elected on an annual basis beginning with the Annual Meeting of Shareholders in 2021 (Item 2 on the proxy card) |
Ratification of selection of Grant Thornton as our independent registered public accounting firm (Item |
To approve, by anon-binding vote, the compensation of our named executive officers (Item |
How do I vote? |
For Proposal 1, you may either vote “for” a nominee to the Board or you may “withhold authority” regarding your vote for any nominee you specify. For Proposals 2, 3, and 3,4 you may vote “for” or “against” or “abstain” from voting. The procedures for voting are as follows:
Shareholder of Record: Shares Registered in Your Name
If on March 22, 201818, 2020 your shares were registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, or if you hold shares of our Common Stock that have not vested pursuant to a restricted stock grant, then you are a shareholder of record. If you are a shareholder of record and you have not elected to receive notice of how to access proxy materials over the Internet,internet, you may vote in person at the Annual Meeting, by proxy using the proxy card or over the Internet.internet. If you have elected to receive notice of how to access proxy materials over the Internet,internet, you may vote in person at the Annual Meeting or over the Internet.internet. Whether you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure your vote is counted.
To vote in person, come to the Annual Meeting and we will give you a ballot when you arrive. |
To vote using the proxy card, |
To vote online, please follow the instructions included on your proxy card or in any notice regarding how to access proxy materials over the |
Beneficial Owner: Shares Registered in the Name of a Broker, Bank or Other Nominee Record Holder
If you are a beneficial owner of shares registered in the name of your Broker, you should have received either a Notice of Internet Availability containing instructions on how to access our proxy materials and vote online or a voter information form and voting instructions with these proxy materials from that organization rather than from us. Simply follow the instructions to vote online (or by telephone if you received a voter information form), or complete and return the voter information form in accordance with the instructions provided to ensure your vote is counted. If you received a Notice of Internet Availability, you can elect to request to receive a paper copy of proxy materials which will include a voter information form. To vote in person at the Annual Meeting, you must obtain a valid proxy from your Broker. Follow the instructions from your Broker included with these proxy materials, or contact your Broker for a proxy form.
How many votes do I have? |
On each proposal, you have one vote for each share of Common Stock you own as of March 22, 2018.18, 2020.
Who is paying for this proxy solicitation? |
We are paying for the entire cost of soliciting proxies. In addition to these proxy materials, our directors, employees, and agents may also solicit proxies in person or by other means of communication. Directors and employees will not be paid any special compensation for soliciting proxies. We may reimburse brokerage firms, banks, dealers and other agents for the cost of forwarding proxy materials to beneficial owners.
What does it mean if I receive more than one Notice of Internet Availability, proxy card or voter information form? |
If you receive more than one Notice of Internet Availability, proxy card or voter information form, your shares are registered in more than one name or are registered in different accounts. Please respond to each Notice of Internet Availability or please complete, sign, and return each proxy card or voter information form to ensure all of your shares are voted.
Can I change my vote after submitting my proxy? |
Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. If you are the record holder of your shares, you may revoke your proxy in any one of three ways:
You may enter a new vote over the |
You may send a written notice revoking your proxy to Continental Resources, Inc., 20 N. Broadway, Oklahoma City, Oklahoma 73102, Attn: Eric S. Eissenstat, Secretary. |
You may attend the Annual Meeting and vote in person. Simply attending the meeting will not, by itself, revoke your proxy. |
If your shares are held by your Broker, you should follow the instructions provided by your Broker to revoke your proxy.
What is the quorum requirement? |
A quorum of shareholders is necessary to hold a valid meeting. A quorum is present if at least a majority of the issued and outstanding shares entitled to vote are represented by shareholders present at the Annual Meeting or by proxy. On the record date, there were 376,096,982365,110,896 shares issued and outstanding and entitled to vote. Therefore 188,048,492,182,555,449 shares must be represented by shareholders present at the Annual Meeting or by proxy to have a quorum.
Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your Broker), or if you vote in person at the Annual Meeting. Abstentions and withhold authority votes will be counted towards the quorum requirement and brokernon-votes (discussed immediately below) will be counted toward the quorum requirement assuming the Broker is entitled to vote the applicable shares on at least one discretionary proposal. If there is no quorum, the Chairman of the Annual Meeting may adjourn the Annual Meeting to another date.
What are broker non-votes? |
A brokernon-vote occurs when the Broker is unable to vote the shares it holds on behalf of a beneficial owner (such shares are said to be held in “street name”) because a proposal is not routine and the beneficial owner has not provided any voting instructions on that matter. NYSE rules determine whether proposals are routine. If a proposal is routine, a Broker holding shares in street name may vote on the proposal without voting instructions. If a proposal is not routine, the Broker may vote on the proposal only if the beneficial owner has provided voting instructions. If a Broker does not receive instructions for anon-routine proposal, the Broker will return a proxy card without a vote on that proposal, which is commonly referred to as a “brokernon-vote.” The ratification of Grant Thornton’s appointment is a routine proposal, but the election of directors, the Declassification Proposal, and say on pay proposal are not routine proposals under applicable NYSE rules.
What vote is required to approve the election of directors (Item 1 on the proxy card)? |
Directors are elected by a plurality of the votes cast at the Annual Meeting (that is the twothree director nominees receiving the greatest number of votes cast will be elected). While votes “withheld” will not have an effect on the outcome of the elections, our Bylaws provide that, if a nominee for director receives a greater number of votes “withheld” from his or her election than votes “for” such election, he or she must submit his or her offer of resignation for consideration by the Nominating/Corporate Governance Committee. Brokernon-votes will not have an effect on the outcome since they do not count as a vote in favor of a nominee under the plurality standard.
What vote is required to approve the amendment to our Third Amended and Restated Certificate of Incorporation, |
Oklahoma state law requires the Declassification Proposal be approved by a majority of the outstanding shares entitled to vote. If you “abstain” from voting, it will have the same effect as an “against” vote on the Declassification Proposal, since approval requires a majority of the outstanding shares entitled to vote. Brokernon-votes will also have the same effect as an “against” vote on the Declassification Proposal, for the reason described in the preceding sentence.
What vote is required to approve the ratification of the selection of accounting |
Under Oklahoma state law the ratification of the selection of Grant Thornton as our independent registered public accounting firm requires a majority of the shares present in person or represented by proxy and entitled to vote on the matter vote “for” the proposal. If you “abstain” from voting, it will have the same effect as an “against” vote because abstentions are treated as entitled to vote under Oklahoma state law.
What vote is required to approve the compensation of the named executive officers (Item |
Oklahoma state law requires the proposal to approve the compensation of the named executive officers be approved by a majority of the shares present in person or represented by proxy and entitled to vote on the matter. If you “abstain” from voting, it will have the same effect as an “against” vote on the proposal to approve, by anon-binding vote, the compensation of the Company’s named executive officers, because abstentions are treated as entitled to vote under state law. Since this proposal is not a routine proposal, brokernon-votes will not be treated as entitled to vote on the matter and accordingly will have no impact on the outcome of this vote.
What if I do not mark a voting choice for some of the matters listed on |
If you return a signed proxy card without indicating your vote, your shares will be voted in accordance with the Board’s recommendation for each proposal with respect to which a voting choice is not indicated.
Could other matters be decided at the Annual Meeting? |
We do not know of any other matters that will be considered at the Annual Meeting. If any other matters arise at the meeting, proxies will be voted at the discretion of the proxy holders.
What happens if the Annual Meeting is postponed, relocated or adjourned? |
It may be necessary or advisable to change the location (including to a virtual location) or time of the Annual Meeting due to the impact of any local or national health related emergency measures associated with theCOVID-19 (novel Coronavirus), or for another reason. Should this occur, notice of the changed time and/or location will be given by press release, which will specify the new time and/or location of the Annual Meeting. In the event it is not possible or advisable to hold our Annual Meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting “virtually”, i.e. solely by means of Internet enabled remote communication. Please monitor our annual meeting website at www.CLR.com for updated information. If you are planning to attend our meeting, please check the website ten days prior to the meeting date
If the Annual Meeting is postponed or adjourned, your proxy will still be valid and may be voted at the rescheduled meeting. You may change or revoke your proxy until it is voted. As always, we encourage you to vote your shares prior to the Annual Meeting.
How does the Board recommend I vote on the proposals? |
The Board recommends you vote:
FOR the |
FOR the Declassification Proposal (Item 2 on the proxy card); |
FOR the ratification of the selection of Grant Thornton as our independent registered public accounting firm for the fiscal year ending December 31, |
FOR approval, by anon-binding vote, of the compensation of our named executive officers (Item |
Who will serve as the inspector of election at the Annual Meeting? |
We anticipate Eric S. Eissenstat, our Senior Vice President, General Counsel, Chief Risk Officer and Secretary, will serve as the inspector of election and will tabulate the proxies and ballots at the Annual Meeting.
How can I find out the results of the voting at the Annual Meeting? |
Preliminary voting results will be announced at the Annual Meeting. Final voting results will be published in a Form8-K filed within four business days after the Annual Meeting.
Our Board does not know of any other matters to be presented for action at the Annual Meeting other than those listed in the Notice of Annual Meeting of Shareholders and referred to herein. If any other matters properly come before the Annual Meeting or any adjournment thereof, it is intended the proxy solicited hereby be voted as to any such matter in accordance with the recommendations of our Board.
NYSE Independence Standards Generally Applicable to Directors
The Board of Directors uses the independence standards of the New York Stock Exchange (“NYSE”) generally applicable to directors to determine the independence of its members. These are set forth below, omitting commentary and definitions. Defined terms are marked with asterisks and have the meanings set forth in Section 303A.02 of the NYSE Listed Company Manual.
No director qualifies as “independent” unless the board of directors affirmatively determines that the director has no material relationship with the *listed company* (either directly or as a partner, shareholder or officer of an organization that has a relationship with the *company*).
In addition, in affirmatively determining the independence of any director who will serve on the compensation committee of the listed company’s board of directors, the board of directors must consider all factors specifically relevant to determining whether a director has a relationship to the listed company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to:
(A) the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the listed company to such director; and
(B) whether such director is affiliated with the listed company, a subsidiary of the listed company or an affiliate of a subsidiary of the listed company.
In addition, a director is not independent if:
(i) The director is, or has been within the last three years, an employee of the listed company, or an *immediate family member* is, or has been within the last three years, an *executive officer*, of the listed company.
(ii) The director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from the listed company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service).
(iii) (A) The director is a current partner or employee of a firm that is the listed company’s internal or external auditor; (B) the director has an immediate family member who is a current partner of such a firm; (C) the director has an immediate family member who is a current employee of such a firm and personally works on the listed company’s audit; or (D) the director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on the listed company’s audit within that time.
(iv) The director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the listed company’s present executive officers at the same time serves or served on that company’s compensation committee.
(v) The director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the listed company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues.
Text of Proposed Amendment to our Third Amended and Restated Certificate of Incorporation
Certificate of Amendment
to the Third Amended and Restated
Certificate of Incorporation of
Continental Resources, Inc.
The undersigned officers of Continental Resources, Inc., an Oklahoma corporation (the “Corporation”), hereby file this Certificate of Amendment to the Corporation’s Third Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), which is hereby amended as follows:
1. | The text of Article Five, Section 1 of the Certificate of Incorporation is hereby amended and restated in its entirety, as follows: |
Section 1. Term of Office. All directors of the Corporation shall be elected annually, in the manner described in Section 2 of this Article. Each director shall hold office for a term ending at the next succeeding annual meeting of shareholders, beginning with the annual meeting of shareholders held in 2021, and until the election and qualification of his or her successor, subject, however, to such director’s prior death, resignation, retirement, disqualification, or removal from office. The term of office of each directorship established pursuant to this Section shall apply and control even in the case of a director who previously was elected or appointed for a term that extended beyond the 2021 annual meeting of shareholders at the time of such election or appointment.
2. | The text of Article Eight of the Certificate of Incorporation is hereby amended and restated in its entirety, as follows: |
ARTICLE EIGHT: Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall, unless otherwise required by law or by resolution of the Board of Directors, be filled by the affirmative vote of a majority of the directors then in office, though less than a quorum (and not by shareholders), and directors so chosen shall hold office for a term expiring at the next annual meeting of shareholders and until such director’s successor shall have been duly elected and qualified. No decrease in the authorized number of directors shall shorten the term of any incumbent director.
The foregoing amendments were duly adopted in accordance with the provisions set forth in Section 1077 of the Oklahoma General Corporation Act.
IN WITNESS WHEREOF, the undersigned officers have executed this Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation this day of , 2020.
CONTINENTAL RESOURCES, INC. | ||
By: | ||
William B. Berry, Chief Executive Officer |
ATTEST:
Eric S. Eissenstat, Secretary
ANNUAL MEETING OF SHAREHOLDERS OF
CONTINENTAL RESOURCES, INC.
May 17, 201814, 2020
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS:
The Notice of Meeting, Proxy Statement, and Proxy Card and the Annual Report
are available at https://materials.proxyvote.com/212015
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
i Please detach along perforated line and mail in the envelope provided.i
∎ | |
You may withhold the authority of the Proxies to vote for any nominee to be elected as
a director of the Company by marking the WITHHOLD AUTHORITY box set forth next to such nominee’s name.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE ☒
1. Election of Directors: |
2. |
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FOR ☐ |
AGAINST ☐ |
ABSTAIN ☐ | |||||||||||||||||
☐
☐
☐ |
FOR ALL NOMINEES
WITHHOLD AUTHORITY FOR ALL NOMINEES
FOR ALL EXCEPT (See instructions below)
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NOMINEES: ¡ ¡ ¡ Timothy G. Taylor | ||||||||||||||||||||
FOR | AGAINST | ABSTAIN | ||||||||||||||||||||
3. | Ratification of | ☐ | ☐ | ☐ | ||||||||||||||||||
FOR | AGAINST | ABSTAIN | ||||||||||||||||||||
4. | Approve, by a non-binding vote, the compensation of the named executive officers. | ☐ | ||||||||||||||||||||
☐ | ☐ | |||||||||||||||||||||
INSTRUCTIONS: 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: |
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof. If any other business is presented at the Annual Meeting, this Proxy shall be voted in accordance with the recommendations of the Board. The shares represented by this Proxy when properly executed will be voted in the manner directed herein by the undersigned | |||||||||||||||||||||
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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 changes to the registered name(s) on the account may not be submitted via this method. | ☐ |
Signature of Shareholder | Date: | Signature of Shareholder | Date: |
∎ | 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.
|
∎ |
ANNUAL MEETING OF SHAREHOLDERS OF
CONTINENTAL RESOURCES, INC.
May 17, 201814, 2020
PROXY VOTING INSTRUCTIONS
|
INTERNET- Access “www.voteproxy.com” and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page. |
Vote online until 11:59 PM EST the day before the |
MAIL -Sign, date and mail your proxy card in the envelope provided as soon as possible. |
IN PERSON- You may vote your shares in person by attending the Annual Meeting. |
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. |
COMPANY NUMBER
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ACCOUNT NUMBER
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS: The Notice of Meeting, Proxy Statement, are available at https://materials.proxyvote.com/212015
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i Please detach along perforated line and mail in the envelope providedIF you are not voting via the Internet. i
∎ | |
You may withhold the authority of the Proxies to vote for any nominee to be elected as
a director of the Company by marking the WITHHOLD AUTHORITY box set forth next to such nominee’s name.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE ☒
1. Election of Directors: |
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FOR ☐ |
AGAINST ☐ |
ABSTAIN ☐ | |||||||||||||||||||||||||
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FOR ALL NOMINEES
WITHHOLD AUTHORITY FOR ALL NOMINEES
FOR ALL EXCEPT (See instructions below)
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NOMINEES: ¡ ¡ ¡ Timothy G. Taylor | ||||||||||||||||||||||||||||
FOR | AGAINST | ABSTAIN | ||||||||||||||||||||||||||||
3. | Ratification of | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||
FOR | AGAINST | ABSTAIN | ||||||||||||||||||||||||||||
4. | Approve, by a non-binding vote, the compensation of the named executive officers. | ☐ | ||||||||||||||||||||||||||||
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INSTRUCTIONS: 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: |
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof. If any other business is presented at the Annual Meeting, this Proxy shall be voted in accordance with the recommendations of the Board. The shares represented by this Proxy when properly executed will be voted in the manner directed herein by the undersigned | |||||||||||||||||||||||||||||
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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 changes to the registered name(s) on the account may not be submitted via this method. | ☐ |
Signature of Shareholder | Date: | Signature of Shareholder | Date: |
∎ | 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.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CONTINENTAL RESOURCES, INC.
20 N. Broadway
Oklahoma City, Oklahoma 73102
(405) 234-9000
The undersigned hereby appoints Eric Eissenstat and John Hart, and each of them, as proxies (the “Proxies”), each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated below, all of the shares of stock of Continental Resources, Inc. held of record by the undersigned on the record date at the Annual Meeting of Shareholders to be held on May 17, 2018,14, 2020, or any later reconvened meeting.postponement or adjournment thereof.
(Continued and to be signed on the reverse side)
∎ 1.1 | 14475 ∎ |