 | | ![[MISSING IMAGE: ph_lorilancaster-4c.gif]](https://files.docoh.com/PRE 14A/0001104659-22-038093/ph_lorilancaster-4c.gif) MANAGING DIRECTOR,Former Managing Director, UBS SECURITIES, GLOBAL ENERGY GROUPSecurities, Global Energy Group
✔ INDEPENDENT DIRECTOR
•
Independent Director
Director since Nov. 2020 Age 53
•
Age 52
COMMITTEES
•
Committees
Audit
•
Finance (Chair)
| | | | LORI A. LANCASTER | | | CAREER HIGHLIGHTSCareer Highlights
•UBS Securities •
Managing Director in the Global Energy Group
•Goldman, Sachs & Co. •
Managing Director in the Global Natural Resources Group
•Nomura Securities •
Managing Director in the Global Natural Resources Group
| | | | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPSKey Qualifications and Experience
•
Intrepid Potash
PRIOR DIRECTORSHIPS
•
Energen Corporation
•
HighPoint Resources Corp. (formerly Bill Barrett Corp.)
EDUCATION
•
MBA, University of Chicago
•
BS, Texas Christian University
| | | KEY QUALIFICATIONS AND EXPERIENCE
Ms. Lancasterhas extensive experience in the oil and gas sector and in particular finance. During her 18-year tenure in investment banking, she led or was a key member of the execution team on more than $60 billion of announced energy merger and acquisition deals and led the structuring and execution of numerous capital markets transactions. Her wealth of knowledge in financing and structuring deals is key as we execute on our strategies to expand our high-margin drilling inventory through acquisitions and reduce our leverage. Additionally, she brings public company audit committee and nominating and corporate governance experience to our team. For these reasons, among others, we believe Ms. Lancaster is qualified to serve as a director. | |
Class III Director Not Standing For Re-election in May 2022
| | ![[MISSING IMAGE: ph_pamelapierce-4clr.gif]](https://files.docoh.com/PRE 14A/0001104659-22-038093/ph_pamelapierce-4clr.gif) CHIEF EXECUTIVE OFFICER AND PRESIDENT, SCIENTIFIC DRILLING INTERNATIONAL, INC.•Precision Drilling
✔ INDEPENDENT DIRECTOR•Intrepid Potash
•
Prior Directorships
Director since May 2007•Energen Corporation
•HighPoint Resources Corp. (formerly Bill Barrett Corp.)
•
Education
Age 66•MBA, University of Chicago
•BS, Texas Christian University
COMMITTEES
•
Compensation
•
NGE&S
| | | | PAMELA S. PIERCE | | | CAREER HIGHLIGHTS
Scientific Drilling International, Inc.
•
Chief Executive Officer and President
Ztown Investments, Inc.
•
Partner
Huber Energy, LP (an operating company of J.M. Huber Corp.)
•
President and Chief Executive Officer
Mirant Americas Energy Capital and Production Company
•
President
Vastar Resources, Inc.
•
Vice President of Business Development
•
Offshore Business Unit Manager
ARCO Oil and Gas Company/ARCO Alaska
•
Offshore Business Unit Manager
•
Vice President of Safety, Health, Environmental and External Affairs
| | | | OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS
•
ShawCor Ltd. (Compensation and Organization Development committee chair and Nominating and Corporate Governance Committee)
OTHER CURRENT ENGAGEMENTS
•
Scientific Drilling International, Inc., Board Member
•
University of Oklahoma College of Engineering Board of Visitors
PRIOR DIRECTORSHIPS
•
Michael Baker Corporation
EDUCATION
•
Independent Petroleum Association of America’s Executive Oil and Gas Course, Harvard College
•
MBA, Corporate Finance, University of Dallas
•
BS, Petroleum Engineering, University of Oklahoma
| | | KEY QUALIFICATIONS AND EXPERIENCE
Ms. Pierce is a highly experienced business executive with extensive knowledge of the energy industry. She has experience in both the operational side of the industry, as well as the service sector, which is an important component affecting our operations. Her breadth of experiences in the industry allows her to bring a perspective on issues that may not be readily apparent to others. Her general business acumen enhances the Board of Directors’ discussions on all matters affecting us, and her leadership insights contribute significantly to the Board of Directors’ decision-making process. For these reasons, among others, we believe Ms. Pierce is qualified to serve as a director.
| |
Laredo Petroleum, Inc. 2022 Proxy Statement |23
CORPORATE GOVERNANCE AND BOARD MATTERS
| | | | | | | Corporate Governance and Board Matters | 27 |
Director Leadership In 2019, the Board acted to separate the roles of Board Chair and CEO. In 2020, the Board elected an independent director to serve as the non-executive Board Chair. The Board believes that separating the roles of Chair and CEO and making the Board Chair an independent director provides further accountability by optimizing the Board’s processes, ability to constructively challenge management and appropriately prioritize matters.
The Chair facilitates the Board’s business and activities as follows: | BOARD CHAIR RESPONSIBILITIES | | | ✔ | | | Propose a quarterly schedule of major Board discussions items | | | ✔ | | | Guide the Board’s governance processes | | | ✔ | | | Approve the agenda, schedule and information sent to directors prior to Board meetings | | | ✔ | | | Oversee the Board’s evaluations and CEO evaluation | | | ✔ | | | Chair all Board meetings | | | ✔ | | | Serve as liaison between CEO and management and the other independent directors | | | ✔ | | | Lead executive sessions of the Board without management present (unless invited) | | | ✔ | | | Advise the NGE&S Committee in choosing Committee chairs and membership | | | ✔ | | | Call additional Board or independent director meetings | | | ✔ | | | Be available for direct communication with stockholders as appropriate | |
Board Chair Responsibilities •Propose a quarterly schedule of major Board discussions items •Approve the agenda, schedule and information sent to directors prior to Board meetings •Chair all Board meetings •Lead executive sessions of the Board without management present (unless invited) •Call additional Board or independent director meetings •Guide the Board’s governance processes •Oversee the Board’s evaluations and CEO evaluation •Serve as liaison between CEO and management and the other independent directors •Advise the NGE&S Committee in choosing Committee chairs and membership •Be available for direct communication with stockholders as appropriate The Board believes that the decision as to who should serve as Board Chair and CEO is the proper responsibility of the Board, and the Board will continue to carefully consider whether to combine or separate the roles of Chair and CEO in the future. At the present time, the Board believes the interests of all stockholders are best served through a leadership model that separates the independent Board Chair and CEO position. Director Independence The Board has determined that each continuing director and director nominee, except Mr. Pigott, meets the standards of independence set forth in our Corporate Governance Guidelines and the NYSE Listed Company Manual. ![[MISSING IMAGE: tm222850d1-tbl_direct4c.jpg]](https://files.docoh.com/PRE 14A/0001104659-22-038093/tm222850d1-tbl_direct4c.jpg) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Independence* | | | | | | Our CEO | | 90% Independent | •William E. Albrecht •Frances Powell Hawes •Jarvis V. Hollingsworth •Dr. Craig M. Jarchow •Lisa M. Lambert | •Lori A. Lancaster •Edmund P. Segner, III •John Driver •Dr. Shihab Kuran •Jason Pigott | | | | |
*
Reflects the anticipated Board composition at the conclusion of the Annual Meeting, assuming stockholders elect all nominees to the Board.
To make this determination, the Board considers all relevant facts and circumstances indicating whether a director has a material relationship with the Company,, either directly or as a partner, stockholder or officer of an organization that does business with the Company. Material relationships can include commercial, banking, consulting, legal, accounting, charitable and familial relationships. ![[MISSING IMAGE: tm2025328d45-tbl_indep4c.jpg]](https://files.docoh.com/PRE 14A/0001104659-22-038093/tm2025328d45-tbl_indep4c.jpg) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Independence
Evaluation | | Initial
Assessment | | Annual
Questionnaire | | Quarterly
Affirmation | | Ongoing
Disclosure
Requirements | | | | | | | | | | | | |
24| Laredo Petroleum, Inc. 2022 Proxy Statement
| | | | | | | 28 | Vital Energy, Inc. 2023 Proxy Statement |
CORPORATE GOVERNANCE AND BOARD MATTERS
Annually, each director must complete a questionnaire to disclose, among other things, information regarding ownership in the Company, compensation received from the Company (if any) and any relationship a director has either directly or indirectly through a family member or otherwise with certain Board or Company advisors or other companies with whom LaredoVital does business. Additionally, each director must disclose at each regularly scheduled Board meeting, and has an affirmative obligation to promptly inform the Company’s General Counsel of, changes in circumstances or transactions or relationships that could impact his or her designation by the Board as independent. During its assessment, the Board considered the following directorships and transactions for director independence in 2021:2022: | Directors | | | Organization/
Individual | | | Relationship | | | Transaction | | | | | | Directors | Organization/
Individual | Relationship | Transaction | Amount for each
of the
last three
years | | | All Directors | | | Various charitable
organizations | | | Director or Trustee | | | Charitable
donations by LaredoVital | | | <1% of the
Company’s
revenues | |
*
The Board concluded all of the above listed matters fall below the relevant thresholds for independence set forth in the NYSE Listed Company Manual and the Company’s Corporate Governance Guidelines.
Director Compensation All independent directors receive both an annual retainer and an annual fee (together the “Director Base Compensation”) for their service on the LaredoVital Board totaling $230,000. The Company pays the Director Base Compensation ratably following each regularly scheduled quarterly Board meeting for services provided since the previous Board meeting. Directors are required to take at least $130,000 of their Director Base Compensation in the form of Company common stock. The director stock awards vest immediately. We implemented this structure, in part, to provide the directors the cash needed to pay taxes on the stock component of the Director Base Compensation. The Company also reimburses independent directors for their expenses to attend Board meetings. On May 14, 2020, in light of the economic uncertainty resulting from the COVID-19 pandemic and the unprecedented market volatility and historic decline in commodity prices, the independent directors of the Board agreed to a 20% reduction of the Director Base Compensation. In August 2021, following a market survey and recommendation by the Board’s independent compensation consultant, the Board increased its annual pay by 15% and adjusted certain chairperson fees to bring such compensation in line with market standards.
The below table sets forth the Director Base Compensation effective as of August 2021 and the compensation going forward. No changes to director compensation were made in 2022. | | | | | | | | | | | | | Amount Paid
After
August 2021 | | | Terms of Payment | | Retainer | Retainer | $ | 72,000 | $72,000 | | | •
Paid ratably following each regularly scheduled quarterly Board meeting.
| | | Director Fees | | $ | $158,000 | | | •
Paid ratably following each regularly scheduled quarterly Board meeting, with $130,000 paid in stock and $28,000 paid in cash.
| | | Expense Reimbursement | | | Varies | | | •
The Company reimburses non-employee directors for their expenses to attend board meetings.
| |
Directors are also permitted to participate in our Charitable Matching Gift Program, which provides a Company match for up to $1,000 in donations to an approved charity.
| | | | | | | Corporate Governance and Board Matters | 29 |
Directors who performed additional leadership roles, received the following compensation: Laredo Petroleum, Inc. 2022 Proxy Statement |25
CORPORATE GOVERNANCE AND BOARD MATTERS
| | | | | | | | | | | | | Amount Paid | | | Terms of Payment | | | Non-ExecutiveNon-Executive Board Chair | | $ | $100,000 | | | Paid in 70% cash and 30% stock ratably following each regularly scheduled Board meeting. | | | Audit Committee Chair | | $ | $20,000 | | | Paid in cash ratably following each regularly scheduled Board meeting. | | | Compensation Committee Chair | | $ | $20,000 | | | Paid in cash ratably following each regularly scheduled Board meeting. | | | NGE&S Chair | | $ | $20,000 | | | Paid in cash ratably following each regularly scheduled Board meeting. | | | Finance Committee Chair | | $ | $20,000 | | | Paid in cash ratably following each regularly scheduled Board meeting. | |
To determine our director compensation, the Compensation Committee reviewed a market-based analysis and consulted with its independent compensation consultant. The independent compensation consultant performed a competitive review of outside director compensation paid by our peers, which included consideration of the significant time commitment our Board provides to the Company. The Company’s Equity Incentive Plan prohibits granting a stock award to any individual in a given year of more than 71,750 shares, which also applies to our directors.directors. The following table summarizes the compensation earned by our non-employee directors for the fiscal year ended December 31, 2021: | | Name | | | Fees earned
or paid
in cash(1) | | | Stock awards(1)(2) | | | Deferred stock
awards(1)(2)(3) | | | All other
Compensation(4) | | | Total | | | | William E. Albrecht | | | | $ | 169,944 | | | | | $ | — | | | | | $ | 130,056 | | | | | $ | 1,000 | | | | | $ | 301,000 | | | | | Frances Powell Hawes | | | | $ | 119,912 | | | | | $ | — | | | | | $ | 115,088 | | | | | $ | — | | | | | $ | 235,000 | | | | | Dr. Craig M. Jarchow | | | | $ | 119,912 | | | | | $ | — | | | | | $ | 115,088 | | | | | $ | — | | | | | $ | 235,000 | | | | | Jarvis V. Hollingsworth | | | | $ | 89,918 | | | | | $ | 140,082 | | | | | $ | — | | | | | $ | — | | | | | $ | 230,000 | | | | | Lori A. Lancaster | | | | $ | 114,912 | | | | | $ | — | | | | | $ | 115,088 | | | | | $ | — | | | | | $ | 230,000 | | | | | Pamela S. Pierce | | | | $ | 99,912 | | | | | $ | 115,088 | | | | | $ | — | | | | ��� | $ | 1,000 | | | | | $ | 216,000 | | | | | Lisa M. Lambert | | | | $ | 99,912 | | | | | $ | 115,088 | | | | | $ | — | | | | | $ | — | | | | | $ | 215,000 | | | | | Edmund P. Segner, III | | | | $ | 99,912 | | | | | $ | — | | | | | $ | 115,088 | | | | | $ | — | | | | | $ | 215,000 | | | | | Dr. Myles W. Scoggins(5) | | | | $ | 28,756 | | | | | $ | 24,994 | | | | | $ | — | | | | | $ | — | | | | | $ | 53,750 | | | | | James R. Levy(5) | | | | $ | 25,006 | | | | | $ | 24,994 | | | | | $ | — | | | | | $ | — | | | | | $ | 50,000 | | |
2022:
(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | Fees earned or paid in cash(1) | Stock
awards(1)(2) | Deferred stock
awards(1)(2)(3) | All other
Compensation(4) | Total | | William E. Albrecht | | $ | 169,818 | | | $ | — | | | $ | 160,182 | | | $ | 1,000 | | | $ | 331,000 | | John Driver(5) | | $ | 72,006 | | | $ | 61,421 | | | $ | 32,529 | | | $ | — | | | $ | 165,956 | | | Frances Powell Hawes | | $ | 119,826 | | | $ | 16,265 | | | $ | 113,909 | | | $ | — | | | $ | 250,000 | | | Jarvis V. Hollingsworth | | $ | 119,826 | | | $ | 97,645 | | | $ | 32,529 | | | $ | — | | | $ | 250,000 | | | Dr. Craig M. Jarchow | | $ | 119,826 | | | $ | — | | | $ | 130,174 | | | $ | — | | | $ | 250,000 | | Dr. Shihab Kuran(5) | | $ | 72,006 | | | $ | 61,421 | | | $ | 32,529 | | | $ | — | | | $ | 165,956 | | | Lisa M. Lambert | | $ | 99,826 | | | $ | 130,174 | | | $ | — | | | $ | — | | | $ | 230,000 | | | Lori A. Lancaster | | $ | 119,826 | | | $ | — | | | $ | 130,174 | | | $ | — | | | $ | 250,000 | | | Edmund P. Segner, III | | $ | 99,826 | | | $ | — | | | $ | 130,174 | | | $ | — | | | $ | 230,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pamela S. Pierce(6) | | $ | 24,979 | | | $ | 32,521 | | | $ | — | | | $ | 1,000 | | | $ | 58,500 | |
(1)The amounts reported are for compensation earned for services rendered for 2021,2022, which include compensation earned for services rendered for the fourth quarter of 20212022 that was paid during the first quarter of 20222023 in accordance with the fee summary noted above.
(2)
The amounts reported represent the aggregate grant-date fair value of stock awards granted to Laredo’sVital’s non-employee independent directors, based on the closing price of our common stock on the NYSE on the grant date, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 718.
(3)
The amounts reported represent deferred stock compensation received pursuant to the Director Deferred Compensation Plan (defined below).
(4)
The amounts reported represent amounts donated by the Company under our Charitable Matching Gift Program. (5)Mr. Driver and Dr. Kuran joined the board of directors effective June 24, 2022.
(5)
Dr. Scoggins and Mr. Levy(6)Ms. Pierce resigned as directorsdirector of the Company and from all committees of the Board on which theyshe served effective May 20, 2021.26, 2022.
| | | | | | | 30 | Vital Energy, Inc. 2023 Proxy Statement |
Directors who are also employees of the Company do not receive any additional compensation for serving on our Board. See our Summary Compensation Table for the total compensation received by Jason Pigott in 2021. 2022.26| Laredo Petroleum, Inc. 2022 Proxy Statement
CORPORATE GOVERNANCE AND BOARD MATTERS
On February 25, 2021, the Board adopted the Laredo Petroleum,Vital Energy, Inc. Nonqualified Director Deferred Compensation Plan (the “Director Deferred Compensation Plan”), an unfunded nonqualified deferred compensation plan administered by the Compensation Committee. Pursuant to the Director Deferred Compensation Plan, non-employee directors may elect to defer some or all of any cash or stock compensation received. Cash deferrals are invested in an array of investment options as designated by the Compensation Committee’s designee the LaredoVital Energy 401k Administration Committee, and stock is credited to the participant’s deferred stock account as of the date the stock would otherwise have been granted. Distributions will be paid in cash, unless the Compensation Committee approves payment in stock. At this time, only non-employeenon-employee directors are eligible to participate. Directors were eligible to begin deferrals starting with compensation awarded after the Board meeting in May 2021. Director Stock Ownership Pursuant to our Corporate Governance Guidelines, directors have five years from their appointment date to reach the following stock ownership guidelines: | Position | | | | | | Position | Stock ownership requirement | | Directors | Directors | | | $400,000 worth of company stock | |
Based on stock ownership as of December 31, 2022 and the highest closing price of our common stock since January 1, 2022 $83.63,2023 $57.64, the following recently appointed directors have not yet reached the stock ownership requirement: Mr. Driver, Mr. Hollingsworth, Ms. Lambert, Ms. Lancaster and Ms. Lancaster.Dr. Kuran. All other directors have satisfied our stock ownership guidelines. Director Oversight of Risk Management Our Board takes a comprehensive approach in itsA key oversight responsibility of the Board is overseeing the assessment and management of the Company. This includes: (1) creatingCompany’s exposure to various risks. Our enterprise risk management (ERM) is a dynamic process to identify, assess, prioritize and approving governance policiesmitigate the Company’s most significant enterprise risks and best practices; (2) meeting regularly to review and discuss strategies and reports from senior management; (3) supervising senior management through oneuncertainties that could materially impact the long-term health of the Board committees;Company or prevent the achievement of strategic objectives. Our ERM process is an iterative exercise consisting of the following steps:
1.Identify risks – develop rating criteria (e.g., impact, velocity, likelihood) and (4) engaging regularlyidentify key risks 2.Assess and prioritize risks – validate and assess current list of risks by gathering internal and external insights on drivers/root causes 3.Mitigate – based on the assessment and prioritization of the risks a mitigation plan is developed 4.Monitor and report – monitor and evaluate effectiveness of risk mitigation and Key Risk Indicators (KRIs); report quarterly to executives and Board 5.Integrate – discuss plans with stockholdersthird-parties and embed risks into operational and strategic planning Our Director of Internal Audit, who functionally reports to receive feedback. Forthe Audit Committee Chair, facilitates the ERM program. We leverage a summarycombination of our policiesquarterly and practicesannual internal ERM efforts and regular engagement with our stakeholders to understand and focus on issues of material significance to both Vital Energy and our stockholder engagement program, seestakeholders. Once potential risks are identified, we conduct appropriate analyses for each of our potential key risks, including stress tests for financial, operational and strategic business risks. We also monitor the Proxy Overviewlegislative environment and Highlights.regulatory developments to identify any pending matters that may impact our business. Our ERM process continues to evolve to reflect our sector’s dynamic risk landscape.
| | | | | | | Corporate Governance and Board Matters | 31 |
Governance Documents Our governance documents are all located on our website www.laredopetro.comwww.vitalenergy.com under the Investor RelationsInvestors Tab and include all Board of Director Committee Charters, ThirdFourth Amended and Restated Bylaws, Code of Conduct and Business Ethics, Corporate Governance Guidelines, Code of Ethics for Senior Financial Officers and the Policy Statement Regarding Related Party Transactions. CODE OF CONDUCT AND BUSINESS ETHICSCode of Conduct and Business Ethics
The Board has adopted a Code of Conduct and Business Ethics applicable to our employees, directors and officers and a Code of Ethics for Senior Financial Officers, in accordance with applicable U.S. federal securities laws and the NYSE Listed Company Manual. Any waiver of these codes may be made only by our Board and will be promptly disclosed as required by applicable U.S. federal securities laws and the NYSE rules. In accordance with good corporate governance practices, we periodically review and revise these documents as necessary. Laredo Petroleum, Inc. 2022 Proxy Statement |27
CORPORATE GOVERNANCE AND BOARD MATTERS
CORPORATE GOVERNANCE GUIDELINES | | | | | | | 32 | Vital Energy, Inc. 2023 Proxy Statement |
Corporate Governance Guidelines The Company’s Corporate Governance Guidelines cover the following: | | •
Board size
| | | •
Age limits and Retirement
| | | | | •
Director independence
| | | •
Other directorships
| | | | | •
Board size Section•Director independence
•Selection of the Chairman
| | | •
Change in status of directors
| | | | | •
Board meetings and agenda
| | | •
Succession planning
| | | | | •
Access to management and advisers
| | | •
Director compensation
| | | | | •
Executive sessions
| | | •
Stock ownership guidelines
| | | | | •
Committees of the Board of Directors
| | | •
Director orientation and education
| | | | | •
Stockholder communications with the Board of Directors
| | | •
Annual performance evaluations
| | | | | •
Board communications with third parties
| •Age limits and Retirement •Other directorships •Change in status of directors •Succession planning •Director compensation •Stock ownership guidelines •Director orientation and education •Annual performance evaluations | | | | | |
The NYSE Listed Company Manual requires listed companies to adopt certain governance guidelines. The Company believes the Corporate Governance Guidelines comply with the NYSE Listed Company Manual. Annually, the NGE&S Committee reviews the Corporate Governance Guidelines and recommends any changes for Board approval. Director Meetings & Executive Sessions Our Corporate Governance Guidelines require that the Board hold at least four meetings each year, and that our independent directors meet in executive session regularly. Our Board held 727 meetings in 2021,2022, and our independent directors met in executive session during all15 of those meetings. Each DirectorAll Directors attended at leastgreater than 75% of the aggregate total number of Board meetings and Board committeethe Committee meetings for Committees on which they serve except for Mr. Hollingsworth who was unable to attend more than 75% of the Board member served in 2021.Audit Committee meetings. All but one of the Board members who were on the Board at the time attended last year’s annual meeting. | | | | | | | | COMMITTEES | | | | | | | | | Board | | | Audit | | | Compensation | | | NGE&S | | | Finance | | | Total | | | | Meetings in 2021 | | | 7 | | | 5 | | | 5 | | | 5 | | | 3 | | | 25 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Committees | | | Board | | Audit | Compensation | NGE&S | Finance | Total | | Meetings in 2022 | 5 | | 7 | 5 | 4 | 6 | 27 |
| | | | | | | Corporate Governance and Board Matters | 33 |
Director Committees The Board of Directors has four standing committees (the information below reflects the anticipated committee composition at the conclusion of the Annual Meeting, assuming Stockholders elect all nominees to the Board): 28| Laredo Petroleum, Inc. 2022 Proxy Statement
CORPORATE GOVERNANCE AND BOARD MATTERS
| | MEMBERS | | | | •
| | Audit Committee | Members | | | Frances Powell Hawes (Chair)
•
John Driver
Jarvis H. Hollingsworth
•
| Lori A. Lancaster
•
Edmund P. Segner, III
| | | | CHARTER AND AUDIT COMMITTEE REPORT | | | | | Charter and Audit Committee Report •The Audit Committee Charter is available on our website at www.laredopetro.comwww.vitalenergy.com. •The Audit Committee Charter contains the full list of the Audit Committee’s responsibilities. •The Audit Committee Report is set forth beginning on page 3840 of this Proxy Statement. •The Audit Committee reviews the adequacy of and compliance with the Audit Committee Charter annually. | | | | MEETINGS | | | | Meetings The Audit Committee Charter requires that the Audit Committee meet as often as it determines necessary, but at least four times each year. In 2021,2022, the Audit Committee held fiveseven meetings and fivesix executive sessions, either in person or by teleconference. The Audit Committee regularly meets in executive session with each of our external auditors and our internal audit manager. | Director of Internal Audit. | | | | |
| PRIMARY RESPONSIBILITIES | | | | | | Primary Responsibilities | Financial Statements •
Oversee (1) the quality and integrity of Laredo’sVital’s financial statements and its related accounting and financial reporting processes and internal controls over financial reporting, and (2) the audits of the Company’s financial statements, including reviewing with management and the independent registered public accounting firm our annual audited and quarterly financial statements and other financial disclosures, including earnings releases. Oversight of Cybersecurity Risks and Information Technology Systems
Oversight of the Relationship with the Independent Auditor •
Engage and oversee the Company’s independent registered public accounting firm (taking into account the vote on stockholder ratification) and consider the independence, qualifications and performance of the independent registered public accounting firm.
•
Approve all audit and permissible non-audit services to be performed by the independent registered public accounting firm.
•
Review and evaluate the performance of the lead audit partner of the independent registered public accounting firm and periodically consider whether there should be a rotation of the independent registered public accounting firm.
| Oversight of the Relationship with the Independent Reserve Engineer •
Engage the Company’s independent reserve engineer and review and discuss with management the reserve report prepared by the independent reserve engineer.
Oversight of the Internal Audit Function •
Review and approve the internal audit department’s audit plan, staffing, budget and responsibilities.
Oversight of Compliance Matters •
Review Laredo’sVital’s compliance with legal and regulatory requirements, by reviewing and discussing the implementation and effectiveness of our compliance program.
•
Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding: (a) accounting, internal accounting controls, audit matters and other federal securities law matters and (b) confidential, anonymous submissions by employees of concerns regarding accounting or auditing matters or other federal securities law matters and (c) any material legal matter.
•
Review and discuss with management, policies and guidelines regarding enterprise risk assessment and management, major risk exposures and steps taken to monitor and control exposures.
•
Review and provide oversight of all related party transactions.
•
Review and provide oversight of the Company’s cyber security risks and information technology systems.
| | | |
Laredo Petroleum, Inc. 2022 Proxy Statement |29
CORPORATE GOVERNANCE AND BOARD MATTERS
FINANCIAL LITERACY OF AUDIT COMMITTEE AND DESIGNATION OF FINANCIAL EXPERTS | | | | | | | 34 | Vital Energy, Inc. 2023 Proxy Statement |
Financial Literacy of Audit Committee and Designation of Financial Experts As a part of its annual self-assessment process, the Board of Directors evaluated each of the members of the Audit Committee for financial literacy and financial expertise in March 20212022 and March 2022.2023. The Board of Directors determined that each of the current members of the Audit Committee is financially literate and qualifies as a financial expert as defined by the SEC. AUDIT COMMITTEE INDEPENDENCEAudit Committee Independence
Only independent directors serve on the Audit Committee. Members of the Audit Committee must also meet heightened standards for independence set forth by the SEC. Those standards require that a director not be an affiliate of the Company and that the director not receive from the Company, directly or indirectly, any consulting, advisory or other compensatory fees except for fees paid for services as a director. In connection with its assessment of the independence of each director pursuant to the NYSE Listed Company Manual, the Board of Directors also determined that each of the Audit Committee members met the additional independence standards of the SEC applicable to members of the Audit Committee. No Audit Committee member concurrently serves on the audit committee of more than two other public companies. | | | | | | | | | | | | | Compensation Committee | Members | | | ![[MISSING IMAGE: tm2025328d45-pc_audfin4c.jpg]](https://files.docoh.com/PRE 14A/0001104659-22-038093/tm2025328d45-pc_audfin4c.jpg) William E. Albrecht | Dr. Shihab Kuran Lisa Lambert | | | | | | | Charter and Comp Committee Report •The Compensation Committee Charter is available on our website at www.vitalenergy.com. •The Compensation Committee Charter contains the full list of the Compensation Committee’s responsibilities. •The Compensation Committee Report is set forth beginning on page 64. | ![[MISSING IMAGE: tm2025328d45-pc_audinde4c.jpg]](https://files.docoh.com/PRE 14A/0001104659-22-038093/tm2025328d45-pc_audinde4c.jpg) The Compensation Committee Charter requires that the Compensation Committee meet as often as it determines necessary but at least once each year. In 2022, the Compensation Committee held five meetings and two executive sessions either in person or by teleconference. | | | | | | | | Primary Responsibilities | | | •Establish the Company’s general compensation philosophy and objectives in consultation with senior management. •Review and approve the Company’s goals and objectives relevant to the compensation of the Chief Executive Officer, annually evaluate the Chief Executive Officer’s performance in light of those goals and objectives, and, based on this evaluation, recommend to the Board the Chief Executive Officer’s compensation level, including salary, bonus, incentive and equity compensation. •Recommend to the Board compensation for all other named executive officers. •Review and make recommendations to the Board with respect to all employment agreements, severance arrangements, change in control provisions and agreements and any special supplemental benefits applicable to the Company’s executive officers. | •Review and make recommendations to the Board regarding any incentive and equity-based compensation applicable to the Company’s employees. •Administer the Company’s equity-based compensation plans, including the grant of performance unit awards and other equity awards under such plans. •Review and make recommendations to the Board of Directors with respect to director compensation. •Review and discuss with management the disclosures in the Compensation Discussion and Analysis of the Company’s Proxy Statement. | | | |
| | | | | | | Corporate Governance and Board Matters | 35 |
Compensation Committee Independence Only independent directors serve on the Compensation Committee. Additionally, members of the Compensation Committee must meet the definition of “Non-Employee Director” included in Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In connection with its assessment of the independence of each director, the Board also determined that all committee members met the additional independence standards of the NYSE and in the Exchange Act. Compensation Committee Interlocks and Insider Participation No member of the Compensation Committee has been at any time a Vital employee. None of the Company’s executive officers serve on the Board of Directors or compensation committee of a company that has an executive officer that serves on the Company’s Board or Compensation Committee. No member of the Company’s Board is an executive officer of a company in which one of the Company’s executive officers serves as a member of the board of directors or compensation committee of that company. | | | | | | | | | | | | | Nominating, Corporate Governance, Environmental and Social Committee | Members | | Jarvis V. Hollingsworth (Chair) Frances Powell Hawes | Dr. Shihab Kuran Lisa Lambert | | | | | | | Charter •The Nominating, Corporate Governance, Environmental and Social Committee Charter is available on our website at www.vitalenergy.com. •The Nominating, Corporate Governance, Environmental and Social Committee Charter contains the full list of the Committee’s responsibilities. | Meetings The Nominating, Corporate Governance, Environmental and Social Committee Charter requires that the Nominating, Corporate Governance, Environmental and Social Committee meet as often as it determines necessary but at least once each year. In 2022, the NGE&S Committee held four meetings and two executive sessions either in person or by teleconference. | | | | | | | | Primary Responsibilities | | | Oversight of Board and Committee Membership •Identify, evaluate and recommend qualified nominees to serve on the Company’s Board. •Review and make recommendations regarding the composition and size of the Board. Oversight of Governing Policies, Practices and Procedures •Develop and recommend corporate governance guidelines for the Company. •Conduct an annual assessment of the qualifications and performance of the Board and each of the directors. •Review and make recommendations regarding the composition, size, purpose, structure, operations and charter of each of the Board’s committees, including the creation of additional committees or elimination of existing committees. •Recommend committee assignments for directors. | Oversight of Programs and Policies relating to ESG •Review the Company’s performance on environmental and social matters, including the approval and ongoing monitoring of performance against any performance metrics and targets. •Review any significant environmental, health or safety incidents or material regulatory compliance matters and monitor the status of subsequent actions. •Review strategies and policies relation to human capital management, including diversity and inclusion and talent development and retention. •Review significant ESG risks and exposures, and the Company’s actions for managing those risks. •Oversee any reports issued by the Company in connection with its ESG initiatives. | | | |
| | | | | | | 36 | Vital Energy, Inc. 2023 Proxy Statement |
| | | | | | | | | | | | | Finance Committee | Members | | Lori Lancaster (Chair) William E. Albrecht John Driver | Craig M Jarchow Edmund P Segner, III
| | | | | | | Charter The Finance Committee Charter is available on our website at www.vitalenergy.com and contains the full list of the Committee’s responsibilities. | Meetings The Finance Committee Charter requires that the Finance Committee meet as often as it determines necessary but at least four times each year. In 2022, the Finance Committee held six meetings and one executive session either in person or by teleconference. | | | | | | | | Primary Responsibilities | | | •Reviews and provides guidance on the Company’s annual capital and operating budget. •Reviews and provides guidance on the Company’s capital structure and capital allocation strategy. •Reviews and provides guidance on the Company’s hedging program and policies governing the use of financial instruments, including the derivative instruments. | •Upon delegation of authority by the Board, approves acquisitions and hedges which may exceed management’s delegated authority. | | | |
Related Party Transactions The Board recognizes that transactions involving the Company and related parties present a heightened risk of conflicts of interest, and therefore, has adopted a Policy Statement Regarding Related Party Transactions (“Policy Statement”). This Policy Statement is available on our website, www.laredopetro.com.www.vitalenergy.com. The Policy Statement prohibits the Company from entering into a related party transaction unless (1) the Audit Committee approves such transaction in accordance with the Policy Statement; or (2) the transaction is approved by a majority of the disinterested directors of the Company. A “Related-Party Transaction” is a transaction, arrangement or relationship in which the Company or any of its subsidiaries was, is or will be a participant, the amount involved exceeds $120,000, and a related person had, has or will have a direct or indirect material interest. A “Related Person” means: •
any person who is, or at any time during the applicable period was, one of the Company’s executive officers or one of its directors;
•
any person who is known by the Company to be the beneficial owner of more than 5.0% of the Company’s common stock;
•
any 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-lawbrother- in-law or sister-in-law of a director, executive officer or a beneficial owner of more than 5.0% of the Company’s common stock; and
30| Laredo Petroleum, Inc. 2022 Proxy Statement
CORPORATE GOVERNANCE AND BOARD MATTERS
•
any entity in which any of the foregoing persons (i) has direct or indirect control, (ii) is a partner or principal or in a similar position, (iii) has a 10.0% or greater beneficial ownership interest or (iv) is employed if (a) the person is directly involved in the negotiation of the Related-Party Transaction or will share or have primary responsibility for such transaction or (b) the person’s compensation from the entity is directly tied to such transaction.
The Audit Committee annually reviews and assesses the adequacy of this Policy Statement.
| | | | | | | Corporate Governance and Board Matters | 37 |
Procedures for Review, Approval and Ratification of Related-Party Transactions In reviewing and approving any Related-Party Transaction, the Audit Committee shall: •
Satisfy itself that it has been fully informed as to the material facts of the Related Person’s relationship and interest and as to the material facts of the proposed Related-Party Transaction;
•
Take into account the extent of the Related Person’s interest in the Related-Party Transaction; and
•
Determine that the Related-Party Transaction is fair to the Company and that the Related-Party Transaction is on market standard terms including no less favorable than terms generally available to an unaffiliated third-partythird-party under the same or similar circumstances.
At each Audit Committee meeting, management can recommend any Related-Party Transactions, if applicable, the Company desires to pursue. After review, the Audit Committee shall approve or disapprove such transactions, and at each subsequently scheduled meeting, management shall update the Audit Committee as to any material change to those proposed transactions. The Audit Committee establishes any guidelines it determines are necessary or appropriate for management to follow in its dealings with Related Persons in Related-Party Transactions. No member of the Audit Committee participates in the review or approval of any Related-Party Transaction if that member is a Related Person. If management becomes aware of a proposed Related-Party Transaction or an existing Related-Party Transaction that the Audit Committee has not pre-approved, management promptly notifies the Audit Committee Chair to complete the above-described review process. If management, in consultation with the Company’s Chief Executive Officer or Chief Financial Officer, determines that it is not practicable to wait until the next Audit Committee meeting, the Audit Committee Chair has the delegated authority to review, consider and determine whether any such transaction is fair to the Company and whether the transaction should be approved, or ratified. The Audit Committee Chair reports to the Audit Committee any transactions reviewed by her pursuant to this delegated authority at the next Audit Committee meeting. Other Related-Party TransactionsOversight of Programs and Policies relating to ESG
None.
•Review the Company’s performance on environmental and social matters, including the approval and ongoing monitoring of performance against any performance metrics and targets.Laredo Petroleum, Inc. 2022 Proxy Statement |31
•Review any significant environmental, health or safety incidents or material regulatory compliance matters and monitor the status of subsequent actions.TABLE OF CONTENTS•Review strategies and policies relation to human capital management, including diversity and inclusion and talent development and retention.CORPORATE GOVERNANCE AND BOARD MATTERS•Review significant ESG risks and exposures, and the Company’s actions for managing those risks.
•Oversee any reports issued by the Company in connection with its ESG initiatives.
| | | COMPENSATION COMMITTEE | | | | |
| | MEMBERS |
| | | | | | | 36 | Vital Energy, Inc. 2023 Proxy Statement | | | •
|
Dr. Craig M. Jarchow (Chair)
•
William E. Albrecht
•
Lisa Lambert
| | | | CHARTER AND COMP COMMITTEE REPORT | | | | The Compensation Committee Charter is available on our website at www.laredopetro.com. The Compensation | | | | | | | | | | | | | Finance Committee | Members | | Lori Lancaster (Chair) William E. Albrecht John Driver | Craig M Jarchow Edmund P Segner, III
| | | | | | | Charter The Finance Committee Charter is available on our website at www.vitalenergy.com and contains the full list of the Compensation Committee’s responsibilities. The Compensation Committee Report is set forth beginning on page 68. | | | | MEETINGS | | | | The Compensation Committee Charter requires that the Compensation Committee meet as often as it determines necessary but at least once each year. In 2021, the Compensation Committee held five meetings and three executive sessions either in person or by teleconference. | | | | | |
| PRIMARY RESPONSIBILITIES | | | •
Establish the Company’s general compensation philosophy and objectives in consultation with senior management.
•
Review and approve the Company’s goals and objectives relevant to the compensation of the Chief Executive Officer, annually evaluate the Chief Executive Officer’s performance in light of those goals and objectives, and, based on this evaluation, recommend to the Board the Chief Executive Officer’s compensation level, including salary, bonus, incentive and equity compensation.
•
Recommend to the Board compensation for all other named executive officers.
•
Review and make recommendations to the Board with respect to all employment agreements, severance arrangements, change in control provisions and agreements and any special supplemental benefits applicable to the Company’s executive officers.
•
Review and make recommendations to the Board regarding any incentive and equity-based compensation applicable to the Company’s employees.
•
Administer the Company’s equity-based compensation plans, including the grant of performance unit awards and other equity awards under such plans.
•
Review and make recommendations to the Board of Directors with respect to director compensation.
•
Review and discuss with management the disclosures in the Compensation Discussion and Analysis of the Company’s Proxy Statement.
| |
COMPENSATION COMMITTEE INDEPENDENCE
| Only independent directors serve on the Compensation Committee. Members of the Compensation Committee must meet heightened standards for independence set forth by the NYSE Listed Company Manual. Those standards require that the Board consider (1) each director’s sources of compensation, including any consulting, advisory or other compensatory fees paid by the Company, and (2) whether a director is affiliated with the Company, a subsidiary of the Company or an affiliate of a subsidiary of the Company. | | | | |
Additionally, members of the CompensationCommittee’s responsibilities.
| Meetings The Finance Committee mustCharter requires that the Finance Committee meet as often as it determines necessary but at least four times each year. In 2022, the definition of “Non-Employee Director” includedFinance Committee held six meetings and one executive session either in Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In connection with its assessment of the independence of each director, the Board also determined that all committee members met the additional independence standards of the NYSEperson or by teleconference. | | | | | | | | Primary Responsibilities | | | •Reviews and in the Exchange Act. 32| Laredo Petroleum, Inc. 2022 Proxy Statement
CORPORATE GOVERNANCE AND BOARD MATTERS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee has been at any time a Laredo employee. None of the Company’s executive officers serve on the Board of Directors or compensation committee of a company that has an executive officer that servesprovides guidance on the Company’s Board or Compensation Committee. No member ofannual capital and operating budget.
•Reviews and provides guidance on the Company’s Board is an executive officer of a company in which one ofcapital structure and capital allocation strategy. •Reviews and provides guidance on the Company’s executive officers serves as a memberhedging program and policies governing the use of financial instruments, including the boardderivative instruments. | •Upon delegation of directors or compensation committee of that company.authority by the Board, approves acquisitions and hedges which may exceed management’s delegated authority. Laredo Petroleum, Inc. 2022 Proxy Statement |33
CORPORATE GOVERNANCE AND BOARD MATTERS
| | | NOMINATING, CORPORATE GOVERNANCE,
ENVIRONMENTAL & SOCIAL COMMITTEE | | | | |
| | MEMBERS | | | | •
Jarvis V. Hollingsworth (Chair)
•
Lisa M. Lambert
•
Frances Powell Hawes
| | | | CHARTER | | | | The Nominating, Corporate Governance, Environmental and Social Committee Charter is available on our website at www.laredopetro.com. The Nominating, Corporate Governance, Environmental and Social Committee Charter contains the full list of the Committee’s responsibilities. | | | | MEETINGS | | | | The Nominating, Corporate Governance, Environmental and Social Committee Charter requires that the Nominating, Corporate Governance, Environmental and Social Committee meet as often as it determines necessary but at least once each year. In 2021, the NGE&S Committee held five meetings and two executive sessions either in person or by teleconference. | | | | | |
| PRIMARY RESPONSIBILITIES | Related Party TransactionsThe Board recognizes that transactions involving the Company and related parties present a heightened risk of conflicts of interest, and therefore, has adopted a Policy Statement Regarding Related Party Transactions (“Policy Statement”). This Policy Statement is available on our website, www.vitalenergy.com. The Policy Statement prohibits the Company from entering into a related party transaction unless (1) the Audit Committee approves such transaction in accordance with the Policy Statement; or (2) the transaction is approved by a majority of the disinterested directors of the Company. A “Related-Party Transaction” is a transaction, arrangement or relationship in which the Company or any of its subsidiaries was, is or will be a participant, the amount involved exceeds $120,000, and a related person had, has or will have a direct or indirect material interest. A “Related Person” means: •any person who is, or at any time during the applicable period was, one of the Company’s executive officers or one of its directors; •any person who is known by the Company to be the beneficial owner of more than 5.0% of the Company’s common stock; •any 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 or sister-in-law of a director, executive officer or a beneficial owner of more than 5.0% of the Company’s common stock; and •any entity in which any of the foregoing persons (i) has direct or indirect control, (ii) is a partner or principal or in a similar position, (iii) has a 10.0% or greater beneficial ownership interest or (iv) is employed if (a) the person is directly involved in the negotiation of the Related-Party Transaction or will share or have primary responsibility for such transaction or (b) the person’s compensation from the entity is directly tied to such transaction. The Audit Committee annually reviews and assesses the adequacy of this Policy Statement.
| | | | | | | Corporate Governance and Board Matters | 37 | | Oversight of Board and Committee Membership
|
Procedures for Review, Approval and Ratification of Related-Party Transactions In reviewing and approving any Related-Party Transaction, the Audit Committee shall: •Satisfy itself that it has been fully informed as to the material facts of the Related Person’s relationship and interest and as to the material facts of the proposed Related-Party Transaction; •Take into account the extent of the Related Person’s interest in the Related-Party Transaction; and •Determine that the Related-Party Transaction is fair to the Company and that the Related-Party Transaction is on market standard terms including no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances. At each Audit Committee meeting, management can recommend any Related-Party Transactions, if applicable, the Company desires to pursue. After review, the Audit Committee shall approve or disapprove such transactions, and at each subsequently scheduled meeting, management shall update the Audit Committee as to any material change to those proposed transactions. The Audit Committee establishes any guidelines it determines are necessary or appropriate for management to follow in its dealings with Related Persons in Related-Party Transactions. No member of the Audit Committee participates in the review or approval of any Related-Party Transaction if that member is a Related Person. If management becomes aware of a proposed Related-Party Transaction or an existing Related-Party Transaction that the Audit Committee has not pre-approved, management promptly notifies the Audit Committee Chair to complete the above-described review process. If management, in consultation with the Company’s Chief Executive Officer or Chief Financial Officer, determines that it is not practicable to wait until the next Audit Committee meeting, the Audit Committee Chair has the delegated authority to review, consider and determine whether any such transaction is fair to the Company and whether the transaction should be approved, or ratified. The Audit Committee Chair reports to the Audit Committee any transactions reviewed by her pursuant to this delegated authority at the next Audit Committee meeting. •
Identify, evaluate and recommend qualified nominees to serve on the Company’s Board.
•
Review and make recommendations regarding the composition and size of the Board.
| | | Oversight of Governing Policies, Practices and Procedures
•
Develop and recommend corporate governance guidelines for the Company.
•
Conduct an annual assessment of the qualifications and performance of the Board and each of the directors.
•
Review and make recommendations regarding the composition, size, purpose, structure, operations and charter of each of the Board’s committees, including the creation of additional committees or elimination of existing committees.
•
Recommend committee assignments for directors.
Oversight of Programs and Policies relating to ESG •
Review the Company’s performance on environmental and social matters, including the approval of and ongoing monitoring of performance against any performance metrics and targets.
•
Review any significant environmental, health or safety incidents or material regulatory compliance matters and monitor the status of subsequent actions.
•
Review strategies and policies relation to human capital management, including diversity and inclusion and talent development and retention.
•
Review significant ESG risks and exposures, and the Company’s actions for managing those risks.
•
Oversee any reports issued by the Company in connection with its ESG initiatives.
| |
NOMINATING, CORPORATE GOVERNANCE, ENVIRONMENTAL AND SOCIAL COMMITTEE INDEPENDENCE
| Only independent directors serve on the Nominating, Corporate Governance, Environmental and Social Committee. In connection with its assessment of the independence of each director, the Board determined that all members met the general independence standards of the Company’s Corporate Governance Guidelines and NYSE Listed Company Manual. | | | | |
34| Laredo Petroleum, Inc. 2022 Proxy Statement
CORPORATE GOVERNANCE AND BOARD MATTERS
| | FINANCE COMMITTEE | | | | | 36 | Vital Energy, Inc. 2023 Proxy Statement |
| | MEMBERS | | | | | | | | | •
| | Finance Committee | Members | | Lori Lancaster (Chair)
•
William E. Albrecht John Driver
•
| Craig M Jarchow
•
Edmund P Segner, III
| | | | CHARTER | | | | | Charter The Finance Committee Charter is available on our website at www.laredopetro.comwww.vitalenergy.com and contains the full list of the Committee’s responsibilities. | | | | MEETINGS | | | | Meetings The Finance Committee Charter adopted on May 20, 2021, requires that the Finance Committee meet as often as it determines necessary but at least four times each year. In 2021,2022, the Finance Committee held threesix meetings and one executive session either in person or by teleconference. | |
| PRIMARY RESPONSIBILITIES | | | | | | | | | Primary Responsibilities | | | •
Reviews and provides guidance on the Company’s annual capital and operating budget.
•
Reviews and provides guidance on the Company’s capital structure and capital allocation strategy.
•
Reviews and provides guidance on the Company’s hedging program and policies governing the use of financial instruments, including the derivative instruments. |
•
Upon delegation of authority by the Board, approves acquisitionacquisitions and hedges which may exceed management’s delegated authority.
| | | |
Related Party Transactions The Board recognizes that transactions involving the Company and related parties present a heightened risk of conflicts of interest, and therefore, has adopted a Policy Statement Regarding Related Party Transactions (“Policy Statement”). This Policy Statement is available on our website, www.vitalenergy.com. The Policy Statement prohibits the Company from entering into a related party transaction unless (1) the Audit Committee approves such transaction in accordance with the Policy Statement; or (2) the transaction is approved by a majority of the disinterested directors of the Company.
A “Related-Party Transaction” is a transaction, arrangement or relationship in which the Company or any of its subsidiaries was, is or will be a participant, the amount involved exceeds $120,000, and a related person had, has or will have a direct or indirect material interest. A “Related Person” means: •any person who is, or at any time during the applicable period was, one of the Company’s executive officers or one of its directors; •any person who is known by the Company to be the beneficial owner of more than 5.0% of the Company’s common stock; •any 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 or sister-in-law of a director, executive officer or a beneficial owner of more than 5.0% of the Company’s common stock; and •any entity in which any of the foregoing persons (i) has direct or indirect control, (ii) is a partner or principal or in a similar position, (iii) has a 10.0% or greater beneficial ownership interest or (iv) is employed if (a) the person is directly involved in the negotiation of the Related-Party Transaction or will share or have primary responsibility for such transaction or (b) the person’s compensation from the entity is directly tied to such transaction. The Audit Committee annually reviews and assesses the adequacy of this Policy Statement. Only independent directors serve
| | | | | | | Corporate Governance and Board Matters | 37 |
Procedures for Review, Approval and Ratification of Related-Party Transactions In reviewing and approving any Related-Party Transaction, the Audit Committee shall: •Satisfy itself that it has been fully informed as to the material facts of the Related Person’s relationship and interest and as to the material facts of the proposed Related-Party Transaction; •Take into account the extent of the Related Person’s interest in the Related-Party Transaction; and •Determine that the Related-Party Transaction is fair to the Company and that the Related-Party Transaction is on market standard terms including no less favorable than terms generally available to an unaffiliated third-party under the Finance Committee.same or similar circumstances. ![[MISSING IMAGE: tm222850d1-pc_audinde4c.jpg]](https://files.docoh.com/PRE 14A/0001104659-22-038093/tm222850d1-pc_audinde4c.jpg) If management becomes aware of a proposed Related-Party Transaction or an existing Related-Party Transaction that the Audit Committee has not pre-approved, management promptly notifies the Audit Committee Chair to complete the above-described review process. If management, in consultation with the Company’s Chief Executive Officer or Chief Financial Officer, determines that it is not practicable to wait until the next Audit Committee meeting, the Audit Committee Chair has the delegated authority to review, consider and determine whether any such transaction is fair to the Company and whether the transaction should be approved, or ratified. The Audit Committee Chair reports to the Audit Committee any transactions reviewed by her pursuant to this delegated authority at the next Audit Committee meeting. Other Related-Party Transactions None. Communications with Directors Stockholders or other interested parties can contact any director, any Board committee or the Company’s independent directors as a group, by writing to them at the following address: Laredo Petroleum,Vital Energy, Inc. c/o Corporate Secretary, 15 W. SixthSanta Fe Plaza, 521 E. 2nd Street, Suite 900,1000, Tulsa, Oklahoma 74119.74120. All such communications will be given to the appropriate member(s) of the Board. Comments or complaints relating to the Company’s accounting, internal accounting controls or auditing matters will also be referred to the Audit Committee. IDENTIFICATION OF DIRECTOR CANDIDATES
The Board or stockholders may nominate directors in accordance with the Company Bylaws. The NGE&S Committee will review all nominees, including stockholder nominees, in accordance with its charter. For more information on the factors considered by the Board to evaluate a candidate, see the Director Qualification section.
The Board and NGE&S Committee will consider any nominee by stockholders for election at the annual meeting of stockholders to be held in 2023 if that nomination is submitted in writing, between January 20, 2023 and
Laredo Petroleum, Inc. 2022 Proxy Statement |35
CORPORATE GOVERNANCE AND BOARD MATTERS
February 21, 2023, or in the event the Company’s 2023 annual meeting of stockholders is advanced or delayed more than 30 days from the date of the Annual Meeting, not later than the later of (i) the 90th day before the 2023 annual meeting or (ii) the 10th day following the day on which public announcement of the date of the annual meeting is first made by the Company. If the number of directors to be elected to the Board is increased and there has been no public announcement naming all nominees for director or indicating the increase at least 10 days before the last day a stockholder may deliver a notice of nomination in accordance with the preceding sentence, a stockholder’s notice will be considered timely, but only with respect to nominees for any new positions created by such increase, if it is received by the Corporate Secretary at the principal executive offices of the Company not later than the close of business on the 10th day following the day on which such public announcement is first made by the Company.
The written nomination must include information specified in the Bylaws, including certain biographical information and a description of certain arrangements and understandings between the nominee and the recommending stockholder.
Each submission must also include a completed and signed questionnaire and a written representation and agreement that such person (i) is not and will not become a party to any voting or compensation agreement not disclosed to the Company or that could interfere with the nominee’s ability to comply with his or her fiduciary duties under applicable law or provide any direct or indirect compensation, reimbursement or indemnification in connection with service as a director, (ii) will comply with all of the Company’s applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and (iii) that such person intends to serve a full term if elected as director.
STOCKHOLDER PROPOSALS
Written requests for inclusion of any other stockholder proposal should be addressed to the above-listed address. The Company suggests that any such proposal be sent by certified mail, return receipt requested. For more information see the Proxy Statement Question and Answers.
36| Laredo Petroleum, Inc. 2022 Proxy Statement
| | | | AUDIT MATTERS | | | 38 | Vital Energy, Inc. 2023 Proxy Statement |
Proposal Two: Ratification of Selection of Independent Registered Public Accounting FirmAudit Matters
The Audit Committee of the Board of Directors has selected GT as the independent registered public accounting firm of the Company for the fiscal year beginning January 2022. The Board of Directors is providing stockholders the opportunity to vote to ratify the appointment of GT. The submission of this matter for approval by stockholders is not legally required, but the Board of Directors and the Audit Committee believe the submission provides an opportunity for stockholders through their vote to communicate with the Board of Directors and the Audit Committee about an important aspect of corporate governance. If the stockholders do not ratify the selection of GT the Audit Committee will reconsider the selection of that firm as the Company’s auditors but will be under no obligation to appoint a new public accounting firm.
The Audit Committee has the sole authority and responsibility to retain, evaluate and replace the Company’s independent registered public accounting firm. As part of this oversight, the Audit Committee has established general best practices to ensure the auditor’s qualifications, independence and performance, including the following:
During 2021, the Audit Committee conducted its annual evaluation of the Company’s independent registered public accounting firm, reviewing the work performed and the experience and qualifications of the team members and elected to reappoint GT as the independent registered public accounting firm to audit our financial statements for the fiscal year beginning January 1, 2022. GT was our independent auditor for the 2021 fiscal year and has audited Laredo’s consolidated financial statements since its inception in 2007.
The Company expects that one or more representatives of GT will be present at the Annual Meeting. The representative(s) will have an opportunity to respond to appropriate questions and to make a statement if desired.
The stockholders’ ratification of the selection of GT does not limit the authority of the Audit Committee to change auditors at any time.
| | | | | | | | | | | | | | | | | | | | Proposal Two | | | | | | | | | | | | ![[MISSING IMAGE: tm2025328d45-icon_check4c.jpg]](https://files.docoh.com/PRE 14A/0001104659-22-038093/tm2025328d45-icon_check4c.jpg) The Audit Committee of the Board of Directors has selected Ernst & Young LLP (“EY”) as the independent registered public accounting firm of the Company for the fiscal year beginning January 2023. The Board of Directors is providing stockholders the opportunity to vote to ratify the appointment of EY. The submission of this matter for approval by stockholders is not legally required, but the Board of Directors and the Audit Committee believe the submission provides an opportunity for stockholders through their vote to communicate with the Board of Directors and the Audit Committee about an important aspect of corporate governance. If the stockholders do not ratify the selection of EY, the Audit Committee will reconsider the selection of that firm as the Company’s auditors but will be under no obligation to appoint a new public accounting firm. The Audit Committee has the sole authority and responsibility to retain, evaluate and replace the Company’s independent registered public accounting firm. As part of this oversight, the Audit Committee has established general best practices to ensure the auditor’s qualifications, independence and performance, including the following: | | | | | | | | | | | Audit Committee Best Practices | | | •Review of non-audit fees and services when assessing independence. •Audit partner rotation every five years. •Audit Committee approval of every audit partner. •Regular meetings with the Audit Committee. | •Regular executive sessions with the Audit Committee without management present. •Annual evaluation of independent registered public accounting firm by the Audit Committee. | | | | | | | | | | | During 2022, the Audit Committee conducted its annual evaluation of the Company’s independent registered public accounting firm, reviewing the work performed and the experience and qualifications of the team members and elected not to reappoint Grant Thornton, LLP (“GT”) as the independent registered public accounting firm to audit our financial statements for the fiscal year beginning January 1, 2023, and instead voted to replace GT with EY as the independent auditor for the balance of 2022 and for 2023 fiscal year. The Company expects that one or more representatives of EY will be present at the Annual Meeting. The representative(s) will have an opportunity to respond to appropriate questions and to make a statement if desired. The stockholders’ ratification of the selection of EY does not limit the authority of the Audit Committee to change auditors at any time. | | | | | | | The Board of Directors unanimously recommends that stockholders vote FOR the selection of Grant Thornton,Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year 2022.2023. | | | | | |
Laredo Petroleum, Inc. 2022 Proxy Statement |37
Audit Services As disclosed in the Company’s Form 8-K filed on June 7, 2022 (“Auditor 8-K”), the Audit Committee approved the engagement of EY as the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2022, subject to completion of EY’s standard client acceptance process and execution of an engagement agreement, and dismissed GT as the Company’s independent registered public accounting firm. GT had served as the Company’s independent registered public accounting firm since 2007. The reports of GT on the Company’s consolidated financial statements for the fiscal years ended December 31, 2021 and 2020 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the years ended 2020 and 2021, and the subsequent interim period through June 3, 2022: (i) the Company had no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) with GT on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to GT’s satisfaction, would have caused GT to make reference thereto in its reports on the Company’s financial statements for such years, and (ii) there were no “reportable events,” as that term is defined in Item 304(a)(1)(v) of Regulation S-K. The Company provided GT with a copy of the disclosures required by Item 304 of Regulation S-K and requested that GT furnish the Company with a letter addressed to the Securities and Exchange Commission stating whether GT agreed with the statements made by the Company in its Auditor 8-K and, if not, stating the respects in which it did not agree. A copy of GT’s letter, dated June 7, 2022, is filed as Exhibit 16.1 to the Auditor 8-K. External audit services for the fiscal year of 2021,ended December 31, 2022, were provided by GT,EY, included auditing our consolidated financial statements, auditing the effectiveness of our internal control over financial reporting and services related to periodic filings made with the SEC. The Company anticipates external auditorsits selected independent registered public accounting firm will perform similar services for the fiscal year 2022.2023. The Audit Committee Charter and its pre-approval policy require that the Audit Committee review and pre-approve the plan and scope of external audit and tax services as well as the fees associated with such services. Laredo’sVital’s Audit Committee pre-approved 100% of the services included in “Audit fees” and “Tax fees” presented in the table below. Audit and Other Fees External audit fees for professional services are as follows: | | | | | 2021 | | | 2020 | | | | Audit fees(1) | | | | $ | 825,000 | | | | | $ | 690,000 | | | | | Tax fees(2) | | | | | 19,610 | | | | | | 19,610 | | | | | Total | | | | $ | 844,610 | | | | | $ | 709,610 | | |
(1) | | | | | | | | | | | | | | 2022 | 2021 | Audit fees(1) | | $ | 981,000 | | $825,000 | | Tax fees(2) | | 176,128 | | 19,610 | | | | | | | Total | | $ | 1,157,128 | | $844,610 | |
(1)Audit fees represent fees for professional services provided in connection with: (a) the annual audit of Laredo’sVital’s consolidated financial statements; (b) the review of Laredo’sVital’s quarterly consolidated financial statements; (c) the annual audit of the effectiveness of internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002; and (c)(d) the review of Laredo’s othercertain of Vital’s filings with the SEC, including review and preparation of registration statements, comfort letters, consents and research necessary to comply with generally accepted auditing standards for the years ended December 31, 2022 and 2021. Audit fees incurred for the year ended December 31, 2022 represent audit services provided by EY and audit fees for the year ended December 31, 2021 and 2020.represent audit services provided by GT.
(2)
Tax fees representrepresent: (a) provision of certain tax compliance, tax advice and tax planning by EY incurred during the year ended December 31, 2022; and (b) review of Laredo’sVital’s tax return and consultation on tax matters by GT incurred during the years ended December 31, 2021 and 2020.2021.
| | | | | | | 40 | Vital Energy, Inc. 2023 Proxy Statement |
Audit Committee Report During the last fiscal year, and during the first quarter of 20212023 in preparation for the filing with the SEC of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021,2022, the Audit Committee: •
reviewed and discussed the Company’s audited consolidated financial statements as of and for the year ended December 31, 20212022 with management and with GT;EY, including the significant accounting policies used and significant estimates made by management in the preparation of our audited and consolidated financial statements, and the overall quality, not just the acceptability, of our consolidated financial statements and management’s financial reporting process;
•
considered the adequacy ofreviewed and discussed with the Company’s internal auditor the overall scope and plans for their respective audits. The Audit Committee meets with the internal auditor and EY with and without management present to discuss the results of their examinations, their evaluations of internal controls, and the overall quality of itsthe Company’s financial reporting and discussed these matters with management and with GT;their compliance programs;
•
reviewed and discussed with GTEY (i) their judgments as to the quality of the Company’s accounting policies, (ii) the written disclosures and letter from the independent registered public accountants required by Public Company Accounting Oversight Board (“PCAOB”) Independence Rules, and their independence, (iii) any issues deemed significant by EY or the Audit Committee, including critical audit matters addressed during the audit, and (iii)(iv) the matters required to be discussed by the PCAOB’s Auditing Standard No. 1301, Communications with Audit Committees;applicable requirements of the PCAOB, the rules of the SEC, and other applicable regulations;
•
evaluated the process by which the Company’s Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer make the certifications required by the SEC in connection with the filing with the SEC of the Company’s periodic reports, including reports on Forms 10-K and 10-Q; and
•
pre-approved all auditing services and non-audit services to be performed for the Company by the independent registered public accountants as required by the applicable rules promulgated pursuant to the Exchange Act, considered whether the rendering of non-audit services was compatible with maintaining GT’sEY’s independence, and concluded that GT’sEY’s independence was not compromised by the provision of such services (details regarding the fees paid to GTEY in fiscal year 20202022 and GT in 2021 for audit services, tax services and all other services, are set forth in “Audit and Other Fees” above).
38| Laredo Petroleum, Inc. Pre-approval is generally provided for up to one year and is detailed as to the particular service or category of service. The Audit Committee may delegate pre-approval authority for such services to one or more of its members, whose decisions are then presented to the full Audit Committee at its next scheduled meeting. For fiscal years 2022 Proxy Statement
AUDIT MATTERS
and 2021, all of the services provided by our independent registered public accounting firm were pre-approved by the Audit Committee.
The Audit Committee meets regularly with management, including private discussions with GT,EY, and receives the communications described above. However, this oversight does not provide us with an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or policies, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, such considerations and discussions do not assure that the Company’s consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States (“GAAP”) or that the audit of the Company’s consolidated financial statements has been carried out in accordance with generally accepted auditing standards. Management is responsible for the Company’s financial reporting process, including its system of internal controls, and for the preparation of consolidated financial statements in accordance with GAAP. GTEY is responsible for expressing an opinion on those financial statements. The Audit Committee has relied, without independent verification, on management’s representation that the consolidated financial statements have been prepared with integrity and objectivity and in conformity with GAAP and on the representations of the independent registered public accountants included in their report on the Company’s consolidated financial statements. The Audit Committee has also established procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and (ii) the confidential, anonymous submission by the Company’s employees of concerns regarding questionable accounting or auditing matters. However, this oversight does not provide us with an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or policies, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, our considerations and discussions with management and the independent registered public accountants do not assure that the Company’s consolidated financial statements are presented in accordance with generally accepted accounting principles or that the audit of the Company’s consolidated financial statements has been carried out in accordance with generally accepted auditing standards. Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022. Audit Committee of the Board of Directors | | Frances Powell Hawes, Chair
Jarvis V. Hollingsworth
Lori A. Lancaster
Edmund P. Segner, III | |
Audit Committee of the Board of Directors Frances Powell Hawes, Chair Jarvis V. Hollingsworth Lori A. Lancaster Edmund P. Segner, III John Driver The information contained in this Audit Committee Report and references in this Proxy Statement to the independence of the Audit Committee members shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except to the extent that the Company specifically incorporates such information by reference in such filing. Laredo Petroleum, Inc. 2022 Proxy Statement |39
| | | | EXECUTIVE COMPENSATION MATTERS | | | 42 | Vital Energy, Inc. 2023 Proxy Statement |
Proposal Three: Advisory Vote Approving the Compensation of Our Named Executive Officers
We are seeking stockholder approval on an advisory, non-binding basis of the compensation of our named executive officers as disclosed in the Executive Compensation Matters section of this Proxy Statement. In this proposal, stockholders are being asked to vote on the following advisory resolution:
| | | | | | | | | | | | | | | | | Proposal Three | | | | | | | | | | | Advisory Vote Approving the Compensation of Our Named Executive Officers We are seeking stockholder approval on an advisory, non-binding basis of the compensation of our named executive officers as disclosed in the Executive Compensation Matters section of this Proxy Statement. In this proposal, stockholders are being asked to vote on the following advisory resolution: | | | | | | | | | | | “RESOLVED, that the stockholders approve, on an advisory basis, the compensation of our named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the compensation tables and the other narrative executive compensation disclosure in the Proxy Statement for our 20222023 Annual Meeting of Stockholders.” | |
To learn more about our compensation program, including our process for determining executive compensation, please see the Compensation Discussion & Analysis.
Although the vote is advisory and non-binding, our Board of Directors and Compensation Committee value the opinions that our stockholders express in their votes and will carefully consider the voting results in connection with their ongoing evaluation of our compensation program.
The affirmative “FOR” vote of a majority of the votes cast at the Annual Meeting is required to approve, on an advisory basis, the compensation of our named executive officers. Unless otherwise instructed on the proxy, properly executed proxies will be voted in favor of approving on an advisory, non-binding basis the compensation of our named executive officers.
| | | | | | | | | Although the vote is advisory and non-binding, our Board of Directors and Compensation Committee value the opinions that our stockholders express in their votes and will carefully consider the voting results in connection with their ongoing evaluation of our compensation program. The affirmative “FOR” vote of a majority of the votes cast at the Annual Meeting is required to approve, on an advisory basis, the compensation of our named executive officers. Unless otherwise instructed on the proxy, properly executed proxies will be voted in favor of approving on an advisory, non-binding basis the compensation of our named executive officers. | | | | | | | | The Board of Directors unanimously recommends that stockholders vote FOR the advisory resolution approving the compensation of our named executive officers. | | | | | |
40| Laredo Petroleum, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION MATTERS
| | | | | | | Executive Compensation Matters | 43 |
Compensation Discussion & Analysis The following discussion and analysis contains statements regarding our named executive officers’ past and future performance targets and goals. These targets and goals are disclosed in the limited context of our compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. CD&A TABLE OF CONTENTSTable of Contents | | | | Page | | | | | | | | 41 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 68 | | |
| | | | Page | | | | | | | | 69 | | | | Summary Compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Laredo Petroleum, Inc. 2022 Proxy Statement |41
EXECUTIVE COMPENSATION MATTERS
| | | | | | | 44 | Vital Energy, Inc. 2023 Proxy Statement |
CD&A EXECUTIVE SUMMARYExecutive Summary As outlined above, our strategy is to create long-term value for our stockholders through accretive acquisitions of oil-weighted properties and the responsibledisciplined development of those properties in the Permian Basin. In 2022, our Permian Basin acreage. In 2021,strong financial performance was a direct result of the execution of this strategy. The development of assets we continuedacquired since 2019 enabled us to transform the Company by expanding our high-margin inventory, increasing thecapitalize on higher oil percentage of our reserveprices, generate Free Cash Flow, reduce debt and production mix, reducing leverage and continuing our progress on sustainability matters.return cash to stockholders. Specific 2022 highlights include: •
Generated Company-record cash flows from operating activities of $830 million and Free Cash Flow(1) of $220 million Acquiring 41,000 net acres in Howard and W. Glasscock counties, adding ~250 high-margin, oil weighted locations to our drilling inventory•Repurchased $285 million face value of term-debt
•
Adding an additional ~125 locations through appraisal drilling in the Middle Spraberry and Wolfcamp D formations
•
Increasing average daily oil production by 19% versus full-year 2020
•
Grew proved oil reserves by 78% versus full-year 2020
•
Increased oil mix to 48% of production and 38% of total proved reserves
•
Reduced our leverage ratio by ~0.5x1 versus(2) to 1.18x from 2.14x at year-end 20202021 •Repurchased $37 million of common stock
•
Enhanced ESG transparency with the issuance of two comprehensive ESG and Climate Risk Reports
•
Established year-end 2025 targets for greenhouse gas and methane emissions reductions and the elimination of routine flaring
•Grew oil production 19% compared to 2021
•Organically added 35 oil-weighted locations, maintaining eight years of inventory at current activity levels •Demonstrated continued progress towards 2025 emissions reduction goals and introduced a 2025 water recycling goal and a 2030 combined Scope 1 and 2 emissions intensity goal 1
(1) See Annex A for definitions of non-GAAP financial measures.
(2) Leverage measured by Net Debt/Adjusted EBITDA ratio, YE-20 &Consolidated EBITDAX. YE-21 Adjusted EBITDA represent 4Q annualized.Consolidated EBITDAX represents the second half of 2021 annualized due to significant acquisitions in 2021. Non-GAAP financial measure; please see Annex A for descriptionsdefinitions of non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures.
The STIP and LTIP performance metrics for 20212022 were updated from those used in 20202021 to better reflect changes within our industry, current strategy and feedback from our stockholders. For our STIP Performance Metrics, followingstockholders. Following consultation with our independent compensation consultant, the Compensation Committee recommended and the Board approved using fivefour of the sevensix previous metrics with slight modifications and revised targets, all of which reflect a potential improvement over prior year performance and above average industry metrics (Reportable Spill Severity Rate,(Spill Intensity, Air Stewardship, Drilling Rate of Return, Free Cash Flow and Gross Inventory Added with a minimum of 25% Drilling Rate or Return). Net Debt to Adjusted EBITDADrilling Rate of Return was removed as ana STIP performance metric and in 2021 andits place five new metrics were added as an LTIP performance metric to more accurately track our progress in lowering debt over time withoutreflect the impact of short-term commodity price fluctuations. Additionally, theCompany’s focus on safety and production goals (Contractor Plus Employee TRIR(1), Employee DART(2), Operated Base Performance and Cash Cost Control per BOE STIP performance metric was replaced with Lease Operating Expense per BOE, which better incentivizesBOE) that the CompanyCompensation Committee believes help incentivize management to continue to be among the lowest costefficiently operate its newly purchased and most efficient operators in its area.legacy assets.
![[MISSING IMAGE: tm222850d1-tbl_stipm4c.jpg]](https://files.docoh.com/PRE 14A/0001104659-22-038093/tm222850d1-tbl_stipm4c.jpg) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2021 STIP Performance Metrics | | | | 2022 STIP Performance Metrics | | | | | | | | | | | | | | Environmental as follows: | | | | Environmental as follows: | | | | | Spill Severity Rate | 7.5 | % | 15 | % | | Spill Intensity | 5.0% | 10 | % | | | Air Stewardship | 7.5 | % | | | Air Stewardship | 5.0% | | | | Drilling Rate of Return | | 20 | % | | Contractor Plus Employee TRIR | | 5 | % | | | Free Cash Flow | | 20 | % | | Employee DART | | 5 | % | | | Lease Operating Expense per BOE | | 15 | % | | Operated Base Performance, BOPD | | 10 | % | | | Gross Inventory Added with a Minimum 25% Drilling Rate of Return | | 30 | % | | Operated Wedge Performance, CUM Type Curve BOPD | | 10 | % | | | | | 100 | % | | Cash Cost per BOE | | 15 | % | | | | | | | Free Cash Flow ($MM) | | 20 | % | | | | | | | Gross Inventory Added with a Minimum
25% Drilling Rate of Return (Well Count) | | 25 | % | | | | | | | | | 100 | % | | | | | | | | | | |
(1) TRIR is defined as Total Recordable Incident Rate (2) LDART is defined as Days Away Restricted or Transferred
42| Laredo Petroleum, Inc. 2022 Proxy Statement
| | | | | | | Executive Compensation Matters | 45 |
EXECUTIVE COMPENSATION MATTERS
For our LTIP Performance Metrics, followingwe received positive feedback from our stockholders and with input from our independent compensation consultant the Compensation Committee recommended and the Board approved combiningfor our structure that combines the Relative Shareholder Return Metric and Absolute Shareholder Return Metric into a PSU Matrix as shown below that consists of three separate annual performance periods during the three yearthree-year period of the LTIP grant.grant, so we continued this framework. The Board believes that this structure reflects an incentive to consistently align the interests of our executives with stockholders on both an annual basis and for the longer term while also reflecting both our absolute and relative performance. In addition, as discussed above we movedmaintained the Net Debt to Adjusted EBITDA from an STIP metric to an LTIP metric. We also addedConsolidated EBITDAX and Inventory Growth and removed Three-year Return on Average Capital Employedmetrics to better reflect the need for the Company to emphasize inventory growth to extend its runway of oil-weighted projects as desired by our stockholders. TheIn addition, following feedback from our investors, we added an ESG component to the LTIP criteria to reflect our focus on operating in a safe and responsible manner. With the addition of the ESG metric, the weighting used for each of the metrics was updated to 50% for the PSU Matrix, 20% for Net Debt to Consolidated EBITDAX and 25%15% each for the other two metrics.inventory growth and ESG. Lastly, the performance peer group was updated to reflect the Company’s most relevant peer companies in terms of size and competition. ![[MISSING IMAGE: tm222850d1-tbl_stipmet4c.jpg]](https://files.docoh.com/PRE 14A/0001104659-22-038093/tm222850d1-tbl_stipmet4c.jpg) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2021 Performance Unit Award Metrics | | | 2022 Performance Unit Award Metrics | | | | Three-year relative and absolute total
shareholder return | 50% | | Three-year relative and absolute total
shareholder return | 50% | | | Three-year growth in inventory | 25% | | Three-year growth in inventory | 15% | | | Three-year Net Debt/Consolidated EBITDAX | 25% | | Three-year Net Debt/Consolidated EBITDAX | 20% | | | | 100% | | ESG | 15% | | | | | | 100% | | | | | | | | |
Each performance measure is evaluated against established targets and as a result of not achieving a threshold level of performance under two measures (Operated Base Performance and Cash Cost per BOE), the overall STIP payout for 2022 resulted in a payout at 80% of target. For a full description of our 20212022 Executive Compensation Program, see the discussion beginning on page 54. 53. ![[MISSING IMAGE: tm222850d1-bc_stip4c.jpg]](https://files.docoh.com/PRE 14A/0001104659-22-038093/tm222850d1-bc_stip4c.jpg) | | | | | | | | | | | | | | | | | | | | | | | | | | STIP Payout of 80% of Target | | 2020 Performance Unit Awards Payout of 151% of Target | | | | | | | | | | | | | | | | | | | | |
For 2021,2022, we continued to seek to make the total target NEO compensation near the median of our compensation peer group with the understanding that there may be individual variation.
| | | | | | | 46 | Vital Energy, Inc. 2023 Proxy Statement |
Say-on-Pay Results & MANAGEMENT RESPONSIVENESSManagement Responsiveness Of the shares voted at the 20212022 annual meeting of stockholders, 89.8%95.5% voted to approve Laredo’s 2020Vital’s 2021 executive compensation. This sharp increase inWe believe this continued high approval of our executive compensation we believe reflects stockholder satisfaction with the steps taken by the Board and Compensation Committee to address the previousestablish a fair and robust compensation system that reflects concerns held by stockholders. Informed by extensive engagement with stockholders and our independent compensation consultant following both the 2019 and 2020 results that the Compensation Committee, which the Board and the Company found to be unacceptable, the Company made several changes to its structure. stockholders.Laredo Petroleum, Inc. 2022 Proxy Statement |43
EXECUTIVE COMPENSATION MATTERS
Despite a high approval rate for our executive compensation at the 2021 annual meeting of stockholders, the Compensation Committee and the Board continue to review for areas of improvement and greater alignment with stockholder requests. Toward this end, in the fall of 2021 the Compensation Committee adopted an executive incentive clawback plan, effective January 1, 2022, that allows the Company to clawback incentive compensation paid to our executive officers in certain instances of financial restatement or bad acts.
Key Compensation Enhancements Inin Past Three Years | ✓ | | | | | | | | | | | | | | | | | | | | •Implementation of market-based executive severance plan, providing payment only for involuntary termination without cause or other termination for good reason | | | ✓ | | | •Updated STIP performance metrics to better reflect criteria important to stockholders, emphasizing free cash flow and sustainability | | | ✓ | | | •Additional disclosures regarding the Compensation Committee’s role in developing performance metrics and peer group selection methodology | | | ✓ | | | •Updating weighting of LTIP performance unit awards to equally weight each metric | | | | | | •Adoption of an executive incentive clawback plan, providing for clawback in certain instances of financial restatement or bad acts | | | | | | •Evolving enhancement of LTIP performance unit award weighting and metrics, including implementation of a metric for 2022 tied to achievement of our 2025 emission reduction targets | | | | | |
Named Executive Officers 44| Laredo Petroleum, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION MATTERS
NAMED EXECUTIVE OFFICERS
For 2021, ourOur named executive officers (“NEOs”) are as follows:
| | Name | | | | Positions | | | Name | Positions | | | Jason Pigott | | | | President and Chief Executive Officer | | | | | Bryan Lemmerman | | | | Senior Vice President and Chief Financial Officer | | | Karen Chandler* | | Karen Chandler | | | | Former Senior Vice President and Chief Operating Officer | | | | | Mark Denny | | | | Senior Vice President—General Counsel & Secretary | | |
Mr. Pigott* On August 24, 2022, the Company announced the involuntary departure of Dr. T. Karen Chandler, the Company’s Senior Vice President and Mr. Lemmerman are NEOsChief Operating Officer, effective immediately. Dr. Chandler’s involuntary departure was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. The Company did not fill the Chief Operating Officer role, and Dr. Chandler’s responsibilities were absorbed by reason of their positions as the principal executive officer (“PEO”) and principal financial officer (“PFO”)other members of the Company during 2021.Company’s management team. In connection with her involuntary departure, Dr. Chandler and Mr. Denny are NEOs by reason of them being our most highly compensated executive officers (other than our PEO or PFO) who were serving in such capacity atreceived severance under the end of 2021. Mr. Pigott, Mr. Lemmerman,Company’s Executive Severance Plan. Of the total amount paid to Dr. Chandler, 86% was due to payment for previously granted restricted stock and Mr. Denny are our only executive officers whoperformance units that were serving in such capacity atcancelled. Approximately 14% of the end of 2021.total payment to Dr. Chandler was the cash severance payment amount prescribed under the Executive Severance Plan.
Laredo Petroleum, Inc. 2022 Proxy Statement |45
| | | | | | | Executive Compensation Matters | 47 |
EXECUTIVE COMPENSATION MATTERS
In addition to Mr. Pigott, whose biography is included under the Director Qualifications section, set forth below is the biographical information for each of our current executive officers. | | | | | | BRYAN LEMMERMAN
Age 47
| | | | | | Bryan Lemmerman Senior Vice President
and Chief Financial
Officer since June 2020 | | | | | Education
•
Age 48
B.B.A., Accounting, Texas A&M University
•
M.S., Accounting, Texas A&M University
•
M.B.A., University of Texas
| | | | Mr. Lemmerman joined LaredoVital in June 2020. Mr. Lemmerman has more than 1516 years of experience in the energy exploration and production industry, including an extensive background in strategic planning and business development. He previously spent 10 years with Chesapeake Energy Corporation, serving in financial roles with increasing responsibility, most recently as Vice President—Business Development and Treasurer. Prior to joining Chesapeake, Mr. Lemmerman was a portfolio manager at Highview Capital Management and Ritchie Capital Management, overseeing investments in public and private energy companies. He began his career as a tax consultant with Deloitte & Touche. | | |
| | | | | | KAREN CHANDLEREducation
Age 51•B.B.A., Accounting, Texas A&M University
| | •M.S., Accounting, Texas A&M University •M.B.A., University of Texas | | Senior Vice President and Chief Operating Officer
since October 2018
| | | | | Education
•
B.S., Chemical Engineering, University of Kentucky
•
M.S., Chemical Engineering, Georgia Institute of Technology
•
Ph.D., Chemical Engineering, Georgia Institute of Technology
| | | | Dr. Chandler joined Laredo in December 2012 as Director—Operations. Prior to joining Laredo, Dr. Chandler spent 15 years at ExxonMobil, working in a variety of management and technical roles in the areas of drilling, completions and technology development. These roles included operations experience in the Colorado Piceance Basin, Australia Bass Strait and Papua New Guinea. | | |
| | | | | | MARK DENNY
Age 41
| | | | Mark Denny Senior Vice President—General Counsel and Secretary since April 2019 | | | | | Education
•
B.S., Economics and Political Science, Vanderbilt University
•
J.D., Georgetown University Law Center
Age 42
| | | | Mr. Denny joined LaredoVital in February 2013. Prior to his most recent promotion, he served as Vice President and General Counsel. Prior to joining Laredo,Vital, Mr. Denny worked in-house at SEH Offshore, Inc. and Seahawk Drilling, Inc. Prior to that, Mr. Denny worked at the international law firms of Vinson & Elkins and Fried Frank. | Education •B.S., Economics and Political Science, Vanderbilt University •J.D., Georgetown University Law Center | | | |
46| Laredo Petroleum, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION MATTERS
2021 COMPENSATION ALIGNMENT | | | | | | | 48 | Vital Energy, Inc. 2023 Proxy Statement |
2022 Compensation Alignment & PAY FOR PERFORMANCEPay for Performance To ensure that we pay our NEOs for their performance in relation to our strategy, the majority of their compensation is variable and heavily dependent on performance metrics pre-established by our Board. The following pie charts depict the allocation of fixed compensation (salary rate) vs. variable compensation (target STIP awards and target LTIP awards) for 20212022 of our CEO and average for the other current NEOs, assuming each person receives his or her target percentage for STIP and LTIP awards. ![[MISSING IMAGE: tm222850d1-pc_target4c.jpg]](https://files.docoh.com/PRE 14A/0001104659-22-038093/tm222850d1-pc_target4c.jpg) | | | | | | | | | | | | | | | | | | | | | | | | | | CEO Target Pay Mix | | Other NEOs Average Target Pay Mix | | | | | | |
The following table sets forth the approximate allocation between fixed and variable compensation for each NEO’s actual pay. This table is the approximate percentages of our NEOs’ total compensation in the form of salary, STIP award and LTIP awards during the fiscal year 20212022 as set forth in the Summary Compensation Table. 20212022 Actual Pay Mix(1)
| | Name | | | Principal Position | | | Salary as a
percentage of total
compensation(2) | | | Cash awards as a
percentage of total
compensation(2) | | | Equity-based awards
as a percentage
of total
compensation(3) | | | | Jason Pigott | | | President and Chief
Executive Officer | | | 12% | | | 20% | | | 68% | | | | Bryan Lemmerman | | | Senior Vice President and
Chief Financial Officer | | | 15% | | | 20% | | | 62% | | | | Karen Chandler | | | Senior Vice President and
Chief Operating Officer | | | 14% | | | 19% | | | 67% | | | | Mark Denny | | | Senior Vice President
General Counsel &
Secretary | | | 20% | | | 25% | | | 54% | | | |
(1) | | | | | | | | | | | | | Name and Principal Position | Salary as a
percentage of total
compensation(2) | Cash awards as a
percentage of total
compensation(2) | Equity-based awards
as a percentage
of total
compensation(3) | | | | | Jason Pigott
President and Chief Executive Officer | 12.5% | 12.5% | 75% | | | | | | | | | Bryan Lemmerman
Senior Vice President and Chief Financial Officer | 12% | 9% | 79% | | | | | | | | | | | | | Mark Denny
Senior Vice President General Counsel & Secretary | 22% | 15% | 63% | | | | |
(1)The remaining portions of the NEOs’ total compensation were attributable to all other compensation during the fiscal year 2021.2022. For further discussion of the NEOs’ all other compensation see the Summary Compensation Table.
(2)
The amounts used in these calculations were the actual amounts earned in 2021, even if paid in another year.2022.
(3)
The equity-based award amounts used in these calculations were the sum of the grant-date fair value of the restricted stock awards and performance unit awards. Please refer to Note 9 to our audited consolidated financial statements in our 20212022 Annual Report for disclosures regarding fair value estimates of these awards.
Laredo Petroleum, Inc. 2022 Proxy Statement |47
| | | | | | | Executive Compensation Matters | 49 |
EXECUTIVE COMPENSATION MATTERS
The below tables shows the specific performance metrics in 20212022 for the STIP and LTIP and demonstrates how those performance metrics align with our corporate strategy on both a short-term and long-term basis. For more details regarding the 20212022 executive compensation and performance metric results, see page 54. 53. ![[MISSING IMAGE: tm222850d1-pc_compen4c.jpg]](https://files.docoh.com/PRE 14A/0001104659-22-038093/tm222850d1-pc_compen4c.jpg) | | | | | | | | | | | | | | | | | | | Compensation | | Key Performance Metrics | Company Strategy | | | | | | | | Short-Term
Incentive Program | | Environmental •Spill Severity Rate (5%) •Air Stewardship (5%) | Managing Risks | | | | | | Contractor Plus Employee TRIR (5%) | Safety | | | Employee DART(5%) | Safety | | | Operated Base Performance, BOPD (10%) | Asset Optimization | | | Operated Wedge Performance, CUM Type Curve BOPD (10%) | Growth in Production | | | Cash Cost per BOE, excl. LTIP(15%) | Fiscal Responsibility | | | Free Cash Flow Excluding Acquisitions ($MM) (20%) | Optimizing Assets | | | Gross Inventory Added with Minimum 25% Drilling ROR (Well Count) (25%) | Seeking High-Margin Inventory | | | | | | | Long-Term Incentive Program | Restricted Stock Awards (50%) | | Stock Price | Increasing Stockholder Value | | | | | | | Performance Share Units (50%) | | Relative Three-Year Total Shareholder Return compared to peer group and Absolute Three-Year Total Shareholder Return (50%) | Increasing Stockholder Value | | | Three-Year Net Debt/Consolidated EBITDAX (20%) | Risk Management | | | | | | | Three-Year Growth in Inventory (15%) | High Margin
Growth | | | ESG (15%) | Community Stewardship and Safety |
Compensation Philosophy & Process for Determining Executive Compensation 48| Laredo Petroleum, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION MATTERS
Over the past three years, Laredo has delivered on its strategic goals of adding oil-weighted, high-margin leasehold, increasing the oil percentage of our total production mix and reducing leverage.
| | | | | | | 2019 | | | | 2020 | | | | 2021 | | | | | | Cumulative Oil-Weighted Acres Acquired | | | | ~12,000 | | | | ~15,500 | | | | ~56,500 | | | | | | Oil % of Total Production | | | | 35% | | | | 31% | | | | 39% | | | | | | Leverage Ratio(1) | | | | 2.0x | | | | 2.4x | | | | 1.9x | | |
(1)
Leverage measured by Net Debt/Adjusted EBITDA ratio, YE-20 & YE-21 Adjusted EBITDA represent 4Q annualized. Non-GAAP financial measure; please see Annex A for descriptions of non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures.
The Board believes our 2021 compensation program is appropriate because it rewarded our NEOs for their execution of our corporate strategy as demonstrated by the results obtained in relation to the performance metrics.
We believe our CEO’s pay is aligned with the Company’s performance overall during his tenure. Mr. Pigott’s time at the Company has overlapped with a period of great market disruption including volatile energy prices, the COVID-19 global pandemic and general macro-economic tumult. As demonstrated in the stock performance chart below, the Company’s shareholder returns have reflected this period of disruption but have recently shown large positive gains. The Compensation Committee and the Board believe that Mr. Pigott’s overall total compensation package is appropriate with a heavy weighting on risk-based performance components which appropriately incentivize him to execute on the Company’s longer-term strategy and aligns him with stockholder interests.
Laredo Petroleum, Inc. 2022 Proxy Statement |49
EXECUTIVE COMPENSATION MATTERS
The Compensation Committee and the Board believe Mr. Pigott’s overall total compensation package is appropriate, less weighted towards cash compensation and more at risk than his predecessor, which appropriately incentivizes him to execute on the Company’s long-term strategy and better aligns his compensation with stockholder experience. Mr. Pigott’s salary, STIP target percentage and LTIP target percentage did not change from 2020 to 2021.
We seek to make the total target NEO compensation near the median of our compensation peer group with the understanding that there may be individual variation. Based on the Company’s performance, the Compensation Committee and the Board believe the pay mix between salary, annual incentives and long-term incentives and the targets set for each NEO, appropriately reflect the Company’s historical performance and its long-term strategy.
50| Laredo Petroleum, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION MATTERS
COMPENSATION PHILOSOPHY & PROCESS FOR DETERMINING EXECUTIVE COMPENSATION
We design our executive compensation program to attract, retain and motivate highly-qualified and committed personnel who will successfully execute our strategy and create stockholder value.
| | | | | | | 50 | Vital Energy, Inc. 2023 Proxy Statement |
Compensation Committee’s Role in Our Compensation Program The Board has delegated to the Compensation Committee the responsibility of establishing the general compensation philosophies and objectives of the Company. Specifically, the Compensation Committee evaluates and recommends for ultimate approval by the Board compensation related decisions for the Company as follows: | | ✔ | | | •Review and approve the Company’s goals and objectives relevant to the compensation of the Chief Executive Officer, annually evaluate the Chief Executive Officer’s performance in light of those goals and objectives, and, based on this evaluation, recommend to the Board the CEO’S compensation level, including salary, bonus, incentive and equity compensation. In determining the long-term incentive component of the CEO’s compensation, the Compensation Committee considers, among other factors, the Company’s performance and relative shareholder return, the value of similar incentive awards to CEOs at comparable companies and the award given to the Company’s CEO in past years. | | | | | ✔ | | | •Consider the non-binding vote of stockholders to approve executive compensation each year at the annual meeting, feedback received from stockholders as part of the Company’s stockholder engagement program, recommendations from the CEO and input from the Company’s independent compensation consultant •Make recommendations to the Board with respect to all compensation for executive officers. | | | | | ✔ | | | •Make recommendation to the Board with respect to all employment agreements, severance arrangements, change in control provisions and agreements and any special supplemental benefits applicable to the Company’s executive officers. | | | | | ✔ | | | •Review and make recommendations to the Board of Directors with respect to incentive compensation and equity-based plans. | | | | | ✔ | | | •Administer the Company’s equity-based compensation plans, including the grant of performance unit awards and other equity awards under such plans. | | |
The Compensation Committee has developed a set of best practices that it follows when administering our compensation program, which are summarized in the Proxy Overview & Highlights.
In addition to these best practices, the Compensation Committee annually reviews our compensation program to ensure that it accomplishes our goals. During that review, the Compensation Committee considers, among other things, the non-binding vote of stockholders to approve executive compensation each year at the annual meeting, feedback received from stockholders as part of the Company’s stockholder engagement program, recommendations from the CEO and input from the Company’s independent compensation consultant.
For more information regarding the results of the stockholder vote to approve executive compensation from the 20212022 annual meeting and the Compensation Committee’s 20212022 stockholder outreach related to our compensation program, please see the Say-on-Pay Results and Management Responsiveness section. CEO’s Role in Our Compensation Program With the approval of the Compensation Committee, the CEO obtains and reviews external market information (including that received from the Compensation Committee’s independent compensation consultant, as more fully described below) to determine if the Company is offering competitive compensation packages to our NEOs and to recommend any adjustment to the compensation levels when necessary. The CEO also considers both the Company’s and the officer’s performances during the year, including whether the officer served in an expanded role at the Company. The CEO provides recommendations to the Compensation Committee regarding the compensation levels for our existing officers and our compensation program as a whole (except regarding his own compensation). While the Compensation Committee gives considerable weight to the CEO’s input on compensation matter, it applies its own analysis and judgment before making a recommendation to the Board of Directors. The Board of Laredo Petroleum, Inc. 2022 Proxy Statement |51
EXECUTIVE COMPENSATION MATTERS
Directors considers the recommendations of the Compensation Committee but has the final decision-making authority on all executive compensation matters. Independent Compensation Consultant Role in Our Compensation Program and Conflicts of Interest Analysis The Compensation Committee Charter grants the Compensation Committee the authority, to the extent it deems appropriate, to retain one or more compensation consultants to assist in the evaluation of director and executive compensation. The Compensation Committee’s objective when engaging an independent consultant is to assess our level of competitiveness for executive-level talent and provide recommendations for attracting, motivating and retaining key employees, including identifying industry-best practices. The Compensation Committee has the sole authority to retain
| | | | | | | Executive Compensation Matters | 51 |
and terminate any such consulting firm and to approve the firm’s fees and other retention terms. The Company provides appropriate funding as determined by the Compensation Committee, for payment of compensation to any consulting firm or other advisers employed by the Compensation Committee. The Compensation Committee elected to engage Willis Towers Watson (“WTW”) to serve as its independent compensation adviser beginning August 14, 2019. In 2019, WTW undertook a comprehensive review of our compensation program. WTW assistedassists the Compensation Committee in reviewing our executive compensation program and providing comparative market data and trends on compensation practices and programs based on an analysis of our peer companies. The Compensation Committee anticipates continuing to utilize WTW as its independent compensation consultant throughout 2022. WTW provides a very small amount of nonexecutive compensation consulting services. The Compensation Committee considered the relationships that WTW had with the Company, the members of the Compensation Committee and our executive officers, as well as the polices that WTW has in place to maintain their independence and objectivity, and determined that no conflicts of interest arose from the work performed by WTW. Peers Benchmarking and Developing Performance MetricsBenchmarking The Compensation Committee engages with the independent compensation consultant to develop the competitive assessment of NEO compensation on an annual basis, which includes benchmarking our NEO compensation against a compensation peer group as well as relevant industry specific compensation surveys. WeThe peer group is developed using a combination of objective and subjective criteria, including size, similarity of business, geographical proximity of operations, production focus, performance and competition for talent. While the Compensation Committee believes that it may be difficult to select an appropriate size peer group due to the competitive environment and unique services provided by the Company, the Compensation Committee believes the companies identified below were the most appropriate companies for benchmarking compensation for the 2022 compensation program. The Compensation Committee aims for Vital’s revenue to be within the 40th to 60th percentiles of the peer group, recognizing that this may not be possible in every year. Based on this review, the Committee approved the following peer group for 2022: 2022 Compensation Peer Group* | | | | | | | | | | | | Bonanza Creek Energy, Inc. Callon Petroleum Company Centennial Resource Development, Inc. Cimarex Energy, Inc. Comstock Resources, Inc. | Contango Oil & Gas Company Magnolia Oil & Gas Corporation Matador Resources Company Murphy Oil Corporation Northern Oil and Gas, Inc. | PDC Energy, Inc. Penn Virginia Corporation SM Energy Company Southwestern Energy Company Talos Energy, Inc. | | | |
* This peer group was used to develop competitive market data in November 2021 to inform the 2022 executive compensation decisions. The Compensation Committee adjusts the compensation peer group on an annual basis to add or remove companies due to size, revenue, geographic basin, bankruptcies and mergers. As part of our compensation philosophy and design, we seek to make the total target NEO compensation near the median of thisour compensation peer group with the understanding that there may be individual variation. For information on the data sources and the peer group used in 2021, see the 2021 Executive Compensation Program on page 54. We utilize a differentseparate peer group for the purposes of the performance metrics forin our performance unit awards. The Compensation Committee believes this is beneficial as the performance unit award peer group represents a much larger market basedmarket-based investment group while the compensation peer group represents the most analogous companies competing for talented employees. To see the performance unit award peer group for the 2019, 2020, 2021 and 20212022 performance unit awards, see page 7770 following our Outstanding Equity Awards at 20212022 Fiscal Year EndYear-End Table. The For 2022, the Compensation Committee monitorsapproved the appropriateness of both peer groups closely, and with the assistance of an independent compensation consultant, annually reviews bothconsultant’s use of the following data as part of its annual efforts to develop a competitive assessment of NEO pay: (i) WTW’s 2022 Southwest Energy Survey Group; (ii) WTW’s 2022 Oil and Gas compensation survey; (iii) WTW’s 2022 General Industry compensation survey; and (vi) Proxy data of public companies in our peer groups for the possible addition or removal of companies.group.
| | | | | | | 52 | Vital Energy, Inc. 2023 Proxy Statement |
Developing Performance Metrics Additionally, the Compensation Committee and the Board, with the assistance of the independent compensation consultant, determine the performance metrics we use in our compensation program for both short-term and long-term incentive awards. The Compensation Committee reviews all performance metrics annually to make sure they appropriately incentivize our NEOs and employees to execute the short-term goals and long-term strategies important to the Company’s success and the creation of value for its stockholders. In setting the performance metrics, the Compensation Committee also takes into account prior performance on similar metrics and establishes future goals based; in part, on prior performance. For more information on the establishment of the 20212022 performance metrics, see the 20212022 Executive Compensation Program. 52| Laredo Petroleum, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION MATTERS
Risk Assessment The Compensation Committee and management have reviewed our compensation policies as generally applicable to our employees and believe that our policies do not encourage excessive and unnecessary risk-taking, and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on us. Our compensation philosophy and culture support the use of salary, short-term incentive cash awards and long-term incentive equity and cash compensation throughout our organization and with all levels of employees. In addition, the following specific factors, in particular, reduce the likelihood of excessive risk-taking: •
Our overall compensation levels are competitive with the market; and
•
Our compensation mix is balanced among (i) fixed components such as salary and benefits, (ii) short-term incentive cash awards and (iii) long-term incentive equity and cash awards that reward our employees based on long-term overall financial performance and operational measures.
We believe our historical compensation programs did not, and our current compensations programs do not, encourage excessive and unnecessary risk taking by NEOs (or other employees) because of its focus on the Company’s performance with only some consideration given to individual performance. The Compensation Committee will continue to monitor the compensation program to discourage excessive and unnecessary risk-taking. Additionally, the Compensation Committee manages risk by establishing equity ownership guidelines and prohibiting hedging our stock or using it as collateral for any purpose. Equity Ownership Guidelines The Compensation Committee recommended, and the Board approved, stock ownership guidelines for the current NEOs to further align the interest of our NEOs with those of our stockholders. Individuals have five years from their hire, promotion or appointment date to reach the following stock ownership guidelines (as a multiple of salary rate): ![[MISSING IMAGE: tm2025328d45-tbl_stockown4c.jpg]](https://files.docoh.com/PRE 14A/0001104659-22-038093/tm2025328d45-tbl_stockown4c.jpg) | | | | | | | Stock Ownership Requirements | Multiple of Base Salary | | CEO | 5x | | Senior Vice Presidents | 2x |
Stock actually owned and stock awarded under restricted stock awards are included for purposes of satisfying these guidelines. No stock potentially exercisable under stock option awards is included. The value of the stock used for calculation of compliance with these requirements shall be the higher of (i) value at the date of grant and (ii) market value. In 2021,2022, all of our NEOs satisfied the stock ownership guidelines. | Name | | | | | | | | | Name | Multiple of
Base Salary Required | | | Compliance Status | | | Jason Pigott | 5x | | 5x | | | In compliance | | | Bryan Lemmerman | 2x | | 2x | | | In compliance | | Mark Denny | Karen Chandler2x | | | 2x | | | In compliance |
| | | | | | Executive Compensation Matters | Mark Denny | | | 2x | | | In compliance | 53 |
Policies Against Hedging and Pledging Stock Our Insider Trading Policy prohibits our directors, NEOs and employees from engaging in hedging transactions designed to hedge or offset a decrease in market value of such person’s common stock in the Company. We prohibit such conduct to ensure our directors and officers have the same objectives as the Company’s other stockholders by remaining exposed to the full risks of ownership of Company stock. Laredo Petroleum, Inc. 2022 Proxy Statement |53
EXECUTIVE COMPENSATION MATTERS
In addition, our directors and NEOs may not hold their Company securities in a margin account and may not, without prior approval and in very limited circumstances, pledge Company securities as collateral for any other loan. The only exception to the prohibition on pledging securities may exist in the case of a non-margin loan where the director or officer was clearly able to demonstrate the financial ability to repay the loan without resort to the pledged securities, and only if such pledge was pre-approved by our General Counsel. No shares owned by our directors or NEOs are currently pledged. Tax and Accounting Implications The Compensation Committee considers the tax and accounting implications in determining the elements of the Company’s compensation program. Section 162(m) of the Internal Revenue Code of 1986, as amended (the" Code"(the “Code”), generally limits the deductibility of annual compensation paid to a “covered employee” to $1 million. As of January 1, 2018, the definition of “covered employee” includes the named executive officers and certain former named executive officers of a Company. Despite this limit, the Compensation Committee may determine that it is in the Company’s best interests to provide for compensation that is not deductible. 2021 EXECUTIVE COMPENSATION PROGRAM
Benchmarking and Peer Group
During the Fall of 2020, we conducted our annual compensation peer group review process to identify and update potential peer companies for the 2021 compensation program. The Compensation Committee considers both survey data and peer data when evaluating the competitiveness of the NEO’s target compensation. For 2021, the Compensation Committee approved the independent compensation consultant’s use of the following data as part of its annual efforts to develop a competitive assessment of NEO pay:
•
WTW’s 2020 Southwest Energy Survey Group;
•
WTW’s 2020 Oil and Gas compensation survey;
•
WTW’s 2020 General Industry compensation survey;
•
Mercer’s 2020 Oil & Gas compensation survey;
•
Mercer’s 2020 MTCS/ General Industry survey; and
•
Proxy data of public companies in our peer group.
The peer group is developed using a combination of objective and subjective criteria. We identify potential peers through the following objective criteria:
•
Publicly-traded companies listed on a major U.S. exchange that have not had a bankruptcy or de-listing in the last 3 years;
•
Relevant 8-digit Global Industry Classification Standard code—Oil and Gas Exploration and Production; and
•
Companies with revenues that are similar to Laredo’s revenues (e.g., approximately 0.5x to 2.5x Laredo’s last twelve month (“LTM”) revenue at the time the peer group decision making process occurred).
To the list of companies generated by the objective criteria, we review additional subjective criteria including:
•
Business and product description;
•
Direct competitors for executive talent;
•
Comparable ownership structure;
•
Operations within a specific region;
•
Gas versus crude production focus;
•
Proxy advisor peer groups;
•
Stockholder input, if any; and
54| Laredo Petroleum, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION MATTERS
•
EBITDA, Total Assets, Market Capitalization/Enterprise Value and total shareholder return performance.
The Compensation Committee aims for Laredo’s revenue to be within the 40th to 60th percentiles of the peer group, recognizing that this may not be possible in every year. Based on this review, the Committee approved the following peer group:
2021 Compensation Peer Group*
| •
Bonanza Creek Energy, Inc.
| | | | •
Magnolia Oil & Gas Corporation
| | | | •
Penn Virginia Corporation
| | | •
Callon Petroleum Company
| | | | •
Matador Resources Company
| | | | •
SM Energy Company
| | | •
Centennial Resource Development, Inc.
| | | | •
Murphy Oil Corporation
| | | | •
Talos Energy, Inc.
| | | •
Comstock Resources, Inc.
| | | | •
Northern Oil and Gas, Inc.
| | | | •
Cimarex Energy Co.
| | | •
Contango Oil & Gas Company
| | | | •
PDC Energy, Inc
| | | | | |
*
This peer group was used to develop competitive market data in November 2020 to inform the 2021 executive compensation decisions. The Compensation Committee adjusts the compensation peer group on an annual basis to add or remove companies due to size, revenue, geographic basin, bankruptcies and mergers.
We strive to develop a sizeable group of peers that are comparable to Laredo in line of business and size. While the Compensation Committee believes that it is difficult to select an appropriate size peer group due to the competitive environment and unique services provided by the Company, the Compensation Committee believes the companies identified were the best and most appropriate companies for benchmarking compensation levels in November 2020 for the 2021 Compensation Program.
As part of our compensation philosophy and design, we seek to make the total target NEO compensation near the median of our compensation peer group with the understanding that there may be individual variation.
We utilize a separate peer group for the performance metrics in our performance unit awards. The Compensation Committee believes this is beneficial as the performance unit award peer group represents a much larger market-based investment group while the compensation peer group represents the most analogous companies competing for talented employees. To see the performance unit award peer group for the 2019, 2020 and 2021 performance unit awards, see page 77 following our Outstanding Equity Awards at 2020 Fiscal Year-End Table. To see the performance unit award peer group approved for the 2021 performance unit awards, see the Material Changes for 2022 Executive Compensation section of this Compensation, Discussion and Analysis.Program
Base Salary Rate Salary rates are structured to reflect each of our named executive officers’ skills, responsibilities, experience, tenure and contributions to the Company. Salary rates are typically reviewed annually and adjusted, if warranted, in the first quarter of each year. Annual salary adjustments are based on a subjective analysis of several individual factors, including: •
the strategic impact of the officer’s position;
•
the potential future contribution of the officer; and
•
the actual performance of the officer during the previous year.
In addition to the individual factors listed above, we also take into consideration our overall business performance and implementation of Company objectives. As with the other components of our compensation program, we review industry trends and the salary rates of our peers as well. While these factors generally provide context for making salary decisions, salary rate decisions do not depend directly on attainment of specific goals or performance levels and no specific weighting is given to one factor over another. Laredo Petroleum, Inc. 2022 Proxy Statement |55
EXECUTIVE COMPENSATION MATTERS
The following table presents the salary rates for our NEOs in 20202021 and 2021. | | Name | | | 2020 salary rate(1)
($) | | | 2021 salary rate(1)
($) | | | | Percent change | | | | Jason Pigott | | | | | 720,000 | | | | | | 720,000 | | | | | | | —% | | | | | Bryan Lemmerman | | | | | 440,000 | | | | | | 440,000 | | | | | | | —% | | | | | Karen Chandler | | | | | 450,000 | | | | | | 470,000 | | | | | | | 4% | | | | | Mark Denny | | | | | 325,000 | | | | | | 350,000 | | | | | | | 8% | | |
2022.
(1) | | | | | | | | | | | | | Name | 2021 salary rate(1)
($) | 2022 salary rate(1)
($) | Percent
change | | Jason Pigott | 720,000 | 775,000 | 7.6% | | Bryan Lemmerman | 440,000 | 475,000 | 8.0% | | Karen Chandler | 470,000 | 485,000 | 3.2% | | Mark Denny | 350,000 | 375,000 | 7.1% |
(1)See the Summary Compensation Table on page 6964 for amounts earned.
PERFORMANCE-BASED AND VARIABLE COMPENSATION | | | | | | | 54 | Vital Energy, Inc. 2023 Proxy Statement |
Annual STIP AwardsIncentive To incentivize and recognize achievements throughout the year, each NEO and Company employee is given ana STIP target percentage, which is a percentage of his or her salary. If the Company meets certain performance metrics throughout the year, the Company will pay STIP awards. STIP target percentages vary by NEO based on differing job classifications and responsibilities, and the Compensation Committee compares each percentage to similar positions in the market and our peer companies. The following table presents the STIP target percentages for our NEOs in 20202021 and 2021. | | Name | | | 2020 STIP target
percentage(1) | | | 2021 STIP target
percentage(1) | | | | Jason Pigott | | | | | 110% | | | | | | 110% | | | | | Bryan Lemmerman | | | | | 90% | | | | | | 90% | | | | | Karen Chandler | | | | | 85% | | | | | | 90% | | | | | Mark Denny | | | | | 85% | | | | | | 85% | | |
2022.
(1) | | | | | | | | | | Name | 2021 STIP target percentage(1) | 2022 STIP target percentage(1) | | Jason Pigott | 110% | 125% | | Bryan Lemmerman | 90% | 90% | | Karen Chandler | 90% | 90% | | Mark Denny | 85% | 85% |
(1)See the Summary Compensation Table on page 6964 for amounts earned.
The Compensation Committee sets the objective performance metrics that the Company must meet to receive an STIP award. Each metric is evaluated independently with threshold, target and maximum goals established for each. No payout is earned for a metric that fails to meet a minimum performance threshold. A 50% payout is earned for a metric that meets the minimum threshold, a 100% payout is earned for a metric that meets target and a maximum of 200% payout is earned for a metric that meets or exceeds the maximum goal (with payout linearly interpolated for performance that falls between the goals). The Compensation Committee recommends and the Board approves any STIP award amount based on performance metrics (weighted 70%) as well as the Compensation Committee’s subjective assessment of the Company’s overall strategic performance in other areas (weighted 30%). Historically, the Compensation Committee has rarely increased the STIP payout percentage based on its subjective assessment of the Company’s overall strategic performance above the objective criteria level. The Company determines an individual award by taking the salary earned during the performance year multiplied by the individual STIP target percentage, the result of which is then multiplied by the Company STIP payout percentage, the result of which may then be adjusted for individual performance. The Compensation Committee considers individual adjustments for our named executive officers after receiving input provided by the CEO regarding both Company performance in other areas, as well as individual performance factors such as leadership, commitment, motivational effect, level of responsibility and overall contribution to Laredo’sVital’s success (provided that the Compensation Committee solely determined the CEO’s STIP award). ![[MISSING IMAGE: tm2025328d45-fc_ceostip4c.jpg]](https://files.docoh.com/PRE 14A/0001104659-22-038093/tm2025328d45-fc_ceostip4c.jpg) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Eligible Earnings | x | Individual STIP Target Percentage of Earnings | x | Company STIP Payout Percentage Approved by Board | ± | Any Individual Performance Adjustment | | | | | | | |
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EXECUTIVE COMPENSATION MATTERS
Although our STIP award includes objective performance metrics, our Compensation Committee has the ultimate discretion to recommend to the Board of Directors whether to award any, and the amount of, STIP awards.
| | | | | | | Executive Compensation Matters | 55 |
The Compensation Committee, in conjunction with our independent compensation consultant, recommended, and the Board approved, moving from seventhe following performance metrics for the 2020 STIP to five2022 STIP. The Compensation Committee believes these performance measures reflect environmental, safety, operational and financial priorities of the business. The performance metrics for the 2021 STIP. The following performance metrics used in 2020 were removed: (1) Cash Cost Control per BOE and, (2) Net Debt to Adjusted EBITDA. These two metrics were dropped to focus our incentives less on growing production and more on value generation. The five performance metrics for the 20212022 STIP are as follows:
1. | | | | | | | | | | | | | | | | | | | Metric | Area of Focus | Weighting | 2022 Target Performance | 2022 Actual Performance | Metric Payout | | | | | | | Spill Intensity(1) | Environmental | 5.0% | 0.03 | 0.021 | 160% | Air Stewardship(2) | Environmental | 5.0% | 5,900 | 4,219 | 200% | Contractor Plus Employee TRIR(3) | Safety | 5.0% | 0.44 | 0.61 | 60% | Employee DART(4) | Safety | 5.0% | 0.20 | 0.00 | 200% | Operated Base Performance, BOPD(5) | Operational and Financial | 10% | 0.0% | -3.3% | 0% | Operated Wedge Performance, CUM Type Curve BOPD(6) | Operational and Financial | 10% | 0.0% | 0.0% | 100% | Cash Cost per BOE(7) | Operational and Financial | 15% | $7.70 | $9.38 | 0% | Free Cash Flow ($MM)(8) | Operational and Financial | 20% | $300 | $220 | 60% | Gross Inventory Added with a Minimum 25% Drilling ROR (Well Count)(9) | Operational and Financial | 25% | 90 | 97 | 108% | | | | | | |
Environmental.
A.
(1)Spill Severity Rate. The metric measures the reduction in volumesIntensity: Gross operated barrels of reportable releasesproduced liquids (both crude and supports our overall Company strategy of managing our risks to operate in a sustainable manner. The Board believes spill severity is something the Company can heavily influence to manage our environmental impact. For 2020, the Company met the stretch target for this metric. The minimum threshold for 2021 for this target was based off of our actual results for the year end 2020.
B.
Air Stewardship. The metric measures the reduction in natural gas flared or vented and supports our overall Company strategy of managing our risks to operate in a sustainable manner. The Board believes air stewardship is something the Company can heavily influence to manage our environmental impact. For 2020, the Company met the stretch target for this metric. The minimum threshold for 2021 for this target was based off of our actual results for the year end 2020.
2.
Drilling Rate of Return (“ROR”). This was a performance metric used by the Company in 2019 and 2020, and for 2019 and 2020, we met the minimum threshold, but not the target goal. The Compensation Committee used the same metric for 2021, but increased the minimum threshold, target and stretch targets. The metric supports our overall strategy of optimizing our assets.
3.
Free Cash Flow. This was a performance metric used in 2020 in support of the Company’s overall strategy to optimize assets and manage risks. For 2020, The Company met the stretch target for this metric. For 2020, the target and stretch goals were increased 5x over 2x, respectively.
4.
Lease Operating Expense per BOE. This was a new performance metric added in support of the Company’s overall strategy to optimize assets with a low cost structure. This metric replaced the metric used in 2020 measuring cash costs control per BOE.
5.
Gross Inventory Added with a Minimum 25% Drilling ROR. This was a performance metric added to further align with the Company’s overall strategy to seek high margin inventory. For 2020, the Company failed to meet the required target.
For 2021, of the Company’s five objective performance metrics, it exceeded its targets on four performance metrics (Environmental, Gross Inventory Added, Free Cash Flow and Lease Operating Expense per BOE) and was below the minimum threshold on one performance metric, Drilling Rate of Return.
The Company’s 2021 performance qualified for a potential STIP payout percentage of 148%.
Each objective 2021 STIP performance metric and its minimum threshold, target, stretch target and relative weighting, together with its actual results from the Company’s 2020 performance, is indicated in the table below.
Laredo Petroleum, Inc. 2022 Proxy Statement |57
EXECUTIVE COMPENSATION MATTERS
2021 STIP Update Normalized to Laredo Performance Before 2021 M&A Activity
| | | | | | | | | | | Targets & Weighting | | | 2021 Results | | | | | | | | 2020
Results | | | Minimum
Threshold | | | Target | | | Stretch
Target | | | Relative
Weighting | | | 2021
Results | | | Metric
Payout | | | Core Focus
Are | | | | Spill Severity Rate(1) | | | | | 28.7 | | | | | | 28.7 | | | | | | 27.3 | | | | | | 25.8 | | | | | | 7.5% | | | | | | 8 | | | | | | 200% | | | | Environmental
Operational | | | | Air Stewardship(2) | | | | | 7,125 | | | | | | 7,125 | | | | | | 6,769 | | | | | | 6,413 | | | | | | 7.5% | | | | | | 3,698 | | | | | | 200% | | | | Environmental
Operational | | | | Drilling Rate Of Return(3) | | | | | 30% | | | | | | 30% | | | | | | 35% | | | | | | 42% | | | | | | 20% | | | | | | 27% | | | | | | 0% | | | | Operational | | | | Free Cash Flow ($MM)(4) | | | | $ | 9 | | | | | $ | 0 | | | | | $ | 25 | | | | | $ | 60 | | | | | | 20% | | | | | $ | 50 | | | | | | 172% | | | | Operational
Financial | | | | Lease Operating Expense per BOE(5) | | | | $ | 2.55 | | | | | $ | 3.20 | | | | | $ | 3.10 | | | | | $ | 2.90 | | | | | | 15% | | | | | $ | 2.99 | | | | | | 158% | | | | Operational | | | | Gross Inventory Added with 8 minimum 25% Drilling ROR
(Well Count)(6) | | | | | 15 | | | | | | 60 | | | | | | 90 | | | | | | 180 | | | | | | 30% | | | | | | 282 | | | | | | 200% | | | | Operational
Financial | | | | Performance Metric Results | | | | | | | | | | | 50% | | | | | | 100% | | | | | | 200% | | | | | | 100% | | | | | | | | | | | | 148% | | | | | |
(1)
Reportable Spill Severity Rate: The Reduction in volumes of net reportable releases (bbls oil/waterproduced water) released per 1MM bbls oil/water handle) vs. 2020 actualsthousand barrels of 28.7 bbl/1 MM bbl/1 handled. Net reportable releases is the sumgross operated combined liquid production outside of total reportable releases less 25% of those reportable releases that were recovered.all secondary containment
(2)
Air Stewardship: The reduction in mcf Mcf flared or vented per bcf produced vs. 2020 actualfrom operated properties owned by Laredo as of 7.125 mcf/cf produced.12/31/2022.
(3)
Drilling Rate Of Return: The discount rate at whichContractor Plus Employee TRIR: Total number of employee and contractor recordable injuries x 200,000 over the total number of hours worked by employees and contractors.
(4)Employee DART: Total number of recordable injuries and illnesses that caused a worker to be away, restricted, or transferred x 200,000 over the total number of hours worked by all employees. (5)Operated Base Performance: Actual 2022 net cash flows equal zero foroperated oil production from base producing wells measured as the 2021 development program. The 2021 development programaverage percentage over / under the forecast supporting the Board of Directors approved 2022 Budget. Base producing well set is defined as all operated wells that haveany well having first oil production prior to 11/1/2021. (6)Operated Wedge Performance: The average gross cumulative oil production of the 2022 development program measured as the average percentage over / under the forecast supporting the Board of Directors approved 2022 Budget. Wedge producing well set is defined as any well having first oil production between November 1, 2020—October 31, 2021. 11/1/2021 and 10/31/2022. (7)Cash flows are calculated using a flat $60/$2.75 index price (WTI(HH). BasisCost per BOE: Lease operating expense, general and non basis deducts are held flat for all years. Capital calculation will use actuals for wells with greater than 90 daysadministrative expense excluding LTIP (long-term incentive plan), transportation expense, minimum volume payments (MVC), 3rd party purchased oil (gain) loss and midstream (gain) loss per barrel of oil production. Wells with less than 90 daysequivalent. Lease operating expense is inclusive of oil production will use either actuals or lookback, which is greater.workovers, G&A allocations, and excludes non-cash items.
(4)
(8)Free Cash Flow:Consolidated earnings before interest, taxes, depreciation, amortization and exploration expense ("EBITDAX") EBITDAX less interest expense less cash costsand incurred capital expenditures, excluding acquisitions, changes in working capital and non-cash charges. The calculation of Free Cash Flow for the 2022 STIP performance metric differs from the non-GAAP financial measure of Free Cash Flow as disclosed in the 20212022 Annual Report. Free Cash Flow presented here differs from results shown on page 64 due to normalization of our performance prior to 2021 M&A activity.
(5)
Lease Operating Expense per BOE: $ LOE/BOE inclusive of workovers, G&A allocations, etc., excluding non-cash items.
(6)
(9)Gross Inventory Added with a Minimum 25% Rate of Return (Well Count):Added: Gross operated inventory added via acquisitions or improved economics on existing acreage that meetmeets or exceeds aexceed the minimum drilling rate of return of 25% inclusiveGross inventory added via acquisitions or improved economics on existing acreage that meets or exceeds an IRR of acquisition costs. Rate of return is the discount rate at which the net cash flows equal zero. To qualify as inventory. Wells must have an after pay-out gross working interest of 50% or greater. Cash flows are calculated using a flat $50/$2.75 index price for organic growth and strip pricing at signing date for acquisitions (WTI/HH)25%. Basis and non-basis deducts are held flat for all years. Capital estimates will use (in descending priority order) AFE or the representative budget estimate for the formation and lateral length.
Separate from the 2021 STIP performance metric is a 5% bonus award in the event the Company completes 2021 with zero employee recordable injuries.
Employee Recordable Injuries: Zero employee recordable injuries vs 2020 actual of 2 employee recordable injuries.
In addition, the Compensation Committee may make individual adjustments after considering (i) Company performance in other areas as well as individual performance factors such as leadership, commitment, motivational effect, level of responsibility and overall contribution to the Company’s success, and (ii) the recommendation of the CEO, other than for himself. After such review and discussion the Compensation Committee did not exercise discretion to change the STIP payout for the CEO or any of our NEOs. 58| Laredo Petroleum, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION MATTERS
In recognition of the strong performance by the Company and the challenges overcome during 2021, Additionally, the Compensation Committee did not exercise any positive discretion for the 30% subjective portion of the performance goals and Board approved a partial payment in cash equal to 75% of targetpayout consistent with the achievement of the 2021 STIP in December 2021 to all Company employees, including our NEOs. This payment was made as an acknowledgment of the strong Company performance during the year. The remaining 73% of target bonus for the 2021 STIP amounts were paid to our NEOs in cash on February 25, 2022 and are shown in the chart below and reported in the Summary Compensation Table in the “Cash awards” column.
| | Name | | | 2021 STIP
salary | | | 2021 STIP target
percentage | | | 2021 STIP target
value | | | Award payout | | | Approved
percent
payout to target | | | | Jason Pigott | | | | | 720,000 | | | | | | 110% | | | | | | 792,000 | | | | | | 1,172,160 | | | | | | 148% | | | | | Bryan Lemmerman | | | | | 440,000 | | | | | | 90% | | | | | | 396,000 | | | | | | 586,080 | | | | | | 148% | | | | | Karen Chandler | | | | | 466,154 | | | | | | 90% | | | | | | 419,539 | | | | | | 620,917 | | | | | | 148% | | | | | Mark Denny | | | | | 345,192 | | | | | | 85% | | | | | | 293,413 | | | | | | 434,252 | | | | | | 148% | | |
LTIP Awardsobjective criteria. | | | | | | | | | | | | | | | | | | | Name | 2022 STIP salary
($) | 2022 STIP target percentage | 2022 STIP target value ($) | Award payout
($) | Approved percent payout to target | | Jason Pigott | 764,423 | 125% | 955,529 | 764,423 | 80% | | Bryan Lemmerman | 468,269 | 90% | 421,442 | 337,154 | 80% | | Mark Denny | 370,192 | 85% | 314,663 | 251,731 | 80% |
| | | | | | | 56 | Vital Energy, Inc. 2023 Proxy Statement |
Long-Term Incentive To prioritize retention and long term goals of the Company, each NEO and employee is given an LTIP target percentage, which is a percentage of his or her salary, and a grant of Company long-term awards in accordance with that percentage. For our NEOs, the Company’s LTIP grant consists of 50% restricted stock and 50% performance unit awards. The applicable vesting periods and restrictions for the restricted stock and applicable performance period and performance metrics for the performance share units are set forth below. By tying a significant portion of our compensation directly to the performance of our common stock, we align the interests of our NEOs with those of our stockholders. LTIP grants are generally awarded in the first quarter following our Board meeting and the filing of our Annual Report on Form 10-K. Following consultation with WTW, our Compensation Committee decided to change the individual LTIP target percentages for our NEOs for the 2022 calendar year performance as indicated in the below table to better align their LTIP targets to approximately the 50th percentile of our 2022 compensation peer group. In addition, the Compensation Committee considered additional factors in making their determination including past performance, criticality to the business and potential future individual growth. The following table presents the LTIP target percentages of salary for our NEOs in 20202021 and 2021. | | Name | | | 2020 long-term
incentive target
percentage(1) | | | 2021 long-term
incentive target
percentage(1) | | | | Jason Pigott | | | | | 485% | | | | | | 485% | | | | | Bryan Lemmerman | | | | | 350% | | | | | | 350% | | | | | Karen Chandler | | | | | 450% | | | | | | 415% | | | | | Mark Denny | | | | | 231% | | | | | | 231% | | |
2022.
(1) | | | | | | | | | | Name | 2021 long-term incentive target percentage(1) | 2022 long-term incentive target percentage(1) | | Jason Pigott | 485% | 516% | | Bryan Lemmerman | 350% | 375% | | Karen Chandler | 415% | 402% | | Mark Denny | 231% | 250% |
(1)The LTIP target percentage is a percentage of salary rate. See the Summary Compensation Table on page 6964 for amounts earned.
The value of the long-term incentive awards to be granted was determined by taking the LTIP target percentage multiplied by the most recent salary rate prior to the grant date (“Grant Value”). The total number of both the shares of stock and performance units granted were calculated by dividing the Grant Value by the average closing price of our stock for the 10 trading days ended February 25, 202116, 2022 for an average closing stock price of $35.40.$69.42. The grant date, number of shares of restricted stock, number of performance units and grant dategrant-date fair values are presented in the following table. The grant dategrant-date fair values were computed in accordance with FASB ASC Topic 718 as described in Note 9 to our audited consolidated financial statements in our 20212022 Annual Report, and not the Grant Value. Laredo Petroleum, Inc. 2022 Proxy Statement |59
| | | | | | | | | | | | | | | | | | | | | | | Restricted stock(1) | | Performance units(2) | | Name | Grant date | Shares of stock (#) | Grant-date fair value ($) | | Units (#) | Grant-date fair value ($) | | Jason Pigott | 2/22/2022 | 28,810 | 1,930,846 | | 28,810 | 2,585,986 | | Bryan Lemmerman | 2/22/2022 | 27,235 | 1,825,290 | | 12,830 | 1,151,621 | Karen Chandler(3) | 2/22/2022 | 14,045 | 941,296 | | 14,045 | 1,260,679 | | Mark Denny | 2/22/2022 | 6,763 | 453,256 | | 6,763 | 607,047 |
EXECUTIVE COMPENSATION MATTERS
| | | | | | | | | | | Restricted stock(1) | | | Performance units(2) | | | | Name | | | Grant date | | | Shares
of stock
(#) | | | Grant-date
fair value
($) | | | Units
(#) | | | Grant-date
fair value
($) | | | | Jason Pigott | | | | | 3/9/2021 | | | | | | 49,322 | | | | | | 1,709,501 | | | | | | 49,322 | | | | | | 2,298,898 | | | | | Bryan Lemmerman | | | | | 3/9/2021 | | | | | | 21,751 | | | | | | 753,890 | | | | | | 21,751 | | | | | | 1,013,814 | | | | | Karen Chandler | | | | | 3/9/2021 | | | | | | 27,549 | | | | | | 954,848 | | | | | | 27,549 | | | | | | 1,284,059 | | | | | Mark Denny | | | | | 3/9/2021 | | | | | | 11,419 | | | | | | 395,783 | | | | | | 11,419 | | | | | | 532,240 | | |
(1)
The restricted stocks’ grant-date fair value is computed in accordance with FASB ASC Topic 718 and is determined based on the closing price of our common stock on the NYSE on March 9, 2021,February 22, 2022, which was $34.66$67.02 per share. These shares vest 33%, 33% and 34% on a time basis per year beginning on the first anniversary date of the grant.grant, except for a one-time retention grant of 14,405 shares included in Mr. Lemmerman’s 2022 restricted stock awards which will cliff-vest at the end of the third anniversary of the grant date.
(2)
The combined $46.61$89.76 per unit grant-date fair value was computed in accordance with FASB ASC Topic 718 and consists of (i) $58.56$112.49 per unit grant-date fair value, determined utilizing a Monte Carlo simulation, for the 50% PSU Matrix Component and (ii) $34.66$67.02 per unit grant-date fair value, for the 25% EBITDAX/Total Debt20% Net Debt/Consolidated EBITDAX Component, the 15% Inventory Growth Component and 25% Inventory Growththe 15% ESG Component determined based on the closing price of our common stock on the NYSE on March 9, 2021.February 22, 2022. These performance units will be settled in cash,stock, have a three-year cliff vest and a performance period of January 1, 20212022 to December 31, 2023.2024. See page 7166 for additional information on these performance units. (3)Effective August 24, 2022, Dr. Chandler, the Company's former Senior Vice President and Chief Operating Officer, was terminated and, as a result, Dr. Chandler's unvested awards were forfeited.
| | | | | | | Executive Compensation Matters | 57 |
Restricted shares will vest and the transfer restrictions thereon will lapse ratably, over three years. The restricted shares of our common stock are subject to forfeiture until vested. Each recipient will forfeit his or her unvested shares if the recipient’s employment is terminated by us for any reason or if the recipient resigns (in either case, other than for death or disability). This vesting schedule is comparable to those utilized by the peer group and will assist us in attracting new talent and retaining existing personnel. Performance unit awards granted in 20212022 will vest in the first quarter of 20242025 following a three-year performance period from 20212022 to 20232024 if the Company meets the performance thresholds established by the Compensation Committee. Each recipient will forfeit his or her performance unit awards if the recipient’s employment with us is terminated by the Company for any reason or if the recipient resigns (in either case, other than for death or disability). If the employment is terminated due to death or disability, the recipient is entitled to receive a prorated performance unit grant. Generally, grants of performance unit awards will be made in the first quarter of each year, when our results of operations for the previous year have generally been determined and when our Compensation Committee is normally meeting to discuss short-term incentive payouts based on the prior year results. 20192020 to 20212022 Performance Unit Award Payout Results
The performance unit awards granted on February 28, 2019 and June 3, 2019March 5, 2020 had a performance period of January 1, 20192020 to December 31, 20212022 and vested in the first quarter of 2022.2023. We determined the payout to be 107%151% based on three performance metrics: 1.
25%1/3rd weighting on relative three year total shareholder return comparing the Company’s shareholder return to the shareholder return of the selected peer group (“RTSR Performance”),
2.
25%1/3rd weighting on absolute three-year total shareholder return (“ATSR Appreciation”) and
3.
50%1/3rd weighting on three-year return on average capital employed (“ROACE”).
Below are tables that summarize the thresholds for each performance metric. All points between the respective levels will be interpolated and the RTSR Factor, ATSR Factor and ROACE Factor will be adjusted accordingly. 60| Laredo Petroleum, Inc. 2022 Proxy Statement
| | | | | | | RTSR Performance Percentage Thresholds | RTSR Factor | Below 30th Percentile | 0% | 30th Percentile | 50% | 60th Percentile | 100% | 90th Percentile | 200% | | | ATSR Appreciation Thresholds | ATSR Factor | | Below 10% | 0% | | 10% | 25% | | 35% | 100% | | 60% and above | 200% | | | ROACE Percentage Thresholds | ROACE Factor | | 10% and below | 0% | | 25% | 100% | | 35% and above | 200% |
EXECUTIVE COMPENSATION MATTERS
The 20192020 performance unit awards resulted in an RTSR Performance of 62nd59th percentile compared to the peer group, an ATSR Appreciation of (16%)82% and an ROACE of 26%30%, which translates into an RTSR Factor, ATSR Factor and ROACE Factor of 105%99%, 0%200% and 161%155%, respectively, and together, a Performance Multiple of 107%151%. See page 7770 for the performance unit award peer group used for the 20192020 Performance Unit Awards.
Laredo Petroleum, Inc. 2022 Proxy Statement |61
| | | | | | | 58 | Vital Energy, Inc. 2023 Proxy Statement |
EXECUTIVE COMPENSATION MATTERS
Other Benefits Each NEO is also eligible for the below listed benefits from the Company. | | HEALTH AND WELFARE BENEFITS | | | | | | | | | | | | | | | | | | | | | | | | Health and Welfare Benefits Our NEOs are eligible to participate in all of our employee health and welfare benefit plans on the same basis as other employees (subject to applicable law). These plans include life, medical, vision and dental insurance, dependent care flexible spending account, medical flexible spending account or health savings account, as well as short and long-term disability benefits. These benefits ensure that we are able to competitively attract and retain officers and other employees. This is a fixed component of compensation, and these benefits are provided on a non-discriminatory basis to all employees. | | |
| | RETIREMENT BENEFITS | | | Retirement Benefits Our NEOs also participate in our defined contribution plan under Code Section 401(k), on the same basis as our other employees. The plan allows eligible employees to make contributions up to 100% of their annual compensation, not to exceed annual limits established by the federal government. We make matching contributions in cash of up to 6% of an employee’s eligible compensation and may make additional discretionary contributions in the form of cash. For our NEOs, we do not have a deferred benefit pension plan or non-qualified deferred compensation.compensation. | | | | | | |
| | PERQUISITES | | | | Perquisites We believe that the total mix of compensation and benefits provided to our executive officers is currently competitive and, therefore, perquisites do not play a significant role in our executive officers’ total compensation. Nevertheless, LaredoVital provides limited perquisites and benefits to its officers, including an annual physical information technology assistance and monthly dues at a downtown lunch/dinner club. A Charitable Matching Gift Program is offered to all LaredoVital employees and members of our Board of Directors. This program is a way the Company can support employees and board members in their efforts to give back to the communities in which they work and live. The Company will match dollar-for-dollar contributions made by employees or members of our Board of Directors, up to $1,000 per calendar year. Gifts will only be matched if they are requested for organizations eligible under Section 501(c)(3) of the Code. The minimum contribution that will be matched is $100 per calendar year. In order for the Company to provide the matching gift, there can be no direct benefit, reward or consideration to the employee or board member when making the donation. | | | |
| | STOCK OPTIONS | | | For 2018, 2019, 2020 and 2021, no stock options were granted to our NEOs. Stock options provide the opportunity to purchase our stock at a price that is fixed on the grant date. We consider stock options a form of performance-based compensation. If our stock price does not increase, then these stock options will have no economic value. Pursuant to the Equity Incentive Plan, the exercise price for each stock option is the closing price of a share of common stock on the NYSE on the grant date. The previously granted stock option awards typically vest ratably over four years. We believe that this vesting schedule is comparable to those utilized by our peer group. The unvested portion of a stock option award will expire upon termination of employment of the optionee, and the vested portion of a stock option award will remain exercisable for (i) one year following termination of employment by reason of the optionee’s death or disability or (ii) 90 days for any other reason, other than for cause. Both the unvested and vested (but unexercised) portion of a stock option award will expire upon the termination of the optionee’s employment by us for cause. Unless sooner terminated, the stock option award will expire if and to the extent it is not exercised within 10 years from the date of the grant. | | |
62| Laredo Petroleum, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION MATTERS
MATERIAL CHANGES FOR 2022 EXECUTIVE COMPENSATION | | | | | | | Executive Compensation Matters | 59 |
Material Changes for 2023 Executive Compensation As part of its annual compensation review, the Compensation Committee, with the assistance of WTW, reviewed the peer group used to benchmark our compensation structure. The Compensation Committee adjusts the compensation peer group on an annual basis to add or remove companies due to size, revenue, geographic basin, bankruptcies and mergers. Our Compensation Committee and Board reviewed and discussed these recommendations and ultimately adopted the below peer group used to benchmark our 20222023 compensation structure. 20222023 Compensation Peer Group*
| | | | | | | | | | | | •
Callon Petroleum Company
Bonanza CreekCentennial Resource Development, Inc.
Civitas Resources, Inc. Comstock Resources, Inc. Coterra Energy, Inc. Earthstone Energy, Inc.
| | | | •
Magnolia Oil & Gas Corporation
| | | | •
SM Energy Company
| | | •
Callon Petroleum Company
| | | | •
Matador Resources Company
| | | | •
Talos Energy, Inc.
| | | •
Centennial Resource Development, Inc.
| | | | •
Murphy Oil Corporation
| | | | | | | •
Cimarex Energy Co.
| | | | •
Northern Oil and Gas, Inc.
| | | | | | | •
Comstock Resources, Inc.
| | | | •
PDC Energy, Inc. Ranger Oil Corporation
| | | | | SM Energy Company Talos Energy, Inc. | | •
Contango Oil & Gas Company
| | | | •
Penn Virginia Corporation
| | | | | |
*
This peer group was used to develop competitive market data in the fall of 20212022 to inform the 20222023 executive compensation decisions.
Base Salary Following an extended review of data provided by WTW with respect to target pay elements of our peer group, our Compensation Committee and our Board elected to increase the salary rates for 20222023 for NEOs as indicated in the below table. The increases in the salaries for the NEOs are to better align their salary rates to our 2022 2023 compensation peer group and reflect the overall macro-economic effects of wage inflation. Following these changes each of our NEOs remain within 7% of the 50th percentile for their respective positions for our 20222023 compensation peer group. | | Name | | | 2021 salary rate
($) | | | 2022 salary rate
($) | | | | Salary rate
percentage change | | | | Jason Pigott | | | | | 720,000 | | | | | | 775,000 | | | | | | | 7.6% | | | | | Bryan Lemmerman | | | | | 440,000 | | | | | | 475,000 | | | | | | | 8.0% | | | | | Karen Chandler | | | | | 470,000 | | | | | | 485,000 | | | | | | | 3.2% | | | | | Mark Denny | | | | | 350,000 | | | | | | 375,000 | | | | | | | 7.1% | | |
2022 | | | | | | | | | | | | | Name | 2022 salary rate
($) | 2023 salary rate
($) | Salary rate
percentage change | | Jason Pigott | 775,000 | 800,000 | 3.2% | | Bryan Lemmerman | 475,000 | 500,000 | 5.3% | | Mark Denny | 375,000 | 400,000 | 6.7% |
2023 STIP Target Percentages Following consultation with WTW, our Compensation Committee determined not to change the individual STIP target percentages for our NEOs for the 20222023 calendar year performance with the exception of our Chief Executive Officer, who received a 13.6% increase to his STIP target percentage for 2022 as indicated in the below table. The 13.6% increase to Mr. Pigott’s STIP target percentage is to better align his STIP target percentage between the 50th and 75th percentiles of our 2022 compensation peer group. | | Name | | | 2021 STIP target
percentage(1) | | | 2022 STIP target
percentage(1) | | | STIP target
percentage charge | | | | Jason Pigott | | | | | 110% | | | | | | 125% | | | | | | 13.6% | | | | | Bryan Lemmerman | | | | | 90% | | | | | | 90% | | | | | | —% | | | | | Karen Chandler | | | | | 90% | | | | | | 90% | | | | | | —% | | | | | Mark Denny | | | | | 85% | | | | | | 85% | | | | | | —% | | |
performance.
(1) | | | | | | | | | | | | | Name | 2022 STIP target
percentage(1) | 2023 STIP target
percentage(1) | STIP target
percentage charge | | Jason Pigott | 125% | 125% | —% | | Bryan Lemmerman | 90% | 90% | —% | | Mark Denny | 85% | 85% | —% |
(1)The STIP target percentage is a percentage of salary rate.
Laredo Petroleum, Inc. 2022 Proxy Statement |63
| | | | | | | 60 | Vital Energy, Inc. 2023 Proxy Statement |
EXECUTIVE COMPENSATION MATTERS
20222023 STIP Performance Metrics
For 2022,2023, following review by our independent compensation consultant, our Compensation Committee recommended and the Board approved the objective STIP performance metrics and relative weightings reflected in the table below. Of the sixnine performance metrics used in 2021,2022, three will be used again in 20222023 (Spill Intensity, Operated Base performance, BOPD and Operated Wedge performance, CUM Type Curve BOPD), and one is used again with slight modification (including the addition of two safety criteria under the Environmental metric) and revised targets (Environmental, Free Cash Flow and Gross(Gross Inventory Added with a minimum 25%20% Drilling RateROR (Well Count)). Under the Environmental metric, the 2022 metric of Return). The Lease Operating Expense per BOEContractor plus Employee TRIR was broken into two metrics (Contractor TRIR and Employee TRIR) and the Air Stewardship metric was replaced bywith Flaring Intensity to better reflect operational control. Finally, a new metric (Free Cash Cost per BOE whichFlow, Excluding Acquisitions) was selected to align with the Compensation Committee felt is a more inclusive metric to track overall costs per unit of production than Lease Operating Expense per BOE. The Drilling Rate of Return metric was replaced by Operating Base Performance, BOPD and Operating Wedge Performance, Cum Type Curve BOPD which the Compensation Committee believe help incentivize management to efficiently operate its newly purchased and legacy assets.Company’s focus on reducing debt. The objective 20222023 STIP performance metric results continue to establish 70% of the total STIP payout percentage, while the remaining 30% is subjectively determined by the Compensation Committee considering the Company’s overall strategic performance in other areas. | | 2022 STIP performance metric | | | 2021 Results | | | Minimum
Threshold | | | Target | | | Stretch
Target | | | Relative
weighting | | | | Environmental and Safety | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Spill Intensity(1) | | | | | 0.0172 | | | | | | 0.040 | | | | | | 0.030 | | | | | | 0.015 | | | | | | 5.0% | | | | | Air Stewardship(2) | | | | | 7,850 | | | | | | 6,300 | | | | | | 5,900 | | | | | | 5,500 | | | | | | 5.0% | | | | | Contractor plus Employee TRIR(3) | | | | | 1.44 | | | | | | 0.65 | | | | | | 0.44 | | | | | | 0.00 | | | | | | 5.0% | | | | | Employee DART(4) | | | | | 1.22 | | | | | | 0.35 | | | | | | 0.2 | | | | | | 0.00 | | | | | | 5.0% | | | | | Operated Base Performance, BOPD(5) | | | | | — | | | | | | -2.5% | | | | | | 0.0% | | | | | | 3.0% | | | | | | 10.0% | | | | | Operated Wedge Performance, CUM Type Curve BOPD(6) | | | | | — | | | | | | -6.5% | | | | | | 0.0% | | | | | | 8.0% | | | | | | 10.0% | | | | | Cash Cost per BOE(7) | | | | $ | 6.88 | | | | | $ | 7.94 | | | | | $ | 7.70 | | | | | $ | 7.39 | | | | | | 15.0% | | | | | Free Cash Flow (MM)(8) | | | | $ | 11 | | | | | $ | 200 | | | | | $ | 300 | | | | | $ | 400 | | | | | | 20.0% | | | | | Gross Inventory Added with a minimum 25% Drilling ROR
(Well Count)(9) | | | | | 282 | | | | | | 60 | | | | | | 90 | | | | | | 180 | | | | | | 25.0% | | |
In making its annual determination regarding the subjective performance portion, the Compensation Committee consults with WTW to gain an independent perspective and considers factors including company performance, market conditions and significant achievements during the prior year.
(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2023 STIP performance metric | 2022
Results | Minimum Threshold | Target | Stretch
Target | Relative
weighting | | Environmental and Safety | | | | | | | | | | Spill Intensity(1) | | 0.021 | | | 0.030 | | | 0.020 | | | 0.010 | | 5.0 | % | Flaring Intensity(2) | | 1.160 | | 2.500 | | 1.100 | | | 0.350 | | 5.0 | % | Contractor TRIR(3) | | 0.780 | | | 0.797 | | | 0.619 | | | 0.405 | | 5.0 | % | Employee TRIR(4) | | 0.000 | | | 0.700 | | | 0.350 | | | 0.000 | | 5.0 | % | Operated Base Performance, BOPD(5) | | -3.3% | | -2.5% | | 0.0% | | 3.0% | 20.0 | % | Operated Wedge Performance, CUM Type Curve BOPD(6) | | 0.0% | | -6.5% | | 0.0% | | 8.0% | 20.0 | % | Free Cash Flow, Excluding Acquisitions ($MM)(7) | | $ | 220 | | | $ | (78) | | | $ | 64 | | | $ | 203 | | 20.0 | % | Gross Inventory Added with a minimum 20% Drilling ROR (Well Count)(8) | | 97 | | | 60 | | | 90 | | | 180 | | 20.0 | % |
(1)Spill Intensity: Gross operated barrels of produced liquidsIntensity: Produced fluid (both crude oil and produced water) greater than or equal to 1 BBL released per thousand barrels of gross operated combined liquid production outside of alllined secondary containment.
(2)
Air Stewardship: McfFlaring Intensity: Ratio of total gross operated gas flared or vented per bcftotal gross operated gas produced from operated properties owned by Laredo as of 12/31/2021.2023.
(3)
Contractor Plus Employee TRIR: Total number of employee and contractor recordable injuries x 200,000 over the total number of hours worked by employees and contractors.
(4)
Employee DART:TRIR: Total number of employee recordable injuries and illnesses that caused a worker to be away, restricted, or transferred x 200,000 over the total number of hours worked by all employees.
(5)
Operated Base Performance: Actual 2022 net2023 gross operated oil production volume from base producing wells measured as the average percentage over / under the forecast supporting the Board of Directors approved 20222023 Budget. Base producing well set is defined as any well having firstsustained oil production greater than 200 BOPD prior to 11/1/2021.2022.
(6)
Operated Wedge Performance: The average gross cumulative oil production of the 20222023 development program measured as the average percentage over / under the forecast supporting the Board of Directors approved 20222023 Budget. Wedge producing well set is defined as any well having firstsustained oil production greater than 200 BOPD between 11/1/20212022 and 10/31/2022.2023.
(7)
Cash Cost per BOE: Lease operating expense, general and administrative expense excluding LTIP (long-term incentive plan), transportation expense, minimum volume payments (MVC), 3rd party purchased oil (gain) loss and midstream (gain) loss per barrel of oil equivalent. Lease operating expense is inclusive of workovers, G&A allocations, and excludes non-cash items.
64| Laredo Petroleum, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION MATTERS
(8)
Free Cash Flow: Consolidated EBITDAX less interest expense and incurred capital expenditures, excluding acquisitions, changes in working capital and non-cash charges. The calculation of Free Cash Flow for the 20222023 STIP performance metric differs from the non-GAAP financial measure of Free Cash Flow as disclosed in the 20212022 Annual Report.
(9)
(8)Gross Inventory Added: Gross inventory added via acquisitions or improved economics on existing acreage that meets or exceed the minimum drilling rateexceeds an IRR of return of 25%20%.
2022 | | | | | | | Executive Compensation Matters | 61 |
2023 LTIP Target Percentage Following consultation with WTW, our Compensation Committee decided to change the individual LTIP target percentages for our NEOs for the 20222023 calendar year performance as indicated in the below table. For the Chief Executive Officer, his LTIP target percentage was increased by 6.4%table to better align histheir LTIP targettargets to approximately the 50th percentile of our 2022 compensation peer group. The Chief Financial Officer’s LTIP target percentage was increased by 7.1%In addition, the Compensation Committee considered additional factors in making their determination including past performance, criticality to better align his LTIP target to approximately the 50th percentile of our 2022 compensation peer group. The 3.1% reduction to Dr. Chandler’s LTIP target percentage is to better align her LTIP target percentage to approximately the 50th percentile of our 2022 compensation peer group. The General Counsel’s LTIP target percentage was increased by 8.2% to better align his LTIP target to approximately the 50th percentile of our 2022 compensation peer group. | | Name | | | 2021 long-term
incentive target
percentage(1) | | | 2022 long-term
incentive target
percentage(1) | | | LTIP target
percentage change | | | | Jason Pigott | | | | | 485% | | | | | | 516% | | | | | | 6.4% | | | | | Bryan Lemmerman | | | | | 350% | | | | | | 375% | | | | | | 7.1% | | | | | Karen Chandler | | | | | 415% | | | | | | 402% | | | | | | (3.1)% | | | | | Mark Denny | | | | | 231% | | | | | | 250% | | | | | | 8.2% | | |
business and potential future individual growth.
(1) | | | | | | | | | | | | | Name | 2022 long-term
incentive target
percentage(1) | 2023 long-term
incentive target
percentage(1) | LTIP target
percentage
change | | Jason Pigott | 516% | 625% | 21% | | Bryan Lemmerman | 375% | 420% | 12% | | Mark Denny | 250% | 275% | 10% |
(1)The LTIP target percentage is a percentage of salary rate.
20222023 LTIP Awards
The number of shares of restricted stock and performance units granted on February 22, 202215, 2023 to our NEOs are presented below. These grants were calculated based on the average closing price of our common stock for the 10 trading days ending on the day before the Board meeting held on February 16, 2022.9, 2023. This 10-day10-day average closing price was $69.42. | | | | | | | | | | | Restricted stock(1) | | | Performance units(2) | | | | Name | | | Grant date | | | Shares of
stock
(#) | | | Grant-date
fair value
($) | | | Units
(#) | | | Grant-date
fair value
($) | | | | Jason Pigott | | | | | 2/22/2022 | | | | | | 28,810 | | | | | $ | 1,930,846 | | | | | | 28,810 | | | | | $ | 2,585,986 | | | | | Bryan Lemmerman(3) | | | | | 2/22/2022 | | | | | | 27,235 | | | | | $ | 1,825,290 | | | | | | 12,830 | | | | | $ | 1,151,621 | | | | | Karen Chandler | | | | | 2/22/2022 | | | | | | 14,045 | | | | | $ | 941,296 | | | | | | 14,045 | | | | | $ | 1,260,679 | | | | | Mark Denny | | | | | 2/22/2022 | | | | | | 6,763 | | | | | $ | 453,256 | | | | | | 6,763 | | | | | $ | 607,047 | | |
$54.57.
(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Restricted stock(1) | | Performance units(2) | | Name | Grant date | | Shares of
stock
(#) | | Grant-date
fair value
($) | | Units
(#) | | Grant-date
fair value
($) | | Jason Pigott | 2/15/2023 | | 45,813 | | | $ | 2,533,001 | | | 45,812 | | | $ | 3,235,702 | | | Bryan Lemmerman | 2/15/2023 | | 19,241 | | | $ | 1,063,835 | | | 19,241 | | | $ | 1,358,992 | | | Mark Denny | 2/15/2023 | | 10,079 | | | $ | 557,268 | | | 10,078 | | | $ | 711,809 | |
(1)The restricted stocks’ grant-date fair value is computed in accordance with FASB ASC Topic 718 and is determined based on the closing price of our common stock on the NYSE on February 22, 2022,15, 2023, which was $67.02$55.29 per share. These shares vest 33%, 33% and 34% on a time basis per year beginning on the first anniversary date of the grant.grant.
(2)
The combined $89.76$70.63 per unit grant-date fair value was computed in accordance with FASB ASC Topic 718 and consists of (i) $112.49$85.97 per unit grant-date fair value, determined utilizing a Monte Carlo simulation, for the (50%) PSU Matrix Component and (ii) $67.02$55.29 per unit grant-date fair value, determined based on the closing price of our common stock on the NYSE on February 22, 2022,15, 2023, for the (20%) EBITDAX/Total DebtNet Debt/Consolidated EBITDAX Component, (15%) Inventory Growth Component and (15%) ESG Component. These performance units will be settled in common shares, cash or a combination of common stock and cash, have a three-year cliff vest and a performance period of January 1, 20222023 to December 31, 2024.2025. See page 66 62 for additional information on these performance units.
Laredo Petroleum, Inc. 2022 Proxy Statement |65
| | | | | | | 62 | Vital Energy, Inc. 2023 Proxy Statement |
EXECUTIVE COMPENSATION MATTERS
(3)
Mr. Lemmerman received a one-time retention grant of 14,405 shares of restricted stock, also granted on February 22, 2022 which will cliff-vest at the end of the third anniversary of the grant date.
20222023 Performance Unit Award Performance Metrics and Peer Group
The performance unit awards granted in 20222023 have a performance period of January 1, 20222023 through December 31, 2024.2025. The Compensation Committee and the Board approved the performance unit award performance criteria as follows: 1.
50% weighting on a PSU Matrix, which has two components:
a.
Annual relative total shareholder return comparing the Company’s shareholder return to the shareholder return of the E&P companies listed in the Russell 2000 index listed in the below peer group table (“Relative TSR”).
b.
Annual absolute total shareholder return (“Absolute Return”).
(collectively the “PSU Matrix Component”). The PSU Matrix Component is calculated on the basis of the following matrix: | | | | | Relative TSR (quartile) | | | | | | | | | | 1st | | | 2nd | | | 3rd | | | 4th | | | | 1-Year
Absolute
Return | | | <8% | | | | | 75% | | | | | | 50% | | | | | | 25% | | | | | | 0% | | | | | ≥8% and <14% | | | | | 100% | | | | | | 75% | | | | | | 50% | | | | | | 25% | | | | | ≥14% and <20% | | | | | 200% | | | | | | 100% | | | | | | 75% | | | | | | 50% | | | | | ≥20% | | | | | 250% | | | | | | 200% | | | | | | 100% | | | | | | 75% | | |
2. | | | | | | | | | | | | | | | | | | | Relative TSR (quartile) | | | 1st | 2nd | 3rd | 4th | 1-Year
Absolute Return | <8% | 75% | 50% | 25% | 0% | | ≥ 8% and <14% | 100% | 75% | 50% | 25% | | ≥ 14% and <20% | 200% | 100% | 75% | 50% | | ≥20% | 250% | 200% | 100% | 75% |
2.20% weighting on three-year Net Debt to Consolidated EBITDAX and three-year total debt reduction (“EBITDAX/Total DebtNet Debt/Consolidated EBITDAX Component”).
3.
15% weighting on growth in inventory (“Inventory Growth Component”).
4.
15% weighting on emissions reduction targets related to progress toward our 2025 emissions reductions targets, as described on page 911 (“ESG Component”).
The Compensation Committee and Board believe the revised PSU performance metrics align with the Company’s strategy of minimizing risk by lowering debt and seeking high margin inventory to grow the Company all while operating our assets in an environmentally friendly manner. While understanding the need to reduce the emissions profile of our assets. The below table shows the peer group used to measure the PSU Matrix Component for the 20222023 performance unit awards.awards. | Ovintiv Inc | | | California Resources Corp | | | Comstock Resources Inc | | | | | | | | | Chesapeake | | | | | Matador Resources Murphy Oil Corp. Chord Energy Corp | | | Corp. Civitas Resources Inc. Denbury Inc. Magnolia Oil Gas CorpCorp. SM Energy Kosmos Energy LTD California Resources Corp. CNX Resources Corp. Northern Oil and Gas Inc. | | | Permian Resources Corp. Callon Petroleum Sitio Royalties Corp. Talos Energy Inc. Comstock Resources Inc. Tellurian Inc Ranger Oil Corp | | | Antero Resources Corp | | | Whiting Petroleum Corp | | | Berry | | | PDCCorp.Gulfport Energy Inc | | | Oasis Petroleum Inc | | | TalosCorpBerry Earthstone Energy Inc | | | Matador Resources | | | Callon Petroleum | | | Crescent Energy | | | Range Resources Corp | | | Civitas Resources Inc | | | Inc. W and T Offshore IncInc. | | | Murphy Oil Corp | | | KosmosVaalco Energy Ltd | | | EarthstoneInc.Crescent Energy Inc | | | Southwestern Energy | | | Centennial Resource Development Inc | | | Falcon Minerals Corp | | | SM Energy | | | Northern Oil and Gas Inc | | | Highpeak Energy Inc | | | Denbury Inc | | | Brigham Minerals Inc | | | Riley Exploration Permian IncInc. Sandridge Energy Inc. Amplify Energy Corp. Silverbow Resources Inc. Ring Energy Inc. Highpeak Energy Inc. Empire Petroleum Corp. Battalion Oil Corp. | | | CNX Resources Corp | | | Tellurian Inc | | | | |
66| Laredo Petroleum, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION MATTERS
EMPLOYMENT, SEVERANCE OR CHANGE IN CONTROL AGREEMENTS | | | | | | | Executive Compensation Matters | 63 |
Employment, Severance or Change in Control Agreements We do not currently maintain any long-term employment agreements. On November 9, 2011, the Company adopted the Laredo Petroleum,The Vital Energy, Inc. Change in Control Executive Severance Plan (as amended, the “Change in Control Plan”), which provides severance payments and benefits to our named executive officers and eligible persons with the title of vice president and above, as determined by our Compensation Committee. The policy provides an eligible participant with a lump-sum cash severance payment and continued health benefits in the event that the participant experiences a qualifying termination event within the 18-month period following the occurrence of a qualifying change in control event (“double trigger”). In the event that an eligible executive’s employment is terminated without cause by the employer or for good reason by the executive within the 18-month period following the occurrence of a change in control, the executive would become entitled to receive 100% (in the case of our Chief Executive Officer, 300%, and in the case of our other named executive officers, 200%) of the executive’s salary rate and 200% (in the case of our Chief Executive Officer, 300%, and in the case of our other named executive officers, 200%) of the executive’s target STIP cash bonus and prorated amount of such target STIP cash bonus for the fiscal year in which the change in control payment is triggered. In addition, the executive would receive Company-paid COBRA continuation coverage for up to 18 months following the date of termination. The policy contains a modified cutback provision whereby payments payable to an executive may be reduced if doing so would put the executive in a more advantageous after-tax provision than if payments were not reduced and the executive became subject to excise taxes under Section 4999 of the Code and loss of deduction under Section 280G of the Code. We believe these severance levels are comparable to those utilized by our peer group. We believe that our Change in Control Plan, including its requirement of a “double trigger,” provides suitable incentive for our officers to remain with the Company in the event of a potential change in control through the consummation of any such transaction. We further believe such an incentive is to the benefit of our stockholders as well as any potential purchaser in connection with a change in control transaction, as it helps to ensure the continued operation and seamless transition of the Company prior to and through the conclusion of any such transaction. The compensation “multipliers” among the different categories of our officers were established based upon information provided by an independent compensation consultant regarding both our peer group and the industry in general. Executive Severance Plan In addition to the Change in Control Plan, on February 20, 2020, the Company adoptedhas the Laredo Petroleum,Vital Energy, Inc. Executive Severance Plan (as amended, the “Severance Plan”), which provides severance payments and benefits to our named executive officers and eligible persons with the title of vice president and above, as determined by our Compensation Committee. The Severance Plan provides an eligible participant with a lump-sum cash severance payment and continued health benefits in the event of involuntary termination without cause or other termination due to a good reason. In the event of a qualifying termination under the Severance Plan, the participant would become entitled to receive 100% (in the case of our Chief Executive Officer, 200%, and in the case of our other named executive officers, 150%) of the participant’s salary rate and 100% (in the case of our Chief Executive Officer, 200%) of the participant’s target STIP cash bonus and prorated amount of such target STIP cash bonus for the fiscal year in which the change in control payment is triggered. The Severance Plan also provides for an amount in cash equal to the value of (i) the number of unvested restricted stock awards held by the participant multiplied by the closing stock price on the last trading day before the participant’s termination; plus (ii) the number of all other long-term compensation and equity awards not covered in (i) prorated based on the date of termination, multiplied by a current value of each such award. In addition, the participant would receive Company-paid COBRA continuation coverage for up to 18 months following the date of termination. We believe these severance levels are comparable to those utilized by our peer group. The compensation “multipliers” among the different categories of our officers were established based upon information provided by WTW regarding both our peer group and the industry in general. Laredo Petroleum, Inc. 2022 Proxy Statement |67
EXECUTIVE COMPENSATION MATTERS
| | | | | | | 64 | Vital Energy, Inc. 2023 Proxy Statement |
Compensation Committee Report Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement. | | | | COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS | | | | | | Dr. Craig M. Jarchow, Chair
William E. Albrecht
Lisa Lambert | |
Compensation Committee of the Board of Directors Dr. Craig M. Jarchow, Chair William E. Albrecht Lisa Lambert Dr. Shihab Kuran The information contained in this Compensation Committee Report shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates such information by reference in such filing. 68| Laredo Petroleum, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION MATTERS
SUMMARY COMPENSATIONSummary Compensation
The following table summarizes, with respect to our NEOs, information relating to the compensation (as defined by the SEC) for services rendered in all capacities during the fiscal years ended December 31, 2022, 2021 2020 and 2019.2020. Summary Compensation Table | | Name and principal position | | | Year | | | Salary
($)(1) | | | Restricted
stock
awards
($)(2) | | | Performance
unit
awards
($)(2) | | | Out-
performance
award
($)(2) | | | Stock
awards
total
($) | | | Non-equity
Incentive Plan
Compensation
($)(1)(3) | | | All other
compensation
($)(4) | | | Total
($) | | | | Jason Pigott
President and
Chief Executive Officer | | | | | 2021 | | | | | | 720,000 | | | | | | 1,709,501 | | | | | | 2,298,898 | | | | | | N/A | | | | | | 4,008,399 | | | | | | 1,172,160 | | | | | | 33,290 | | | | | | 5,933,849 | | | | | | | 2020 | | | | | | 720,000 | | | | | | 906,152 | | | | | | 850,899 | | | | | | N/A | | | | | | 1,757,051 | | | | | | 792,000 | | | | | | 27,535 | | | | | | 3,296,586 | | | | | | | 2019 | | | | | | 412,615 | | | | | | 2,394,660 | | | | | | 1,481,455 | | | | | | 670,000 | | | | | | 4,546,115 | | | | | | 2,129,120 | | | | | | 130,091 | | | | | | 7,217,941 | | | | | Bryan Lemmerman
Senior Vice President and
Chief Financial Officer | | | | | 2021 | | | | | | 440,000 | | | | | | 753,890 | | | | | | 1,013,814 | | | | | | N/A | | | | | | 1,767,704 | | | | | | 586,080 | | | | | | 72,286 | | | | | | 2,866,070 | | | | | | | 2020 | | | | | | 209,846 | | | | | | 771,559 | | | | | | N/A | | | | | | N/A | | | | | | 771,559 | | | | | | 996,000 | | | | | | 17,816 | | | | | | 1,995,221 | | | | | | | 2019 | | | | | | N/A | | | | | | N/A | | | | | | N/A | | | | | | N/A | | | | | | N/A | | | | | | N/A | | | | | | N/A | | | | | | N/A | | | | | Karen Chandler
Senior Vice President and
Chief Operating Officer | | | | | 2021 | | | | | | 466,154 | | | | | | 954,848 | | | | | | 1,284,059 | | | | | | N/A | | | | | | 2,238,907 | | | | | | 620,917 | | | | | | 29,042 | | | | | | 3,355,020 | | | | | | | 2020 | | | | | | 450,000 | | | | | | 525,475 | | | | | | 493,434 | | | | | | N/A | | | | | | 1,018,909 | | | | | | 382,500 | | | | | | 23,342 | | | | | | 1,874,751 | | | | | | | 2019 | | | | | | 450,000 | | | | | | 951,472 | | | | | | 1,037,465 | | | | | | N/A | | | | | | 1,988,937 | | | | | | 454,314 | | | | | | 18,210 | | | | | | 2,911,461 | | | | | Mark Denny
Senior Vice President–
General Counsel & Secretary | | | | | 2021 | | | | | | 345,192 | | | | | | 395,783 | | | | | | 532,240 | | | | | | N/A | | | | | | 928,023 | | | | | | 434,252 | | | | | | 22,490 | | | | | | 1,729,957 | | | | | | | 2020 | | | | | | 325,000 | | | | | | 194,815 | | | | | | 182,936 | | | | | | N/A | | | | | | 377,751 | | | | | | 276,250 | | | | | | 19,590 | | | | | | 998,591 | | | | | | | 2019 | | | | | | 310,769 | | | | | | 258,423 | | | | | | 281,779 | | | | | | N/A | | | | | | 540,202 | | | | | | 280,003 | | | | | | 17,886 | | | | | | 1,148,860 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Name and principal position | Year | Salary ($)(1) | Restricted stock awards ($)(2) | Performance unit awards ($)(2) | Stock awards total ($) | Non-equity Incentive Plan Compensation ($)(1)(3) | All other compensation ($)(4) | Total ($) | Jason Pigott President and Chief Executive Officer | 2022 | 764,423 | | 1,930,846 | | 2,585,986 | | 4,516,832 | | 764,423 | | 36,190 | | 6,081,868 | | | 2021 | 720,000 | | 1,709,501 | | 2,298,898 | | 4,008,399 | | 1,172,160 | | 33,290 | | 5,933,849 | | | 2020 | 720,000 | | 906,152 | | 850,899 | | 1,757,051 | | 792,000 | | 27,535 | | 3,296,586 | | | | | | | | | | Bryan Lemmerman
Senior Vice President and Chief Financial Officer | 2022 | 468,269 | | 1,825,290 | | 1,151,621 | | 2,976,911 | | 337,154 | | 77,736 | | 3,860,070 | | | 2021 | 440,000 | | 753,890 | | 1,013,814 | | 1,767,704 | | 586,080 | | 72,286 | | 2,866,070 | | | 2020 | 209,846 | | 771,559 | | N/A | 771,559 | | 996,000 | | 17,816 | | 1,995,221 | | | | | | | | | | Karen Chandler
Senior Vice President and Chief Operating Officer | 2022 | 329,154 | | 941,296 | | 1,260,679 | | 2,201,975 | | — | | 10,476,287 | | 13,007,416 | | | 2021 | 466,154 | | 954,848 | | 1,284,059 | | 2,238,907 | | 620,917 | | 29,042 | | 3,355,020 | | | 2020 | 450,000 | | 525,475 | | 493,434 | | 1,018,909 | | 382,500 | | 23,342 | | 1,874,751 | | | | | | | | | | Mark Denny Senior Vice President– General Counsel & Secretary | 2022 | 370,192 | | 453,256 | | 607,047 | | 1,060,303 | | 251,731 | | 22,325 | | 1,704,551 | | | 2021 | 345,192 | | 395,783 | | 532,240 | | 928,023 | | 434,252 | | 22,490 | | 1,729,957 | | | 2020 | 325,000 | | 194,815 | | 182,936 | | 377,751 | | 276,250 | | 19,590 | | 998,591 | | | | | | | | | |
(1)
The amounts presented in these columns reflect the actual amounts earned in 2022, 2021 2020 and 2019,2020, even if paid in another year.
(2)
For the 2022, 2021 2020 and 20192020 equity-based awards, the amounts presented in these columns reflect the grant-date fair value, with the exception of the performance unit awards granted on February 28, 2019 which were modified on May 16, 2019, computed in accordance with FASB ASC Topic 718.value. The restricted stock award amount for Mr. Lemmerman in 2020 is for a one-time new hire award granted on July 1, 2020. The restricted stock award amount and outperformance award amount for Mr. Pigott in 2019 includes one-time new hire award amounts of $872,053 and $670,000, respectively, granted on June 3, 2019.
(3)
The amounts presented in this column includes the STIP award payout, if applicable, and a one-time cash signing award to Mr. Lemmerman in 2020 and to Mr. Pigott in 2019 of $600,000 and $1,250,000, respectively.$600,000.
(4)
The amounts presented in this column include the aggregate value of matching contributions to our 401(k) plan, the dollar values of life insurance coverage, charitable gifts made on behalf of the NEOs pursuant to our charitable gift matching program, Severance, Unused Vacation, wellness reimbursements and health savings contributions, among other items. For all other compensation details related to 2021,2022, please see the below “All Other Compensation” table.
| | | | | | | Executive Compensation Matters | 65 |
All Other Compensation Table | | | | | 401(k) match | | | Health
savings
match | | | Life
insurance
coverage | | | Charitable
gifts
match | | | Temporary
housing
arrangement | | | Total all
other
compensation | | | | Jason Pigott | | | | | 17,400 | | | | | | N/A | | | | | | 810 | | | | | | 15,080 | | | | | | N/A | | | | | | 33,290 | | | | | Bryan Lemmerman | | | | | 17,400 | | | | | | 1,200 | | | | | | 810 | | | | | | 9,750 | | | | | | 43,126 | | | | | | 72,286 | | | | | Karen Chandler | | | | | 17,400 | | | | | | N/A | | | | | | 1,242 | | | | | | 10,400 | | | | | | N/A | | | | | | 29,042 | | | | | Mark Denny | | | | | 17,400 | | | | | | N/A | | | | | | 540 | | | | | | 4,550 | | | | | | N/A | | | | | | 22,490 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 401(k) match ($) | Health savings match ($) | Life insurance coverage ($) | Charitable gifts match ($) | Temporary housing arrangement ($) | Severance
($) | Unused vacation
($) | Continued medical
($) | Total all other compensation ($) | | Jason Pigott | 18,300 | | N/A | 810 | | 17,080 | | N/A | N/A | N/A | N/A | 36,190 | | | Bryan Lemmerman | 18,300 | | 1,500 | | 810 | | 14,000 | | 43,126 | | N/A | N/A | N/A | 77,736 | | Karen Chandler(1) | 18,300 | | N/A | 860 | | 15,800 | | N/A | 10,420,145 | | 7,263 | | 13,919 | | 10,476,287 | | | Mark Denny | 18,300 | | N/A | 540 | | 3,485 | | N/A | N/A | N/A | N/A | 22,335 | |
Laredo Petroleum, Inc.(1)Dr. Chandler received certain payments and benefits in connection with her involuntary departure on August 24, 2022, Proxy Statement |69
pursuant to the Company’s Executive Severance Plan.EXECUTIVE COMPENSATION MATTERSRealized Compensation
REALIZED COMPENSATION
The calculation of total compensation, as shown in the Summary Compensation Table, includes items driven by accounting assumptions as defined by the SEC. As a result, total compensation as defined by the SEC differs substantially from the compensation actually realized by our NEOs in a particular year. To supplement the SEC-required disclosure, the table below shows compensation actually realized by the NEOs. These amounts are not a substitute for the amounts reported as total compensation as defined by the SEC. Realized compensation includes each NEOs’ earned salary, earned cash awards, value realized on vesting of stock awards, value realized on exercise of stock options, value realized on vesting of performance unit awards and all other compensation, which includes matching contributions to our 401(k) plan, the dollar values of life insurance coverage, charitable gifts made on behalf of NEOs pursuant to our charitable gift matching program, wellness reimbursements and health savings contributions, among other items.items. The following table summarizes, with respect to our NEOs, information relating to the realized compensation earned for services rendered in all capacities during the fiscal years ended December 31, 2022, 2021 and 2020.2020. | | | | | Realized compensation | | | | Name | | | 2021 | | | 2020 | | | | Jason Pigott | | | | | 3,552,764 | | | | | | 1,807,413 | | | | | Bryan Lemmerman | | | | | 2,891,680 | | | | | | 1,223,662 | | | | | Karen Chandler | | | | | 1,682,864 | | | | | | 978,892 | | | | | Mark Denny | | | | | 1,011,029 | | | | | | 662,752 | | |
| | | | | | | | | | | | | | | | | | | Realized compensation | | Name | 2022 | | 2021 | | 2020 | | Jason Pigott | $ | 8,396,829 | | | $ | 3,552,764 | | | $ | 1,807,413 | | | Bryan Lemmerman | $ | 2,715,390 | | | $ | 2,891,680 | | | $ | 1,223,662 | | | Karen Chandler | $ | 13,865,985 | | | $ | 1,682,864 | | | $ | 978,892 | | | Mark Denny | $ | 1,660,475 | | | $ | 1,011,029 | | | $ | 662,752 | |
70| Laredo Petroleum, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION MATTERS
GRANTS OF PLAN-BASED AWARDS FOR THE YEAR ENDED DECEMBER | | | | | | | 66 | Vital Energy, Inc. 2023 Proxy Statement |
Grants of Plan-Based Awards for the Year Ended December 31, 20212022 The following table provides information concerning each award granted to our NEOs under any plan during the year ended December 31, 2021.2022. The grant-date fair values presented in the following table were computed in accordance with FASB ASC Topic 718 as described in Note 9 to our audited consolidated financial statements in our 20212022 Annual Report, and not the Grant Value. | | | | | | | | | | | Estimated future payouts
under non-equity
incentive plan awards(1) | | | All other
stock awards:
Number of
shares
of stock(2)
(#) | | | Estimated future payout under
equity incentive plan awards
(Performance units)(3) | | | Grant-date
fair value
of stock
awards and
performance units
($) | | | | Name | | | Grant date | | | Threshold
($) | | | Target
($) | | | Maximum
($) | | | Threshold
(#)(4) | | | Target
(#)(5) | | | Maximum
(#)(6) | | | | Jason Pigott | | | | | 3/9/2021 | | | | | | 396,000 | | | | | | 792,000 | | | | | | 1,584,000 | | | | | | 49,322 | | | | | | 18,496 | | | | | | 49,322 | | | | | | 110,975 | | | | | $ | 4,008,399 | | | | | Bryan Lemmerman | | | | | 3/9/2021 | | | | | | 198,000 | | | | | | 396,000 | | | | | | 792,000 | | | | | | 21,751 | | | | | | 8,157 | | | | | | 21,751 | | | | | | 48,940 | | | | | $ | 1,767,704 | | | | | Karen Chandler | | | | | 3/9/2021 | | | | | | 209,770 | | | | | | 419,539 | | | | | | 839,078 | | | | | | 27,549 | | | | | | 10,331 | | | | | | 27,549 | | | | | | 61,985 | | | | | $ | 2,238,907 | | | | | Mark Denny | | | | | 3/9/2021 | | | | | | 146,707 | | | | | | 293,413 | | | | | | 586,826 | | | | | | 11,419 | | | | | | 4,282 | | | | | | 11,419 | | | | | | 25,693 | | | | | $ | 928,023 | | |
(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated future payouts under non-equity incentive plan awards(1) | | All other stock awards: Number of shares of stock(2) (#) | | Estimated future payout under equity incentive plan awards (Performance units)(3) | | Grant-date fair value of stock awards ($) | | Name | Grant date | Threshold ($) | Target ($) | Maximum ($) | | | Threshold (#)(4) | Target (#)(5) | Maximum (#)(6) | | | Jason Pigott | 2/22/2022 | 477,765 | | 955,529 | | 1,911,058 | | | 28,810 | | | 10,804 | | 28,810 | | 64,823 | | | 4,516,832 | | | Bryan Lemmerman | 2/22/2022 | 210,721 | | 421,442 | | 842,884 | | | 27,235 | | | 4,811 | 12,830 | | 28,868 | | | 2,976,911 | | Karen Chandler(7) | 2/22/2022 | N/A | N/A | N/A | | 14,045 | | | N/A | N/A | N/A | | 2,201,975 | | | Mark Denny | 2/22/2022 | 157,332 | | 314,663 | | 629,326 | | | 6,763 | | | 2,536 | 6,763 | | 15,217 | | | 1,060,303 | |
(1)Estimated future payout is based on the Company’s achievement over a one-year period of the 20212022 STIP metrics, along with each individual's 2021individual’s 2022 STIP target percentage. See pages 56-57page 55 for the 20212022 STIP metrics and 20212022 individual STIP targets. In order to determine the value of "Threshold"“Threshold”, "Target"“Target” and "Maximum"“Maximum” payout, achievements over a one-year period of 50%, 100% and 200% of the 20212022 STIP target percentage were utilized, respectively.
(2)
The restricted stock’s grant-date fair value was based on the closing price of our common stock on the NYSE on March 9, 2021,February 22, 2022, which was $34.66$67.02 per share. These shares vest 33%, 33% and 34% on a time basis per year beginning on the first anniversary date of the grant.grant, except for a one-time retention grant of 14,405 shares included in Mr. Lemmerman’s 2022 restricted stock awards which will cliff-vest at the end of the third anniversary of the grant date.
(3)
The combined grant-date fair value per performance unit is $46.61.$89.76. See the table below for additional information. These performance units are payable in cashstock upon a three-year cliff vest based on achievement of specific levels for each of the PSU Matrix Component, EBITDAX/Total DebtNet Debt/Consolidated EBITDAX Component, Inventory Growth Component and Inventory GrowthESG Component, with achieved points between levels to be interpolated, for the performance period of January 1, 20212022 to December 31, 2023.2024.
(4)
In order to determine the “Threshold” number of units, an achievement over a three-year period of 50% PSU Matrix performance equaling 25% (12.5% of total performance units payable in cash)stock), 25% EBITDAX/Total Debt20% Net Debt/Consolidated EBITDAX equaling 2.2 (12.5%1.75 (10% of total performance units payable in cash)stock), 25%15% Inventory Growth equaling 165 wells added (12.5%(7.5% of total performance units payable in cash)stock), 15% ESG emissions reduction equaling 8% (7.5% of total performance units payable in stock) were utilized, resulting in an aggregate of 37.5% of total performance units payable in cash.stock.
(5)
In order to determine the “Target” number of units, an achievement over a three-year period of 50% PSU Matrix performance equaling 100% (50% of total performance units payable in cash)stock), 25% EBITDAX/Total Debt20% Net Debt/Consolidated EBITDAX equaling 2.0 (25%1.5 (20.0% of total performance units payable in cash)stock), 25%15% Inventory Growth equaling 275 wells added (25%(15% of total performance units payable in cash)stock), 15% ESG emissions reduction equaling 16% (15% of total performance units payable in stock) were utilized were utilized, resulting in an aggregate of 100% of total performance units payable in cash.stock.
(6)
In order to determine the “Maximum” number of units, an achievement over a three-year period of 50% PSU Matrix performance equaling 250% (125%(125.0% of total performance units payable in cash)stock), 25% EBITDAX/Total Debt20% Net Debt/Consolidated EBITDAX equaling 1.5 (50%1.0 (40% of total performance units payable in cash)stock), 25%15% Inventory Growth equaling 385 wells added (50%(30% of total performance units payable in cash)stock), 15% ESG emissions reduction equaling 22% (30% of total performance units payable in stock) were utilized were utilized, resulting in an aggregate of 225% of total performance units payable in cash.stock.
(7)Effective August 24, 2022, upon her involuntary departure from the Company, Dr. Chandler's unvested awards were forfeited.Laredo Petroleum, Inc. 2022 Proxy Statement |71
EXECUTIVE COMPENSATION MATTERS
The following table presents the grant-date fair values per performance unit computed in accordance with FASB ASC Topic 718: | | | | March 9, 2021 | | | February 22, 2022 | | Market criteria: | | | 50% PSU Matrix Component | | | Grant-date fair value per performance unit(1)(3) | | | $58.56 | 112.49 | | Performance criteria:
| | | 25% EBITDAX/Total Debt20% Net Debt/Consolidated EBITDAX Component
+ 25%15% Inventory
Growth Component | + 15% ESG Component | | Grant-date fair value per performance unit(2)(3) | | | $34.66 | 67.02 | | Combined grant-date fair value per performance unit(3) | | | $46.61 | 89.76 |
(1)
The grant-date fair value per performance unit for the 50% PSU Matrix Component was determined utilizing a Monte Carlo simulation.
(2)
The grant-date fair value per performance unit for the 25% EBITDAX/Total Debt20% Net Debt/Consolidated EBITDAX Component, and 25%15% Inventory Growth Component wereand 15% ESG Component was determined based on the closing price of our common stock on the NYSE on the grant date. (3)
As the form of payment for the 2021 performance unit awards is cash, these awards are accounted for as liability awards and are re-measured at each accounting period until final settlement. | | | | | | | Executive Compensation Matters | 67 |
Vital Energy, Inc. Omnibus Equity Incentive Plan
LAREDO PETROLEUM, INC. OMNIBUS EQUITY INCENTIVE PLAN
Under the Equity Incentive Plan, awards of stock options, including both incentive stock options and nonstatutory stock options, stock appreciation rights, restricted stock and restricted stock units, stock bonus awards, performance unit awards and performance compensation awards (payable in cash or otherwise) may be granted. Subject to adjustment for certain corporate events, 2,432,500 shares is currently the maximum number of shares of our common stock authorized and reserved for issuance under the Equity Incentive Plan. Eligibility Our employees, consultants and directors and those of our affiliated companies, as well as those whom we reasonably expect to become our employees, consultants and directors or those of our affiliated companies are eligible for awards, provided that incentive stock options may be granted only to employees. A written agreement between us and each participant will evidence the terms of each award granted under the Equity Incentive Plan. Shares Subject to the Equity Incentive Plan The shares that may be issued pursuant to awards will be our common stock, $0.01 par value per share, and currently the maximum aggregate amount of common stock which may be issued upon exercise of all awards under the Equity Incentive Plan, including incentive stock options, may not exceed 2,432,500 shares, subject to adjustment to reflect certain corporate transactions or changes in our capital structure. In addition, the maximum number of shares with respect to which options and/or stock appreciation rights may be granted to any participant in any one year period is limited to 717,500 shares, the maximum number of shares with respect to which incentive stock options may be granted to any participant in any one year period under the Equity Incentive Plan may not exceed 717,500 shares, no more than 717,500 shares may be earned in respect of performance compensation awards denominated in shares granted to any single participant for a single calendar year during a performance period, or in the event that the performance compensation award is paid in cash, other securities, other awards or other property, no more than the fair market value of 717,500 shares of common stock on the last day of the performance period to which the award related, and the maximum amount that can be paid to any single participant in one calendar year pursuant to a cash bonus award is $5 million, in each case, subject to adjustment for certain corporate events. In addition, no more than 71,750 shares of common stock may be issued in respect of awards granted to any single participant who is a non-employee director for a single calendar year. 72| Laredo Petroleum, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION MATTERS
If any award under the Equity Incentive Plan expires or otherwise terminates, in whole or in part, without having been exercised in full, the common stock withheld from issuance under that award will become available for future issuance under the Equity Incentive Plan. If shares issued under the Equity Incentive Plan are reacquired by us pursuant to the terms of any forfeiture provision, those shares will become available for future awards under the Equity Incentive Plan. Awards that can only be settled in cash will not be treated as shares of common stock granted for purposes of the Equity Incentive Plan. Administration Our Board of Directors, or a committee of members of our Board of Directors appointed by our Board of Directors, may administer the Equity Incentive Plan, and that administrator is referred to in this summary as the “administrator.” Among other responsibilities, the administrator selects participants from among the eligible individuals, determines the number of shares of common stock that will be subject to each award and determines the terms and conditions of each award, including exercise price, methods of payment and vesting schedules. Our Board of Directors may amend or terminate the Equity Incentive Plan at any time. Amendments will not be effective without stockholder approval if stockholder approval is required by applicable law or stock exchange requirements.
| | | | | | | 68 | Vital Energy, Inc. 2023 Proxy Statement |
Adjustments in Capitalization Subject to the terms of an award agreement, if there is a specified type of change in our common stock, such as dividends, stock splits, reverse stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes in capitalization, appropriate equitable adjustments will be made to the various limits under, and the share terms of, the Equity Incentive Plan and the awards granted thereunder, including the maximum number of shares reserved under the Equity Incentive Plan, the maximum number of shares with respect to which any participant may be granted awards and the number, price or kind of shares of common stock or other consideration subject to awards to the extent necessary to preserve the economic intent of the award. In addition, subject to the terms of an award agreement, in the event of certain mergers, the sale of all or substantially all of our assets, our reorganization or liquidation, or our agreement to enter into any such transaction, the administrator may cancel outstanding awards and cause participants to receive, in cash, stock or a combination thereof, the value of the awards or provide for a substitution or assumption of awards, accelerating the exercisability of, lapse of restrictions on or termination of, awards, or providing for a period of time for exercise prior to the occurrence of such event. Change in Control In general, in the event of a change in control and the termination of the participant’s employment without cause or for good reason during the 18-month period immediately following a change in control, or if the successor to the Company does not assume or substitute awards under the Equity Incentive Plan, all options and stock appreciation rights subject to an award held by that participant will become fully vested and immediately exercisable and any restricted period imposed upon restricted awards of the participant will expire immediately (including a waiver of applicable performance goals). In addition, all incomplete performance periods will end, and any performance awards of the participant will be paid based upon assuming that the applicable target levels of performance have been attained. For the avoidance of doubt, equity awards that were outstanding as of May 20, 2021, and that are currently still outstanding, will continue to be subject to “single trigger” vesting. Clawback Policy Awards made to officers of the Company under the Equity Incentive Plan on or after December 31, 2021 are subject to the Company’s executive compensation clawback policy adopted November 2021 and described herein. Laredo Petroleum, Inc. 2022 Proxy Statement |73
NontransferabilityEXECUTIVE COMPENSATION MATTERS
Nontransferability
In general, each award granted under the Equity Incentive Plan may be exercisable only by a participant during the participant’s lifetime or, if permissible under applicable law, by the participant’s legal guardian or representative. Except in very limited circumstances, no award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a participant other than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance will be void and unenforceable against us. However, the designation of a beneficiary will not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. Section 409A The provisions of the Equity Incentive Plan and the awards granted under the Equity Incentive Plan are intended to comply with or be exempt from the provisions of Section 409A of the Code and the regulations thereunder. 74| Laredo Petroleum, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION MATTERS
OUTSTANDING EQUITY AWARDS AT 2021 FISCAL YEAR-END | | | | | | | Executive Compensation Matters | 69 |
Outstanding Equity Awards at 2022 Fiscal Year-End The following table provides information concerning restricted stock awards and performance unit awards and outperformance award that are not vested and stock option awards that are vested and exercisable for our NEOs as of December 31, 2021.2022. Outstanding equity-based awards tableEquity-Based Awards Table as of December 31, 2021 | | | | | | | | | | | Restricted stock
awards | | | Performance unit
awards | | | Outperformance
award | | | Stock option awards | | | | Name | | | Grant
date | | | Number of
shares
not
vested
(#)(1) | | | Market
value of
shares
not
vested
($)(2) | | | Number of
unearned
units not
vested
(#)(3) | | | Market
value of
units
not
vested
($)(2) | | | Number of
unearned
units not
vested
(#)(4) | | | Market
value of
units
not
vested
($)(2) | | | Number of
securities
underlying
unexercised
options
exercisable
(#) | | | Exercise
price
($) | | | Expiration
date | | | | Jason Pigott | | | | | 3/9/2021 | | | | | | 49,322 | | | | | $ | 2,965,732 | | | | | | 80,395 | | | | | $ | 4,834,151 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | — | | | | | | | 3/5/2020 | | | | | | 37,020 | | | | | $ | 2,226,013 | | | | | | 92,273 | | | | | $ | 5,548,375 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | — | | | | | | | 6/3/2019 | | | | | | 15,718 | | | | | $ | 945,123 | | | | | | 31,451 | | | | | $ | 1,891,149 | | | | | | 10,000 | | | | | $ | 767,200 | | | | | | — | | | | | $ | — | | | | | | — | | | | | Bryan Lemmerman | | | | | 3/9/2021 | | | | | | 21,751 | | | | | $ | 1,307,888 | | | | | | 35,454 | | | | | $ | 2,131,849 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | — | | | | | | | 7/1/2020 | | | | | | 38,039 | | | | | $ | 2,287,285 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | — | | | | | Karen Chandler | | | | | 3/9/2021 | | | | | | 27,549 | | | | | $ | 1,656,521 | | | | | | 44,905 | | | | | $ | 2,700,138 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | — | | | | | | | 3/5/2020 | | | | | | 21,468 | | | | | $ | 1,290,871 | | | | | | 53,508 | | | | | $ | 3,217,436 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | — | | | | | | | 2/28/2019 | | | | | | 4,715 | | | | | $ | 283,513 | | | | | | 14,839 | | | | | $ | 892,269 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | — | | | | | | | 2/17/2017 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | 794 | | | | | $ | 282.40 | | | | | | 2/17/2027 | | | | | | | 2/15/2013 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | 821 | | | | | $ | 346.80 | | | | | | 2/15/2023 | | | | | Mark Denny | | | | | 3/9/2021 | | | | | | 11,419 | | | | | $ | 686,624 | | | | | | 18,613 | | | | | $ | 1,119,200 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | — | | | | | | | 3/5/2020 | | | | | | 7,958 | | | | | $ | 478,515 | | | | | | 19,836 | | | | | $ | 1,192,739 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | — | | | | | | | 2/28/2019 | | | | | | 1,281 | | | | | $ | 77,027 | | | | | | 4,030 | | | | | $ | 242,324 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | — | | | | | | | 2/17/2017 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | 504 | | | | | $ | 282.40 | | | | | | 2/17/2027 | | | | | | | 2/19/2016 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | | 1,338 | | | | | $ | 82.00 | | | | | | 2/19/2026 | | |
2022
(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Restricted stock
awards | | Performance unit
awards | | Stock option
awards | | Name | Grant
date | Number
of shares
not vested
(#)(1) | Market
value of
shares
not vested
($)(2) | | Number of
unearned
units
not vested
(#)(3) | Market
value of
units
not vested
($)(2) | | Number
of securities
underlying
unexercised
options
exercisable
(#) | Exercise
price
($) | Expiration
date | Jason
Pigott | 2/22/2022 | 28,810 | | | $ | 1,481,410 | | | 21,608 | | | $ | 1,111,083 | | | — | | | $ | — | | — | | 3/9/2021 | 33,046 | | | $ | 1,699,225 | | | 83,354 | | | $ | 4,286,063 | | | — | | | $ | — | | — | | 3/5/2020 | 18,787 | | | $ | 966,028 | | | 83,432 | | | $ | 4,290,073 | | | — | | | $ | — | | — | Bryan
Lemmerman | 2/22/2022 | 27,235 | | | $ | 1,400,424 | | | 9,623 | | | $ | 494,815 | | | — | | | $ | — | | — | | 3/9/2021 | 14,574 | | | $ | 749,395 | | | 36,759 | | | $ | 1,890,148 | | | — | | | $ | — | | — | | 7/1/2020 | 19,304 | | | $ | 992,612 | | | — | | | $ | — | | | — | | | $ | — | | — | Mark
Denny | 2/22/2022 | 6,763 | | | $ | 347,753 | | | 5,072 | | | $ | 260,802 | | | — | | | $ | — | | — | | 3/9/2021 | 7,651 | | | $ | 393,414 | | | 19,298 | | | $ | 992,303 | | | — | | | $ | — | | — | | 3/5/2020 | 4,038 | | | $ | 207,634 | | | 17,936 | | | $ | 922,269 | | | — | | | $ | — | | — | | 2/17/2017 | — | | | $ | — | | | — | | | $ | — | | | 504 | | | $ | 282.40 | | 2/17/2027 | | 2/19/2016 | — | | | $ | — | | | — | | | $ | — | | | 1,338 | | | $ | 82.00 | | 2/19/2026 |
(1)Restricted shares granted in 2022, 2021 2020 and 20192020 vest 33%, 33% and 34% on a time basis per year beginning on the first anniversary date of the grant.grant, except for a one-time retention grant of 14,405 shares included in Mr. Lemmerman’s 2022 restricted stock awards which will cliff-vest at the end of the third anniversary of the grant date.
(2)
Market value is based on the $60.13$51.42 per share closing price of our common stock on the NYSE on December 31, 2021, 30, 2022, the last trading day of the year.
(3)
The performance share unit awards granted on February 28, 2019 and June 3, 2019March 5, 2020 had a performance period of January 1, 20192020 to December 31, 20212022, and resulted in ana RTSR Performanceperformance of 62nd59th percentile compared to peer group, andan ATSR Appreciation of (16%)82% and an ROACE of 26%30%, which translates into an RTSR Factor, ATSR Factor and ROACE Factor of 105%99%, 0%200% and 161%155%, respectively, and together, is the Performance Multiple of 107%151%. As such, the granted units vested and were converted into the Company’s common stockcash during the first quarter of 20222023 based on this Performance Multiple. For the March 5, 2020 performance unit awards, the potential RTSR Factor, ATSR Factor and ROACE Factor pursuant to the next highest performance level of 200%, 200% and 100%, respectively, results in a potential Performance Multiple of 167% based on their actual performance through December 31, 2021 attaining 77th percentile in RTSR Performance, 103% in ATSR Appreciation and 24% in ROACE. The performance unit awards granted March 5, 2020 have a performance period of January 1, 2020 to December 31, 2022, and any units earned under such awards are expected to be settled in cash in the first quarter of 2023 if the market and/or performance and vesting criteria are met. For the March 9, 2021 performance unit awards, the potential payout percentages for the PSU Matrix Component, EBITDAX/Total DebtNet Debt/Consolidated EBITDAX Component and Inventory Growth Component pursuant to the next highest performance level of 250%138%, 50%200% and 100%200%, respectively, results in a potential Performance Multiple of 163%169% based on their actual performance through December 31, 20212022 attaining 202%0% for the PSU Matrix Component, 2.60.8 for the EBITDAX/Total DebtNet Debt/Consolidated EBITDAX Component and 272386 wells for the Inventory Growth Component. The performance unit awards granted March 9, 2021 have a performance period of
Laredo Petroleum, Inc. 2022 Proxy Statement |75
EXECUTIVE COMPENSATION MATTERS
January 1, 2021 to December 31, 2023, and any units earned under such awards are expected to be settled in cash in the first quarter of 2024 if the market and/or performance and vesting criteria are met. (4)
Mr. Pigott received a one-time new hire outperformance award granted June 3, 2019. If earned, For the February 22, 2022 performance unit awards, the potential payout ranges from zero to 50,000 shares inpercentages for the Company’s common stock per the vesting schedule. The highest 50 consecutive trading day average closing stock pricePSU Matrix Component, Net Debt/Consolidated EBITDAX Component, Inventory Growth Component and ESG Component pursuant to the next highest performance level of $12025%, 200%, 50% and 100%, respectively, results in potentially 10,000 units earneda potential Performance Multiple of 75% based on the stock pricetheir actual performance through December 31, 20212022 attaining a highest 50 consecutive trading day average closing stock price of $76.72.0% for the PSU Matrix Component, 1.22 for the Net Debt/Consolidated EBITDAX Component, 114 wells for the Inventory Growth Component and 16.1 for the ESG Component. The performance unit awards granted February 22, 2022 have a performance period commenced on June 3, 2019of January 1, 2022 to December 31, 2024, and ends on June 3, 2022. Of theany units earned outperformanceunder such awards are expected to be settled in shares one-third of the award will vest on the Final Date, one-third will vest onCompany’s common stock in the first anniversaryquarter of 2025 if the Final Datemarket and/or performance and one-third will vest on the second anniversary of the Final Date, provided that Mr. Pigott has been continuously employed with the Company through the applicable vesting date.criteria are met.
76| Laredo Petroleum, Inc. 2022 Proxy Statement | | | | | | | 70 | Vital Energy, Inc. 2023 Proxy Statement |
EXECUTIVE COMPENSATION MATTERS
Performance Unit Award Peer Groups* | | Company | | | 2019 | | | 2020 | | | 2021 | | | | Amplify Energy Corp. | | | | | | x | | | | | | | Antero Resources Corp | | | | | | | | | x | | | | Berry Petroleum Corporation | | | | | | x | | | x | | | | Bonanza Creek Energy, Inc. | | | | | | x | | | x | | | | Brigham Minerals, Inc. | | | | | | x | | | | | | | California Resources Corporation | | | | | | x | | | | | | | Callon Petroleum Company | | | x | | | x | | | | | | | Carrizo Oil & Gas, Inc. | | | | | | | | | | | | | Centennial Resource Development, Inc. | | | x | | | | | | | | | | CNX Resources Corporation | | | | | | x | | | x | | | | Comstock Resources Inc. | | | | | | x | | | x | | | | Contango Oil & Gas Co | | | | | | | | | x | | | | Denbury Resources Inc. | | | | | | x | | | | | | | Earthstone Energy, Inc. | | | | | | x | | | x | | | | Evolution Petroleum Corporation | | | | | | x | | | x | | | | Extraction Oil & Gas, Inc. | | | x | | | x | | | | | | | Falcon Minerals Corporation | | | | | | x | | | | | | | Goodrich Petroleum Corp | | | | | | | | | x | | | | Gulfport Energy Corporation | | | | | | x | | | | | | | HighPoint Resources Corporation | | | | | | x | | | | | | | Jagged Peak Energy Inc. | | | | | | | | | | | | | Kosmos Energy Ltd. | | | | | | | | | x | | | | Magnolia Oil & Gas Corporation | | | | | | x | | | x | | | | Matador Resources Company | | | x | | | x | | | x | | | | Montage Resources Corporation | | | x | | | x | | | | | | | Northern Oil & Gas, Inc. | | | | | | x | | | | | | | Oasis Petroleum, Inc. | | | x | | | x | | | | | | | Ovintiv Inc | | | | | | | | | x | | | | Panhandle Oil and Gas Inc. | | | | | | x | | | | | | | Parsley Energy, Inc. | | | x | | | | | | | | | | PDC Energy, Inc. | | | x | | | x | | | x | | | | Penn Virginia Corporation | | | | | | x | | | x | | | | PrimeEnergy Resources Corporation | | | | | | x | | | x | | | | QEP Resources, Inc. | | | x | | | x | | | | | | | Range Resources Corporation | | | x | | | | | | x | | | | Ring Energy, Inc. | | | | | | x | | | | | | | SM Energy Company | | | x | | | x | | | x | | | | Southwestern Energy Company | | | | | | x | | | x | | | | SRC Energy, Inc. | | | | | | | | | | | | | Talos Energy Inc. | | | | | | x | | | x | | | | Tellurian Inc. | | | | | | x | | | x | | | | W&T Offshore, Inc. | | | | | | x | | | x | | | | Whiting Petroleum Corp. | | | x | | | x | | | x | | | | WPX Energy, Inc. | | | x | | | | | | | |
| | | | | | | | | | | | | Company | 2020 | 2021 | 2022 | | Amplify Energy Corp. | | | | | Antero Resources Corporation | | | | | Berry Corporation | | | | | Bonanza Creek, Energy Inc. | | | | | Brigham Minerals, Inc. | | | | | California Resources Corporation | | | | | Callon Petroleum Company | | | | | Chesapeake Energy Corporation | | | | | Civitas Resources, Inc. | | | | | CNX Resources Corporation | | | | | Comstock Resources, Inc. | | | | | Crescent Energy Company | | | | | Denbury Inc. | | | | | Earthstone Energy, Inc. | | | | | Evolution Petroleum Corporation | | | | | Extraction Oil & Gas, Inc. | | | | | Falcon Minerals | | | | | Gulfport Energy Corporation | | | | | HighPeak Energy, Inc. | | | | | HighPoint Resources Corporation | | | | | Kosmos Energy Ltd. | | | | | Magnolia Oil & Gas Corporation | | | | | Matador Resources Company | | | | | Montage Resources Corporation | | | | | Murphy Oil Corporation | | | | | Northern Oil & Gas, Inc. | | | | | Oasis Petroleum, Inc. | | | | | Ovintiv Inc. | | | | | PDC Energy, Inc. | | | | | PHX Minerals Inc. | | | | | PrimeEnergy Resources Corporation | | | | | QEP Resources, Inc. | | | | | Range Resources Corporation | | | | | Ranger Oil Corporation | | | | | Riley Exploration Permian, Inc. | | | | | Ring Energy, Inc. | | | | | SM Energy Company | | | | | Southwestern Energy Company | | | | | Talos Energy Inc. | | | | | Tellurian Inc. | | | | | W&T Offshore, Inc. | | | | | Whiting Petroleum Corp. | | | |
*
Due to mergers and acquisitions, the Board approved removing CarrizoBonanza Creek Energy, Inc., Contango Oil & Gas Inc., Jagged Peak Energy,Company, Goodrich Petroleum Corporation and Whiting Petroleum Corp. from the 2021 performance award peer group and removing Centennial Resource Development Inc, Falcon Minerals, Oasis Petroleum Inc. and SRC Energy, Inc.Whiting Petroleum Corp. from the 20192022 performance unit award peer group.
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EXECUTIVE COMPENSATION MATTERS
STOCK AWARD VESTINGS, STOCK OPTION EXERCISES AND PERFORMANCE UNIT VESTINGS IN FISCAL YEAR 2021 | | | | | | | Executive Compensation Matters | 71 |
Stock Award Vestings, Stock Option Exercises and Performance Unit Vestings in Fiscal Year 2022 The following table provides information concerning the vesting of stock awards, the exercise of stock options and the vesting of performance units during fiscal year 20212022 on an aggregated basis with respect to each of our NEOs. Stock Award Vestings, Stock Option Exercises and Performance Unit Vestings for the Year Ended December 31, 2021 | | | | | Stock awards | | | Stock options | | | Performance units | | | | Name | | | Shares
acquired
on vesting | | | Value
realized
on vesting(1) | | | Shares
acquired
on exercise | | | Value
realized
on exercise | | | Shares
acquired
on vesting(2) | | | Value
realized
on vesting(1) | | | | Jason Pigott | | | | | 33,488 | | | | | $ | 1,627,314 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | Bryan Lemmerman | | | | | 18,735 | | | | | $ | 1,793,314 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | | | | Karen Chandler | | | | | 15,797 | | | | | $ | 535,725 | | | | | | — | | | | | $ | — | | | | | | 818 | | | | | $ | 31,027 | | | | | Mark Denny | | | | | 5,563 | | | | | $ | 189,902 | | | | | | — | | | | | $ | — | | | | | | 506 | | | | | $ | 19,193 | | |
2022
(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock awards | | Stock options | | Performance units | | Name | Shares
acquired
on vesting | Value
realized
on vesting(1) | | Shares
acquired
on exercise | | Value
realized
on exercise | | Shares
acquired
on vesting | Value
realized on vesting(1) | | Jason Pigott | 50,227 | | | $ | 4,423,981 | | | — | | | $ | — | | | 31,450 | | | $ | 2,407,812 | | | Bryan Lemmerman | 25,912 | | | $ | 1,832,231 | | | — | | | $ | — | | | — | | | $ | — | | | Karen Chandler | 24,379 | | | $ | 1,924,546 | | | — | | | $ | — | | | 14,838 | | | $ | 1,135,997 | | | Mark Denny | 8,969 | | | $ | 707,767 | | | — | | | $ | — | | | 4,029 | | | $ | 308,460 | |
(1)The value realized upon vesting was calculated utilizing the closing stock price on the vesting date.
(2)
The performance unit awards granted on February 16, 2018 had a performance period of January 1, 2018 to December 31, 2020, and resulted in a RTSR Performance of 30th percentile compared to peer group, an ATSR Appreciation of (91%) and an ROACE of 16%, which translates into an RTSR Factor, ATSR Factor and ROACE Factor of 50%, 0% and 61%, respectively, and together, is the Performance Multiple of 43%. As such, the granted units vested and were converted into the Company’s common stock during the first quarter of 2021 based on this Performance Multiple.
See page 6057 for details regarding the 20192020 performance unit awards that vested during the first quarter of 2022.2023. PENSION BENEFITS
Pension Benefits We maintain a 401(k) Plan for our employees, including our NEOs, but at this time we do not sponsor or maintain a pension plan for any of our employees. NONQUALIFIED DEFERRED COMPENSATION
Nonqualified Deferred Compensation We do not provide a nonqualified deferred compensation plan for our employees at this time. POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Potential Payments Upon Termination or Change in Control Severance As described above, we do not maintain individual employment agreements. The Company has adopted the Change in Control Plan and the Severance Plan, which provide severance payments and benefits to our NEOs and eligible persons with the title of vice president and above, as determined by our Compensation Committee. See Employment, Severance or Change in Control Agreements for additional information. In order to be eligible for severance benefits under the policies, our NEOs have executed a confidentiality, non-disparagement and non-solicitation agreement. Restricted Stock The restricted stock may be affected by a NEO’s termination of employment or the occurrence of certain corporate events. In the event of the termination of a NEO’s employment by the Company, with or without cause, or the NEO’s resignation for any reason, the NEO will generally forfeit all restricted stock to us.
78| Laredo Petroleum, Inc. 2022 Proxy Statement
| | | | | | | 72 | Vital Energy, Inc. 2023 Proxy Statement |
EXECUTIVE COMPENSATION MATTERS
If the NEO’s employment with the Company is terminated upon the death of the NEO or because the NEO is determined to be disabled by the Board of Directors, then all of his or her restricted stock will automatically vest. A NEO will be considered to have incurred a “disability” in the event of the officer’s inability to perform, even with reasonable accommodation, on a full-time basis the employment duties and responsibilities due to accident, physical or mental illness, or other circumstance; provided, however, that such inability continues for a period exceeding 180 days during any 12-month period. In the event of a change in control, all restricted stock awards will become fully vested as of the date of the change in control, provided that the NEO remains employed by the Company through the date of such change in control. For purposes of these restricted stock awards, a “change in control” generally means: (i)
any person acquires beneficial ownership of our securities representing 40% or more of the combined voting power of our outstanding securities (provided, however, that if the surviving entity becomes a subsidiary of another entity, then the outstanding securities shall be deemed to refer to the outstanding securities of the parent entity);
(ii)
a majority of the members of the Board of Directors who were directors as of the date of the corporate reorganization no longer serve as directors; or
(iii)
the consummation of a merger or consolidation of our Company with any other entity, other than a merger or consolidation which would result in our voting securities outstanding immediately prior thereto continuing to represent more than 40% of the combined voting power of our voting securities outstanding immediately after such merger or consolidation.
Stock Options Stock option awards may be affected by a NEO’s termination of employment or the occurrence of certain corporate events. The unvested portion of a stock option award shall expire upon termination of employment, and the vested portion of a stock option award shall remain exercisable for (i) one year following termination of employment by reason of the holder’s death or disability, but not later than the expiration of the option period, or (ii) 90 days following termination of employment for any reason other than the holder’s death or disability, and other than the holder’s termination of employment for cause. Both the unvested and the vested but unexercised portion of a stock option award shall expire upon the termination of the option holder’s employment or service by the Company for cause. In the event of a change in control (which for these purposes is the same as described for restricted stock above), provided that the NEO remains employed by the Company through the date of such change of in control, all stock option awards will become fully vested and exercisable with respect to all shares of common stock covered thereby as of the date of the change in control. Performance Unit Awards Performance unit awards may be affected by a NEO’s termination of employment or the occurrence of certain corporate events. If the executive’s employment with the Company is terminated by the Company for any reason, with or without cause, or the executive resigns (in either case, other than by reason of death or disability) prior to the maturity date of the performance unit award, then no amount shall generally be issued or paid in respect of the award. If, prior to the maturity date, the executive’s employment with the Company terminates either by reason of death or because the executive is determined by the Board of Directors or the Compensation Committee to be subject to a disability, then the executive shall be eligible to receive a prorated performance unit award, taking into account the time that the executive was employed during the performance period prior to the date of such termination. The performance units granted to each recipient in 2019 2020 are payable in common stock of the Companycash in the first quarter of 20222023 based on the Performance Multiple of 107%151%. The performance units granted to each recipient in 2019 are payable in cash, common stock of the Company or a combination of cash. The performance units granted to each recipient in 20202021 and 20212023 are payable in cash. The performance units Laredo Petroleum, Inc. 2022 Proxy Statement |79
EXECUTIVE COMPENSATION MATTERS
granted to each recipient in 2022 are payable in cash, common stock of the Company or a combination of cash and common stock, with the current election being common stock.
| | | | | | | Executive Compensation Matters | 73 |
In the event of a change in control (which for these purposes is the same as described for restricted stock above), provided that the NEO remains employed by the Company through the date of such change in control, the “performance periods” in effect on the date the change in control occurs shall end on such date, and either the Board of Directors or the Compensation Committee shall determine the extent to which the performance goals with respect to each such performance period have been met, based upon such audited or unaudited financial information or other information then available as it deems relevant. The Board of Directors or Compensation Committee shall then cause each holder of performance unit awards to receive partial, full or no issuance of such awards for each performance period (including a potential range from 0% to 225%), based on the Board of Directors’ or Compensation Committee’s determination of the degree of attainment of the performance goals or that the applicable “target” levels of performance have been attained or on such other basis determined by the Board of Directors or Compensation Committee. Outperformance Award
The outperformance award may be affected by the NEO’s termination of employment or the occurrence of certain corporate events. If the executive’s employment with the Company is terminated by the Company for any reason, with or without cause, or the executive resigns (in either case, other than by reason of death or disability) prior to the maturity date of the outperformance award, then no amount shall generally be issued in respect of the award. If, prior to the maturity date, the executive’s employment with the Company terminates either by reason of death or because the executive is determined by the Board of Directors or the Compensation Committee to be subject to a disability, then the executive shall be eligible to receive a pro-rated outperformance award, taking into account the time that the executive was employed during the performance period prior to the date of such termination. The outperformance award granted in 2019 is payable in common stock of the Company.
In the event of a change in control (which for these purposes is the same as described for restricted stock above), provided that the NEO remains employed by the Company through the date of such change of control, the “performance period” in effect on the date the change in control occurs shall end on such date, and either the Board of Directors or the Compensation Committee shall determine the extent to which the performance goal with respect to such performance period has been met, based upon the highest 50 consecutive trading day average closing stock price of the Company that occurs during the performance period or other information then available as it deems relevant. The Board of Directors or Compensation Committee shall then cause the holder of the outperformance award to receive partial, full or no issuance of such award for the performance period (including a potential range from zero to 50,000 earned shares), based on the Board of Directors’ or Compensation Committee’s determination of the degree of attainment of the performance goal or on such other basis determined by the Board of Directors or Compensation Committee.
Potential Payments upon Termination or Change in Control Table for Fiscal Year 20212022 The information set forth in the table below for Mr. Pigott, Mr. Lemmerman Dr. Chandler and Mr. Denny is based on the assumption that the applicable triggering event under the Change in Control Plan or the applicable restricted stock award, stock option award or performance unit award or outperformance award agreement to which each NEO was a party occurred on December 31, 2021,2022, the last business day of fiscal year 2021.2022. Accordingly, for these NEOs the information reported in the table indicates the amount of cash severance and benefits that would be payable, and the value of restricted stock awards, stock option awards and performance unit awards and outperformance award that would vest or become exercisable, by reason of a termination under the circumstances described above, or upon a change in control, and is our best estimation of our obligations to each NEO and will only be determinable with any certainty upon the occurrence of the applicable event. For Dr. Chandler, the information set forth in the table below reflects the actual amount received in connection with her involuntary departure.
80| Laredo Petroleum, Inc. 2022 Proxy Statement
| | | | | | | 74 | Vital Energy, Inc. 2023 Proxy Statement |
TABLE OF CONTENTS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | Termination without
cause/for good
reason outside of
a change in control | Change in control
(must be coupled
with Termination
without cause/for
good reason)(1) | Change in
control only | Termination
for cause | Termination due
to death or
disability | | Jason Pigott | | | | | | | | | | | | Salary | | $ | — | | | $ | 2,325,000 | | | $ | — | | | $ | — | | | $ | — | | | Bonus | | — | | | 2,906,250 | | | — | | | — | | | — | | Accelerated Equity RS(2) | | — | | | 4,146,663 | | | 4,146,663 | | | — | | | 4,146,663 | | Accelerated Equity PS(2)(3) | | — | | | 8,972,122 | | | 8,972,122 | | | — | | | 8,972,122 | | | Continued Medical | | — | | | 39,818 | | | — | | | — | | | — | | | Total | | $ | — | | | $ | 18,389,853 | | | $ | 13,118,785 | | | $ | — | | | $ | 13,118,785 | | | Bryan Lemmerman | | | | | | | | | | | | Salary | | $ | — | | | $ | 950,000 | | | $ | — | | | $ | — | | | $ | — | | | Bonus | | — | | | 855,000 | | | — | | | — | | | — | | Accelerated Equity RS(2) | | — | | | 3,142,431 | | | 3,142,431 | | | — | | | 3,142,431 | | Accelerated Equity PS(2)(3) | | — | | | 2,067,135 | | | 2,067,135 | | | — | | | 2,067,135 | | | Continued Medical | | — | | | 26,781 | | | — | | | — | | | — | | | Total | | $ | — | | | $ | 7,041,347 | | | $ | 5,209,566 | | | $ | — | | | $ | 5,209,566 | | | Mark Denny | | | | | | | | | | | | Salary | | $ | — | | | $ | 750,000 | | | $ | — | | | $ | — | | | $ | — | | | Bonus | | — | | | 637,500 | | | — | | | — | | | — | | Accelerated Equity RS(2) | | — | | | 948,801 | | | 948,801 | | | — | | | 948,801 | | Accelerated Equity PS(2)(3) | | — | | | 2,008,002 | | | 2,008,002 | | | — | | | 2,008,002 | | Accelerated Equity Options(2) | | — | | | — | | | — | | | — | | | — | | | Continued Medical | | — | | | 39,818 | | | — | | | — | | | — | | | Total | | $ | — | | | $ | 4,384,121 | | | $ | 2,956,803 | | | $ | — | | | $ | 2,956,803 | | Karen Chandler(4) | | | | | | | | | | | | Total Severance | | $ | 10,420,145 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | Continued Medical | | 13,919 | | | — | | | — | | | — | | | — | | | Total | | $ | 10,434,064 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
EXECUTIVE COMPENSATION MATTERS
| | Name | | | Termination without
cause/for good
reason outside of a
change in control | | | Change in control
(must be coupled
with Termination
without cause/for
good reason)(1) | | | Change in
control only | | | Termination
for cause | | | Termination due
to death or
disability | | | | Jason Pigott | | | �� | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Salary | | | | $ | — | | | | | $ | 2,160,000 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | Bonus | | | | | — | | | | | | 2,376,000 | | | | | | — | | | | | | — | | | | | | — | | | | | Accelerated Equity RS(2) | | | | | — | | | | | | 6,136,868 | | | | | | 6,136,868 | | | | | | — | | | | | | 6,136,868 | | | | | Accelerated Equity PS(2)(3) | | | | | — | | | | | | 11,100,299 | | | | | | 11,100,299 | | | | | | — | | | | | | 11,100,299 | | | | | Accelerated Equity OUT(2)(3) | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | Continued Medical | | | | | — | | | | | | 34,339 | | | | | | — | | | | | | — | | | | | | — | | | | | Total | | | | $ | — | | | | | $ | 21,807,506 | | | | | $ | 17,237,167 | | | | | $ | — | | | | | $ | 17,237,167 | | | | | Bryan Lemmerman | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Salary | | | | $ | — | | | | | $ | 880,000 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | Bonus | | | | | — | | | | | | 792,000 | | | | | | — | | | | | | — | | | | | | — | | | | | Accelerated Equity RS(2) | | | | | — | | | | | | 3,595,173 | | | | | | 3,595,173 | | | | | | — | | | | | | 3,595,173 | | | | | Accelerated Equity PS(2)(3) | | | | | — | | | | | | 1,804,862 | | | | | | 1,804,862 | | | | | | — | | | | | | 1,804,862 | | | | | Continued Medical | | | | | — | | | | | | 23,096 | | | | | | — | | | | | | — | | | | | | — | | | | | Total | | | | $ | — | | | | | $ | 7,095,131 | | | | | $ | 5,400,035 | | | | | $ | — | | | | | $ | 5,400,035 | | | | | Karen Chandler | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Salary | | | | $ | — | | | | | $ | 940,000 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | Bonus | | | | | — | | | | | | 846,000 | | | | | | — | | | | | | — | | | | | | — | | | | | Accelerated Equity RS(2) | | | | | — | | | | | | 3,230,905 | | | | | | 3,230,905 | | | | | | — | | | | | | 3,230,905 | | | | | Accelerated Equity PS(2)(3) | | | | | — | | | | | | 6,145,286 | | | | | | 6,145,286 | | | | | | — | | | | | | 6,145,286 | | | | | Accelerated Equity Options(2) | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | Continued Medical | | | | | — | | | | | | 12,013 | | | | | | — | | | | | | — | | | | | | — | | | | | Total | | | | $ | — | | | | | $ | 11,174,204 | | | | | $ | 9,376,191 | | | | | $ | — | | | | | $ | 9,376,191 | | | | | Mark Denny | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Salary | | | | $ | — | | | | | $ | 700,000 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | Bonus | | | | | — | | | | | | 595,000 | | | | | | — | | | | | | — | | | | | | — | | | | | Accelerated Equity RS(2) | | | | | — | | | | | | 1,242,166 | | | | | | 1,242,166 | | | | | | — | | | | | | 1,242,166 | | | | | Accelerated Equity PS(2)(3) | | | | | — | | | | | | 2,289,750 | | | | | | 2,289,750 | | | | | | — | | | | | | 2,289,750 | | | | | Accelerated Equity Options(2) | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | Continued Medical | | | | | — | | | | | | 34,339 | | | | | | — | | | | | | — | | | | | | — | | | | | Total | | | | $ | — | | | | | $ | 4,861,255 | | | | | $ | 3,531,916 | | | | | $ | — | | | | | $ | 3,531,916 | | |
(1)
Our Change in Control Plan, which was applicable to each of the NEOs effective December 31, 2021,2022, provides that in the event that during the 18-month period following a change in control the employment of a NEO is terminated by the employer without cause or by the NEO for good reason, then the NEO is entitled to 200% (300% in the case of Mr. Pigott) of such NEO’s salary rate and 200% (300% in the case of Mr. Pigott) of such NEO’s STIP target cash award, plus a prorated STIP cash award in the year of termination, plus company paid COBRA continuation coverage for up to 18 months. In addition, the Equity Incentive Plan provides that in the event of a change in control, (i) with respect to restricted stock awards, the restricted period shall expire and restrictions applicable to outstanding restricted stock awards shall lapse and such awards shall become fully vested; (ii) with respect to stock option awards, all options will become fully vested and exercisable with respect to all shares of common stock covered thereby as of the date of the change in control; and (iii) with respect to performance unit awards, and the outperformance award, the “performance periods” in effect on the date the change in control occurs shall end on such date, and either the Board of Directors or the Compensation Committee shall determine the extent to which the performance goals with respect to each such performance period have
Laredo Petroleum, Inc. 2022 Proxy Statement |81
EXECUTIVE COMPENSATION MATTERS
been met and shall then cause each holder of performance unit awards and/or outperformance award to receive partial, full or no issuance or cash payment, as applicable, of such awards for each performance period. The STIP cash bonus amounts for each NEO do not include STIP cash award earned and paid in 2021.2022. For purposes of determining the value of the restricted stock awards and performance unit awards, the fair market value per share of our common stock was $60.13$51.42 on December 31, 2021.2022. (2)
At December 31, 2021,2022, the only forms of equity-based awards held by the NEOs consisted of restricted stock awards, stock option awards and performance unit awards and an outperformance award.awards. Each such award may be impacted by the termination of the holder’s employment by the Company, depending on the reason for such termination, as follows: (i) the NEOs’ restricted stock awards provide that if the NEO’s employment is terminated for any reason other than death or a determination of disability, but not later than the expiration of the option period, then the NEO forfeits his or her unvested shares; shares; in the event of termination by death or disability, all unvested shares automatically vest; (ii) the stock option awards provide that the unvested portion of a stock option award shall expire upon termination of employment, and the vested portion of a stock option award shall remain exercisable for (a) one year following termination of employment by reason of the holder’s death or disability, but not later than the expiration of the option period, or (b) 90 days following termination of employment for any reason other than the holder’s death or disability, and other than the holder’s termination of employment for cause; provided both the unvested and the vested but unexercised portion of a stock option award shall expire upon the termination of the option holder’s employment or service by the Company for cause; and (iii) the performance unit awards and the outperformance award provide that if the executive’s employment with the Company is terminated by the Company for any reason, with or without cause, or the executive resigns (in either case, other than by reason of death or disability) prior to the maturity date of the performance unit award and/or outperformance award, then no amount shall be paid in respect of the award. If, prior to the maturity date the executive’s employment is terminated with the Company either by reason of death or because the executive is determined by the Board of Directors or the Compensation Committee to be subject to a disability, then the executive shall be eligible to receive a pro-rated performance unit award, and/or outperformance award, taking into account the time that the executive was employed during the performance period prior to the date of such termination.
(3) | | | | | | | Executive Compensation Matters | 75 |
(3)For the purposes of this table, the performance period was assumed to have ended on December 31, 20212022 for the February 22, 2022 and March 9, 2021 and March 5, 2020 performance unit awards and the June 3, 2019 outperformance award, and actually did end on December 31, 20212022 for the June 3, 2019 and February 28, 2019March 5, 2020 performance unit awards. At December 31, 20212022 (without consideration of any potential impact such change in control event may have), (i) the February 22, 2022 performance unit awards had payout percentages of 0% for the PSU Matrix Component, 148% for the Net Debt/Consolidated EBITDAX Component, 0% for the Inventory Growth Component and 50% for the ESG Component, resulting in a Performance Multiple of 37%, (ii) the March 9, 2021 cash-settled performance unit awards had payout percentages of 250%125% for the PSU Matrix Component, 0%200% for the EBITDAX/Total DebtNet Debt/Consolidated EBITDAX Component and 50%200% for the Inventory Growth Component, resulting in a Performance Multiple of 138%163%, (ii)and (iii) the March 5, 2020 cash-settled performance unit awards had an RTSR Factor of 169%99%, an ATSR Factor of 200% and an ROACE Factor of 93%155%, resulting in a Performance Multiple of 154%, (iii)151%. (4)Of the June 3, 2019 February 28, 2019 share-settledtotal amount paid to Dr. Chandler, 86% was due to payment for previously granted restricted stock and performance unitunits that were cancelled. The cancelled awards had an RTSR Factorwere valued at $76.85 per share, the Company’s price on August 23, 2022. Approximately 14% of 105%, an ATSR Factor of 0% and an ROACE Factor of 161%, resulting in a Performance Multiple of 107%, and (iv) the June 3, 2019 share-settled outperformance award had an earned payout of zero shares based upontotal payment to Dr. Chandler was the highest 50 consecutive trading day average closing stock price duringcash severance payment amount prescribed under the performance period. Executive Severance Plan.
For information on our Change in Control Plan adopted in 2011, and our Severance Plan adopted in 2020, please see the Employee, Severance or Change In Control Agreements section. 82| Laredo Petroleum, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION MATTERS
SECURITIES AUTHORIZED FOR ISSUANCE UNDER THE EQUITY INCENTIVE PLAN | | | | | | | 76 | Vital Energy, Inc. 2023 Proxy Statement |
Securities Authorized for Issuance Under the Equity Incentive Plan At December 31, 2021,2022, a total of 2,432,500 shares of common stock were authorized for issuance under the Equity Incentive Plan. In the table below, we describe certain information about these shares and the Equity Incentive Plan that provides for their authorization and issuance. You can find a description of the Equity Incentive Plan under “—Laredo Petroleum,"—Vital Energy, Inc. Omnibus Equity Incentive Plan.” | | Plan category | | | Number of securities to be
issued upon exercise of
outstanding options
or performance
units(1)(2) | | | Weighted-average
exercise price of
outstanding
options | | | Number of securities remaining
available for future issuance under
equity compensation plans
(excluding outstanding options
and performance units)(1)(3) | | | | Equity compensation plan approved by security holders(3) | | | | | 133,988 | | | | | $ | 275.88 | | | | | | 1,355,870 | | | | | Equity compensation plan not
approved by security holders | | | | | — | | | | | $ | — | | | | | | — | | | | | Total | | | | | 133,988 | | | | | | | | | | | | 1,355,870 | | |
"
(1) | | | | | | | | | | | | | | | | | | | | | | | | | Plan category | Number of securities
to be issued upon
exercise of outstanding
options or performance
units(1)(2) | Weighted-average
exercise price of
outstanding options | Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
outstanding options and
performance units)(1)(3) | Equity compensation plan approved by security holders(3) | 51,865 | | | | $ | 235.08 | | | 979,910 | | | | Equity compensation plan not approved by security holders | — | | | | $ | — | | | — | | | | Total | 51,865 | | | | | | 979,910 | | |
The performance unit awards granted on February 28, 2019 and June 3, 2019 had a performance period of January 1, 2019 to December 31, 2021, and resulted in a RTSR performance of 62nd percentile compared to peer group, an ATSR Appreciation of (16%) and an ROACE of 26%, which translates into an RTSR Factor, ATSR Factor and ROACE Factor of 105%, 0% and 161%, respectively, and together, is the Performance Multiple of 107%. As such, the granted units vested and were converted into the Company’s common stock during the first quarter of 2022 based on this Performance Multiple. (1)The formula for calculating the number of securities remaining available for future issuance (i) includes the February 28, 2019 and June 3, 201922, 2022 performance units at a Performance Multiple of 107% and (ii) the June 3, 2019 outperformance award outstanding results in a maximum performance period level (50,000 shares) even though the actual performance period through June 3, 2022 is not complete. If the June 3, 2019 outperformance award was included at threshold level (10,000 shares), the number of securities to be issued under performance units as of December 31, 2021 would be 93,988.target level.
(2)
This column includes 7,2543,462 in outstanding options and 126,73448,403 in outstanding performance units.
(3)
See Laredo Petroleum,Vital Energy, Inc. Omnibus Equity Incentive Plan in our Compensation Tables for more information.
CEO Pay Ratio As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our CEO. We are utilizing a new median employee after utilizing the same median employee in the 2019, 2020 and 2021 Proxy Statements. We identified this new median employee using our employee population as of December 31, 2022. For 2021,2022, our last completed fiscal year: •
The median employee’s total annual compensation for 2021,2022, in accordance with the requirements of the Summary Compensation Table, was $138,492;$145,245; and
•
The annual total compensation of our CEO, as reported in the Summary Compensation Table, was $5,933,849.$6,081,868.
Based on this information the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees in 20212022 was calculated to be 4342 to 1. | | Accordingly, our 2021 CEO to median employee pay ratio was: | | | 43:1 | | |
1.Laredo Petroleum, Inc. 2022 Proxy Statement |83
EXECUTIVE COMPENSATION MATTERS
METHODOLOGY AND ASSUMPTIONS
Total compensation amounts are required to be calculated using the SEC's compensation disclosure rules applicable to reporting compensation in the summary compensation table of the proxy statement. Median employee compensation used to calculate the pay ratio is required to be the total compensation paid to an actual employee of the company. We have elected to identify ouridentified a new median employee every three years unless a significant change in 2022 using our total employee population, or employeeexcluding our Chief Executive Officer, as of December 31, 2022 by applying a consistently applied compensation arrangements has occurred. In 2019 we determined that, because we experienced a material change inmeasure across our employee population from the Reduction in Force that occurred in April 2019, and we hired our new CEO, it would be prudent to re-determine our median employee for 2019. See our 2019 proxy statement for information regarding the process we utilized to identify our “median employee.” In accordance with Item 402(u)(all of Regulation S-K, because there has been no change in our employee population or employee compensation arrangementswhom are located in the past fiscal year that we reasonablyUnited States), using the following factors:
•Salary rate and wages paid during 2022 •Overtime paid during 2022; •STIP paid for 2022 performance; and •Grant-date fair value of all restricted stock awards and share-settled performance unit awards made during 2022.
| | | | | | | Executive Compensation Matters | 77 |
We believe would result in a significant change to our pay ratio disclosure, we elected to utilizeconsistently applied compensation measure represents the same median employee that we had identified in 2019 to calculate our 2021 CEO pay ratio. The median total annualprimary compensation represented above reflects the 2021 compensation actually paid to an individual employed by us whose compensation reflects the median level of compensationcomponents paid to all of our employees. To determineemployees and therefore provides an accurate depiction of total earnings for the annual total compensationpurpose of identifying our median employee and our CEO, we took the following steps: •
employee. We then calculated the median employee’semployee's total annual compensation for 2021, in accordance with the requirements of the summary compensation table. We did not use any material estimates, assumptions, adjustments or statistical sampling to determine the median employee. Pay Versus Performance As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following information about the relationship of executive “compensation actually paid”, or “CAP”, and certain financial performance of the Company. The following table resulting in annualshows, for the past three fiscal years, total compensation of $138,492.
•
With respect to the annual total compensation of our CEO, we used the amountas reported in the “Total” column of our 2021Summary Compensation Table on page 69, reflecting his annual total compensation of $5,933,849.
Underfor our CEO and the average for our other NEOs, as compared to CAP and the Company’s financial performance. To determine CAP, we are required to make various adjustments to amounts that have been reported in the Summary Compensation Table, as the SEC’s rules for calculating CAP emphasize the changes in fair value of equity awards under applicable financial accounting standards (as further detailed in footnotes below).
Pay Versus Performance Table | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Value of initial fixed $100 investment based on: | | | | Year | Summary Compensation Table Total for CEO($)(1) | Compensation Actually Paid to CEO($)(1)(3) | Average Summary Compensation Table Total for other NEOs($)(2) | Average Compensation Actually Paid to other NEOs($)(2)(3) | Total Shareholder Return($) | Peer Group Total Shareholder Return($)(4) | Net Income ($ in ‘000s) | Free Cash Flow ($ in ‘000s)(5) | | 2022 | 6,081,868 | | 4,599,210 | | 6,190,682 | | 2,704,360 | | 89.58 | | 154.88 | | 613,512 | | 219,941 | | | 2021 | 5,933,849 | | 17,125,786 | | 2,650,349 | | 6,798,965 | | 104.76 | | 106.29 | | 145,008 | | (2,829) | | | 2020 | 3,296,586 | | 472,906 | | 1,903,765 | | 1,314,941 | | 34.32 | | 63.42 | | (874,173) | | 12,056 | |
(1)Mr. Pigott was our CEO for each of 2022, 2021, and guidance, there2020. (2)For 2022 and 2021, the other NEOs were Dr. Chandler and Messrs. Lemmerman and Denny. For 2020, the other NEOs were Dr. Chandler, Messrs. Lemmerman and Denny and Michael Beyer. (3)The dollar amounts reported represent the amount of CAP to the applicable NEO, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid during the applicable year. The following adjustments were made to reconcile the Summary Compensation Table total each year to CAP:
| | | | | | | 78 | Vital Energy, Inc. 2023 Proxy Statement |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year | Executive(s) | Summary Compensation Table Total($) | Subtract Fair Value of Equity Awards Granted in the Year($) | Add Year-End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year($) | Add Year-over-Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years($) | | Add Change in Fair Value from Prior Year-End to Vesting Date for Equity Awards Granted in Prior Years that Vested in the Year($) | Subtract Fair Value as of Prior Year-End for Equity Awards Granted in Prior Years that Failed to Meet Vesting Conditions in the Year($) | | Total Equity Award Adjustments($) | Compensation Actually Paid($) | | 2022 | CEO | 6,081,868 | | (4,516,832) | | 2,935,451 | | (1,818,367) | | | 1,917,090 | | — | | | 3,034,174 | | 4,599,210 | | | Other NEOs | 6,190,682 | | (2,079,730) | | 912,345 | | (323,521) | | | 403,056 | | (2,398,472) | | | (1,406,592) | | 2,704,360 | | | 2021 | CEO | 5,933,849 | | (4,008,399) | | 7,450,088 | | 6,782,647 | | | 967,601 | | — | | | 15,200,336 | | 17,125,786 | | | Other NEOs | 2,650,349 | | (1,644,878) | | 3,057,202 | | 2,153,301 | | | 582,991 | | — | | | 5,793,494 | | 6,798,965 | | | 2020 | CEO | 3,296,586 | | (1,757,051) | | 2,543,296 | | (3,002,166) | | | (607,759) | | — | | | (1,066,629) | | 472,906 | | | Other NEOs | 1,903,765 | | (730,742) | | 785,010 | | (409,762) | | | (82,650) | | (150,680) | | | 141,918 | | 1,314,941 | |
(4)Peer Group Total Shareholder Return represents the total shareholder return of the S&P Oil & Gas Exploration & Production Select Industry Index. (5)Free Cash Flow is a non-GAAP measure; please see Annex A for descriptions of non-GAAP financial measures and reconciliations of GAAP to non-GAAP measures. The fair value of equity awards includes (i) restricted stock awards, (ii) performance unit awards and (iii) de minimis amounts for stock option awards. The measurement-date fair value of restricted stock awards was determined based on the market price of the Company's common stock on the applicable measurement date (i.e., the vesting date or the last day of the applicable fiscal year, as required by SEC rules). The performance unit awards include both a market-based component and a performance-based component. The measurement-date fair value of the market-based component was determined using a Monte Carlo fair value simulation model incorporating the assumptions below. The measurement-date fair value of the performance-based criteria was determined based upon the measurement-date stock price. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Grant Year | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Measurement Date | | 12/31/2019 | | 12/31/2019 | 12/31/2020 | | 12/31/2020 | 12/31/2021 | | 12/31/2021 | 12/31/2022 | | 12/31/2022 | | Remaining Performance Period | | 1.00 years | | 2.00 years | 1.00 years | | 2.00 years | 1.00 years | | 2.00 years | 1.00 years | | 2.00 years | | Risk-free interest rate | | 1.58 | % | | 1.57 | % | 0.10 | % | | 0.13 | % | 0.39 | % | | 0.73 | % | 4.62 | % | | 4.31 | % | | | | | | | | | | | | | | | | Expected volatility | | 63.11 | % | | 62.79 | % | 170.98 | % | | 127.77 | % | 86.17 | % | | 135.42 | % | 79.77 | % | | 83.06 | % |
The measurement-date fair value assumptions outlined above are numerous waysdifferent from the assumptions utilized in determining the grant-date fair value. The assumptions utilized in estimating the grant-date fair value of the market-based component of the performance unit awards are outlined below. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Grant Date | | 2/16/2018 | | 2/28/2019 | 6/3/2019 | | 3/5/2020 | | 3/15/2021 | | 2/22/2022 | | Remaining performance period on grant date | | 2.87 years | | 2.63 years | 2.58 years | | 2.82 years | | 2.81 years | | 2.86 years | | Risk-free interest rate | | 2.34 | % | | 2.14 | % | 1.27 | % | | 0.60 | % | | 0.32 | % | | 1.71 | % | | | | | | | | | | | | | | Expected volatility | | 65.49 | % | | 55.01 | % | 55.45 | % | | 60.41 | % | | 114.60 | % | | 119.25 | % |
Narrative to determinePay Versus Performance Table This section should be read in conjunction with the compensationCD&A on page 43, which includes additional discussion of a company’s median employee, including the employee population sampled, the elementsour objectives of payexecutive compensation and benefits used, any assumptions madeprogram and how they are aligned with the company’s financial and operational performance. The Compensation Committee does not use of statistical sampling. In addition, no two companies have identical employee populations or compensation programs, and pay, benefits and retirement plans differ by country even within the same company. As such, our pay ratio may not be comparable to the pay ratio reported by other companies. We believe our methodology providedCAP as a reasonable basis for determining each employee’s total annualmaking compensation decisions, nor do we use the performance measure of Net Income, as defined by the SEC for purposes of the Pay Versus Performance Table above, to measure performance for compensation. The charts below show, for the past three years, the relationship of Total Shareholder Return relative to our Peer Group Total Shareholder Return as well as an economical method of evaluating our employee populations’ total annual compensationthe relationships between CEO and identifying our median employee. Average Other NEO CAP and (i) Total Shareholder Return; (ii) Net Income; and (iii) Free Cash Flow.84| Laredo Petroleum, Inc. 2022 Proxy Statement
| | | | STOCK OWNERSHIP INFORMATION | | | Executive Compensation Matters | 79 |
| | | | | | | 80 | Vital Energy, Inc. 2023 Proxy Statement |
| | | | | | | | | | 2022 Performance Measures | | Most Important Performance Measures | | We consider the performance measures listed in the table to the right as the most important performance measures used by us to link NEO compensation for 2022 to Company performance. Each of these measures is described in more detail in the CD&A under the section “2022 Compensation Alignment & Pay for Performance.” | | Free Cash Flow | | Absolute Total Shareholder Return | | Net Debt/Consolidated EBITDAX | | Inventory Growth | | Environmental/Safety |
Stock Ownership Information Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information regarding the beneficial ownership of outstanding common stock by (i)
beneficial owners of more than five percent of the Company’s outstanding common stock as of March 29, 2022,28, 2023, of which is determined using the aggregate amount beneficially owned by each reporting person reported in a Schedule 13D or Schedule 13G filing with the SEC as of the date of event which requires filing of such statement,
(ii)
each director of the Company as of March 29, 2022,28, 2023,
(iii)
each NEO of the Company as of March 29, 202228, 2023 and
(iv)
all of the Company’s directors and executive officers as a group as of March 29, 2022.28, 2023.
Unless otherwise noted, the mailing address of each person or entity named below is: | | | | c/o Laredo Petroleum,Vital Energy, Inc.
15 W. Sixth
Santa Fe Plaza
521 E. 2nd Street
Suite 900
1000 Tulsa, Oklahoma 7411974120 | | |
| | | | | | | 82 | Vital Energy, Inc. 2023 Proxy Statement |
Beneficial ownership is determined in accordance with SEC rules. Shares not outstanding but deemed beneficially owned by virtue of the right of a person to acquire shares within 60 days of March 29, 2022,28, 2023, are included as outstanding and beneficially owned for that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Except as noted in the footnotes below, the holders have sole voting and dispositive powers over the shares. Laredo Petroleum, Inc. 2022 Proxy Statement |85
STOCK OWNERSHIP INFORMATION
| | | | | | | | | | Name of person or identity of group | | | Number of
shares | | | Percentage of
class(1) | | | BlackRock, Inc.(2) | 2,677,720 | | | | 2,161,866 | | | | | | | | | | State Street Corporation(3) | 2,443,942 | | | | 1,717,848 | | | | | | | | | | EnCap Energy Capital Fund IX, L.P.(4) | | | | | 1,386,162 | | | | | | | | | | The Vanguard Group(5)(4) | 1,152,140 | | | | 1,084,967 | | | | | | | | | | William E. Albrecht(6)(5) | 15,593 | | | | 13,138 | | | | | | * | | | John Driver(5) | 1,521 | | * | Mark Denny(6) | 25,832 | | * | Frances Powell Hawes(5) | 16,599 | | * | Jarvis V. Hollingsworth(5) | 5,214 | | * | Dr. Craig M. Jarchow(6)(5) | 11,426 | | | | 9,431 | | | | | | * | | | Dr. Shihab A. Kuran(5) | Pamela S. Pierce1,521 | | | | | 25,186 | | | | | | * | | | Lisa M. Lambert | Jason Pigott6,902 | | | | | 136,151 | | | | | | * | | | Lori A. Lancaster(5) | Frances Powell Hawes(6)4,711 | | | | | 14,604 | | | | | | * | | | Bryan Lemmerman | 75,232 | | * | | Jason Pigott | 121,775 | | * | Edmund P. Segner, III(6)(5) | 19,447 | | | | 17,452 | | | | | | * | | | | Jarvis V. Hollingsworth | | | | | 3,219 | | | | | | * | | | | Lisa M. Lambert | | | | | 4,907 | | | | | | * | | | | Lori A. Lancaster(6) | | | | | 2,716 | | | | | | * | | | | Bryan Lemmerman | | | | | 79,848 | | | | | | * | | | | Karen Chandler(7) | | | | | 45,014 | | | | | | * | | | | Mark Denny(7) | | | | | 28,253 | | | | | | * | | | | Directors and executive officers as a group (12 persons) | 305,773 | | | | 379,919 | | | | | | | | |
*
Denotes less than 1% beneficially owned.
(1)
Based upon an aggregate of shares of common stock outstanding as of March 29, 2022.28, 2023.
(2)
This share ownership information was provided in a Schedule 13G Amendment No. 513G/A filed on January 27, 202226, 2023 by BlackRock, Inc., which disclosed that of the reported shares, such entity possesses sole voting and dispositive power of 2,138,2152,660,413 shares and 2,161,8662,677,720 shares, respectively. The address of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055.
(3)
This share ownership information was provided in a Schedule 13G Amendment13G/A filed on February 10, 202213, 2023 by State Street Corporation, which disclosed that of the reported shares, such entity possesses shared voting and dispositive power of 1,700,0392,434,022 shares and 1,717,8482,443,942 shares, respectively. The address of State Street Corporation is 1 Lincoln Street, Boston, Massachusetts 02111.
(4)
This share ownership information was provided in a Schedule 13G Amendment No. 1 filed on March 1, 2022 by EnCap Energy Capital Fund IX, L.P., which disclosed that of the reported shares, such entity possesses shared voting and dispositive power of 1,386,162 shares. The address of EnCap Energy Capital Fund IX, L.P., is 9651 Katy Freeway, Suite 600, Houston, Texas 77024.
(5)
This share ownership information was provided in a Schedule 13G13G/A filed on February 10, 20229, 2023 by The Vanguard Group, which disclosed that of the reported shares, such entity possesses shared voting and dispositive power of 18,41639,411 shares and 27,88552,170 shares, respectively, and sole dispositive power of 1,057,0821,099,970 shares. The address of The Vanguard Group is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355.
(6)
(5)Includes deferred stock compensation received pursuant to the Director Deferred Compensation Plan.
(7)
(6)Includes aggregated vested and exercisable stock options of 1,615 and 1,842 for Dr. Chandler and Mr. Denny respectively, within 60 days of March 29, 2022.28, 2023.
86| Laredo Petroleum, Inc. 2022 Proxy Statement
| | | | | | | Stock Ownership Information | 83 |
| | | | | | | | | | | | | | | | | Proposal Four | | | | | | | | | | | ![[MISSING IMAGE: tm2025328d45-icon_petrol4c.jpg]](https://files.docoh.com/PRE 14A/0001104659-22-038093/tm2025328d45-icon_petrol4c.jpg) The Board voted to approve, and to recommend to our stockholders that they approve, an amendment and restatement of our Amended and Restated Certificate of Incorporation (as amended to date, the “Certificate of Incorporation”) to make certain technical and administrative changes to clarify the Certificate of Incorporation and remove obsolete language relating to the prior equity ownership of Warburg Pincus, LLC (including its affiliates, “Warburg Pincus”), as described below. The changes to the Certificate of Incorporation, as discussed in more detail below, do not impact the rights of our stockholders in any substantive manner. A form of the Second Amended and Restated Certificate of Incorporation (the “Restated Certificate of Incorporation”), which reflects the proposed amendments contemplated by this Proposal 4, is attached to this Proxy Statement as Annex B. | | | | PROPOSED AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION | | | | | | | Background Name Change Effective January 9, 2023, the Company changed its corporate name from Laredo Petroleum, Inc. to Vital Energy, Inc., pursuant to a Certificate of Amendment to its Certificate of Incorporation filed with the Delaware Secretary of State on January 6, 2023. The Company also amended and restated its bylaws to reflect the name change, effective as of January 9, 2023 (as amended and restated, the “Bylaws”). The proposed amendments would amend and restate the Certificate of Incorporation consistent with the name change amendment that became effective as of January 9, 2023. | | | | | | | | | | | Amendment to Authorized Capital Stock At the 2022 Annual Meeting of Stockholders, upon the recommendation of the Board, the Company’s stockholders approved an amendment to the Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), from 22,500,000 shares to 40,000,000 shares. The amendment became effective upon the filing of a Certificate of Amendment to the Certificate of Incorporation with the Delaware Secretary of State on May 26, 2022. The proposed amendments would amend and restate the Certificate of Incorporation consistent with the amendment to increase the number of authorized shares of Common Stock that became effective as of May 26, 2022. Removal of Obsolete Provisions Relating to Prior Equity Ownership of Affiliates of Warburg Pincus Currently, the Certificate of Incorporation includes certain provisions that were applicable until the time that Warburg Pincus no longer beneficially owned more than fifty percent of our outstanding Common Stock. We believe that Warburg Pincus currently owns less than five percent of our Common Stock. The proposed amendments would delete certain obsolete provisions relating to the prior equity ownership of Warburg Pincus, which includes language in Articles Sixth (director terms, board classification, removal of directors), Ninth (ability for stockholders to take action by written consent), Tenth (amendments) and Eleventh (corporate opportunities), as described in more detail below. | | | | | |
Proposal Four: Approval of an amendment to the Amended and Restated Certificate of Incorporation increasing the number of authorized shares of common stock.
The Board has approved and is recommending to our stockholders for approval at the Annual Meeting, an amendment to Article Fourth of our Amended and Restated Certificate of Incorporation (as amended to date, the “Charter”), which sets forth the terms of our authorized capital stock. Article Fourth currently authorizes 72,500,000 shares of all classes of stock, consisting of 22,500,000 shares of common stock, par value one cent ($0.01) per share (the “Common Stock”), and 50,000,000 shares of preferred stock, par value one cent ($0.01) per share (the “Preferred Stock”).
The proposed amendment would increase the authorized Common Stock to 40,000,000 shares and correspondingly increase the number of authorized shares of our capital stock to 90,000,000; the authorized shares of our Preferred Stock would remain at 50,000,000. If approved and adopted by our stockholders at the Annual Meeting, this amendment would become effective upon the filing of a Certificate of Amendment with the Secretary of State of the State of Delaware. The proposed amendment to Article Fourth of our Charter would replace Paragraph A of Article Fourth with the following:
“A. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 90,000,000, consisting of 40,000,000 shares of Common Stock, par value one cent ($0.01) per share (the “Common Stock”), and fifty million (50,000,000) shares of Preferred Stock, par value one cent ($0.01) per share (the “Preferred Stock”).”
Effective June 1, 2020, we conducted a reverse split of our Common Stock, which had the effect of reducing the total number of shares of Common Stock authorized for issuance from 450,000,000 to 22,500,000. In 2021, we issued approximately 1.4 million shares of Common Stock pursuant to our at-the-market equity offering program. We issued approximately 2.5 million shares of Common Stock in connection with the previously announced acquisition of assets from Sabalo Energy, LLC and a non-operating partner, which closed on July 1, 2021. We also issued approximately 0.96 million shares of Common Stock in connection with the previously announced acquisition of 20,000 net acres from Pioneer Natural Resources Company, which closed on October 18, 2021.
As of the Record Date, approximately million shares of Common Stock were issued and outstanding and an aggregate of 2,432,500 shares of Common Stock were reserved for possible future issuance under the Laredo Petroleum, Inc. Omnibus Equity Incentive Plan (the “Equity Incentive Plan). Approximately million authorized shares of Common Stock remain available for issuance for future purposes and the Board deems it advisable to increase our authorized shares of Common Stock. The adoption of the proposed amendment would provide for an additional 17,500,000 shares of Common Stock for future issuance.
We have no present arrangements, commitments, understandings or pending negotiations for the issuance of the proposed additional shares of Common Stock. The amendment to our Charter is intended to ensure that we will continue to have an adequate number of authorized and unissued shares of Common Stock for future use. The proposed increase in the number of authorized shares of our Common Stock would give Laredo the flexibility to issue shares of our Common Stock in connection with future employee and director stock compensation programs as well as for other general corporate purposes, which may include capital-raising transactions or acquisitions of oil and gas properties and other assets.
In addition, having such shares available for issuance in the future will allow shares of Common Stock to be issued without the expense and delay of a stockholders’ meeting or further action by stockholders, unless such action
Laredo Petroleum, Inc. 2022 Proxy Statement |87
is required by applicable law or the rules of any stock exchange on which our Common Stock may then be listed. The NYSE, on which our Common Stock is currently listed, requires stockholder approval prior to issuing shares in certain instances, including where the number of shares to be issued would exceed 20% of the number of shares outstanding prior to such issuance.
We have not proposed the increase in the authorized number of shares of our Common Stock with the intention of using the additional shares for anti-takeover purposes and we do not view the proposed increase as a special anti-takeover measure, although an issuance of additional shares could, depending on the circumstances, make more difficult, or discourage, an attempt to acquire control of Laredo. We are not at this time aware of any currently pending or threatened efforts to acquire control of Laredo, and we are not proposing this increase in response to any third-party effort to acquire control of Laredo or any third-party effort to accumulate Laredo’s Common Stock.
The additional shares of Common Stock authorized by the proposed amendment, if and when issued, would have the same rights and privileges as the shares of Common Stock currently authorized. Our Common Stock has no preemptive rights to purchase additional shares of Common Stock or other of our securities. In addition, under Delaware law, our stockholders are not entitled to any dissenters’ or appraisal rights in connection with the proposed increase in the number of authorized shares of Common Stock.
Approval of the proposed amendment to our Charter requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock. Abstentions with respect to this proposal will have the effect of a vote against this proposal as will broker non-votes (which occur if a broker or other nominee does not have discretionary authority and has not received instructions with respect to this proposal within 10 days of the Annual Meeting), inasmuch as approval of the proposed amendment requires the affirmative vote of a majority of the outstanding shares of Common Stock. Properly executed proxies will be voted at the Annual Meeting in accordance with the instructions specified on the proxy; if no such instructions are given, the persons named as agents and proxies in the accompanying form of proxy will vote such proxy “FOR” this proposal.
| | | | | | | 84 | Vital Energy, Inc. 2023 Proxy Statement |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | If our stockholders approve this Proposal 4, the Company intends to amend and restate the Certificate of Incorporation to reflect each of the prior amendments and to remove obsolete language relating to prior equity ownership of affiliates of Warburg Pincus. The changes to the Certificate of Incorporation do not impact the rights of our stockholders in any substantive manner. Below is a summary of the changes to the Certificate of Incorporation proposed pursuant to this Proposal 4: •Article First: Amending the name of the Company to give effect to the Certificate of Amendment effective as of January 9, 2023. •Article Fourth, Paragraph A.: Amending Paragraph A to give effect to the Certificate of Amendment effective on May 26, 2022, increasing the authorized Common Stock to 40,000,000 shares and correspondingly increasing the number of authorized shares of our capital stock to 90,000,000. •Article Sixth, Paragraphs B., E. and G.: Removing obsolete language pertaining to Warburg Pincus and its affiliates owning more than fifty percent (50%) of outstanding Common Stock as it relates to director terms, classification of the Board and director removal. •Article Ninth: Removing obsolete language pertaining to Warburg Pincus and its affiliates owning more than fifty percent (50%) of outstanding Common Stock as it relates to stockholders’ ability to take action by written consent. •Article Tenth: Removing language requiring the affirmative vote of the holders of at least seventy-five percent (75%) of the voting power of all of the then-outstanding shares of the capital stock of the Company entitled to vote thereon to amend Article Eleventh. •Article Eleventh: Removing obsolete corporate opportunity provisions renouncing any interest or expectancy in any business opportunity, transaction or other matter in which Warburg Pincus participates or desires or seeks to participate in and that involves any aspect of the energy business or industry. | | | | | | | | | | | We believe the adoption of this Proposal 4 would simplify and clarify our governing documents, and eliminate provisions that are no longer applicable. A form of the Restated Certificate of Incorporation, which reflects the proposed amendments contemplated by this Proposal 4, is attached to this Proxy Statement as Annex B. If adopted, the Restated Certificate of Incorporation will become effective immediately following our filing of the Restated Certificate of Incorporation with the Secretary of the State of Delaware after the conclusion of this Annual Meeting. | | | | | | | Approval of the proposed amendment and restatement of our Certificate of Incorporation requires the affirmative vote of the holders of at least seventy-five percent (75%) of the voting power of all of the then-outstanding shares of the capital stock of the Company entitled to vote thereon, voting together as a single class. Abstentions with respect to this proposal will have the effect of a vote against this proposal. This proposal is considered to be “routine” under the NYSE rules. As a result, brokers will have discretionary authority to vote on this proposal and there will be no broker non-votes with respect to this proposal. Properly executed proxies will be voted at the Annual Meeting in accordance with the instructions specified on the proxy. | | | | | | | The Board of Directors unanimously recommends that the stockholders vote FOR an approval of an amendment toand restatement of the Amended and Restated Certificate of Incorporation increasing the number of authorized shares of common stock.to clarify and eliminate obsolete provisions. | | | | | |
88| Laredo Petroleum, Inc. 2022 Proxy Statement
| | | | PROXY STATEMENT QUESTIONS & ANSWERS | | | 85 |
Proxy Statement Questions & Answers 2022
2023 Annual Meeting of Stockholders The Board of Directors requests your proxy for the 20222023 Annual Meeting of Stockholders that will be held: | | DATE & TIME | | | | | | | PLACE | | | | | | | | | | | | Date & Time | Place | | | Thursday, May 26, 2022
25, 2023 at 9:00 a.m. Central Daylight Time | | | | | | | The Bank of AmericaSanta Fe Plaza Building
Lower Level
15 West Sixth 521 E. 2ndStreet
Tulsa, Oklahoma 7411974120 | | | | | |
By granting the proxy, you authorize the persons named on the proxy to represent you and vote your shares at the Annual Meeting. Those persons will also be authorized to vote your shares to adjourn the Annual Meeting from time to time and to vote your shares at any adjournments or postponements of the Annual Meeting. In accordance with the rules and regulations adopted by the SEC, we are providing our stockholders access to our proxy materials on the Internet. Accordingly, a Notice of Internet Availability of Proxy Materials (the “Notice”) will be mailed to most of our stockholders beginning on April 7, 2022.6, 2023. The Notice will include: (i)
instructions on how to access the Company’s proxy materials electronically,
(ii)
the date, time and location of the Annual Meeting,
(iii)
a description of the matters intended to be acted upon at the Annual Meeting,
(iv)
a list of the materials being made available electronically,
(v)
instructions on how a stockholder can request to receive paper or e-mail copies of the Company’s proxy materials,
(vi)
any control/identification numbers that a stockholder needs to access his or her proxy card and instructions on how to access the proxy card, and
(vii)(vii)information about attending the Annual Meeting and voting in person. Stockholders will have the ability to access the proxy materials on the website referred to in the Notice, or request a printed set of the proxy materials to be sent to them by following instructions on the Notice. All stockholders who do not receive a Notice should receive a paper copy of the proxy materials by mail. If you choose to receive future proxy materials by e-mail, you will receive an e-mail next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by e-mail or printed form will remain in effect until you terminate it. We intend to hold our Annual Meeting in person. However, due to the public health impact of COVID-19 and related travel concerns, weWe may impose additional procedures or limitations on meeting attendees beyond those described in this Proxy Statement. Such additional precautionary measures may include, in compliance with guidance issued by the U.S. Centers for Disease Control, restricting the number of meeting attendees gathered in one room and requiring that all meeting attendees wear a mask and remain at a minimum six feet from other persons at all times. Alternatively, we are planning for the possibility that the meeting may be held solely by means of remote communication. If we take this step, we will announce by press release the decision to do so in advance, along with details on how to participate in the meeting. If it becomes necessary, a meeting by remote communication will not impact your ability to vote in advance of the meeting by telephone, internet, mobile device or mail. Laredo Petroleum, Inc. 2022 Proxy Statement |89
PROXY STATEMENT QUESTIONS & ANSWERS
Q.
Who is entitled to vote at the Annual Meeting?
A.
Holders of record of our common stock at the close of business on March 29, 2022, which we refer to as the “Record Date,” are entitled to vote at the Annual Meeting. As of the Record Date, there were shares of our common stock outstanding. Stockholders are entitled to cast one vote per share on each matter presented for consideration and action at the Annual Meeting.
Q.
What is the purpose of the Annual Meeting?
A.
At the Annual Meeting, stockholders will consider and vote upon the following matters:
| Proposal | | | | | 86 | 1Vital Energy, Inc. 2023 Proxy Statement |
| | | | | | | Q. | Who is entitled to vote at the Annual Meeting? | | A. | Holders of record of our common stock at the close of business on March 28, 2023, which we refer to as the “Record Date,” are entitled to vote at the Annual Meeting. As of the Record Date, there were shares of our common stock outstanding. Stockholders are entitled to cast one vote per share on each matter presented for consideration and action at the Annual Meeting. | | | | Q. | What are the proposals to be addressed at the Annual Meeting, how does the Board recommend I vote and what are the voting requirements for each proposal? | | A. | At the Annual Meeting, stockholders will consider and vote upon the four items listed below in the table and the table also contains the voting requirements to approve each of the listed items: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Item | Board’s recommendation | Voting requirements | Abstentions & broker non-votes | | | | | | | | | | 1 | Election of two Class III directors for | FOR | •The persons receiving a three year term;majority of the votes cast “FOR” their election at the Annual Meeting will be elected. | •Abstentions and broker non-votes, if any, are not counted as votes cast and will have no effect on the outcome of this proposal. | | | 2 | | | | | | | | | | | | | | 2 | Ratification of the selectionappointment of Grant Thornton LLP as our independent registered public accounting firm for | FOR | •To be approved by the year ending December 31, 2022;stockholders, this item must receive the “FOR” vote of a majority of the votes cast on this proposal at the Annual Meeting. | •Abstentions are not counted as votes cast and will have no effect on the outcome of this proposal. As this proposal is considered routine under NYSE rules, there will be no broker non-votes on this proposal. | | | 3 | | | An advisory | | | | | | | | | | | 3 | Advisory vote approving the compensation of our named executive officers;officers | FOR | •To be approved by the stockholders, this item must receive the “FOR” vote of a majority of the votes cast on this proposal at the Annual Meeting. | •Abstentions and broker non-votes, if any, are not counted as votes cast and will have no effect on the outcome of this proposal. The results of the votes on this proposal are not binding on the Board of Directors, whether or not the resolution is passed under these voting standards. | | | 4 | | | | | | | | | | | | | | 4 | Approval of an amendment toand restatement of the Amended and Restated Certificate of Incorporation increasingto clarify and eliminate obsolete provisions | FOR | •To be approved by the numberstockholders, this item must receive the “FOR” vote of authorizedthe holders of at least seventy-five percent (75%) of the voting power of all of the then-outstanding shares of common stock.the capital stock of the Company entitled to vote thereon, voting together as a single class. | •Abstentions, if any, will have the effect of a vote against this proposal. As this proposal is considered routine under NYSE rules, there will be no broker non-votes on this proposal. | |
Why did I receive a Notice in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials?
A.
As permitted by SEC rules, we are providing access to our proxy materials over the Internet. As a result, we are sending to most of our stockholders a Notice instead of a paper copy of the proxy materials. The Notice contains instructions on how to access the proxy materials over the Internet and how to request a paper copy. In addition, stockholders may request to receive future proxy materials in printed form by mail or electronically by e-mail. A stockholder’s election to receive proxy materials by mail or e-mail will remain in effect until the stockholder terminates it.
Q.
Why didn’t I receive a Notice in the mail regarding the Internet availability of proxy materials?
A.
We are providing certain stockholders, including those who have previously requested to receive paper copies of the proxy materials, with paper copies of the proxy materials instead of a Notice. If you would like to help reduce the costs we incur in mailing proxy materials, you can consent to receive all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions provided with your proxy materials and on your proxy card or voting instruction card to vote using the Internet. When prompted, indicate that you agree to receive or access stockholder communications electronically in the future.
Q.
Can I vote my stock by filling out and returning the Notice?
A.
No. However, the Notice will provide instructions on how to vote over the Internet, by telephone, by requesting and returning a paper proxy card or by submitting a ballot in person at the Annual Meeting.
Q.
How can I access the proxy materials over the Internet?
A.
Your Notice or proxy card will contain instructions on how to view our proxy materials on the Internet. Our proxy materials are also available on our website at: www.laredopetro.com.
90| Laredo Petroleum, Inc. 2022 Proxy Statement
| | | | | | | Proxy Statement Questions & Answers | 87 |
TABLE OF CONTENTS | | | | | | | Q. | Why did I receive a Notice in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials? | | A. | As permitted by SEC rules, we are providing access to our proxy materials over the Internet. As a result, we are sending to most of our stockholders a Notice instead of a paper copy of the proxy materials. The Notice contains instructions on how to access the proxy materials over the Internet and how to request a paper copy. In addition, stockholders may request to receive future proxy materials in printed form by mail or electronically by e-mail. A stockholder’s election to receive proxy materials by mail or e-mail will remain in effect until the stockholder terminates it. | | | | Q. | Why didn’t I receive a Notice in the mail regarding the Internet availability of proxy materials? | | A. | We are providing certain stockholders, including those who have previously requested to receive paper copies of the proxy materials, with paper copies of the proxy materials instead of a Notice. If you would like to help reduce the costs we incur in mailing proxy materials, you can consent to receive all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions provided with your proxy materials and on your proxy card or voting instruction card to vote using the Internet. When prompted, indicate that you agree to receive or access stockholder communications electronically in the future. |
PROXY STATEMENT QUESTIONS & ANSWERS | | | | | | | Q. | Can I vote my stock by filling out and returning the Notice? | | A. | No. However, the Notice will provide instructions on how to vote over the Internet, by telephone, by requesting and returning a paper proxy card or by submitting a ballot in person at the Annual Meeting. | | | | Q. | How can I access the proxy materials over the Internet? | | A. | Your Notice or proxy card will contain instructions on how to view our proxy materials on the Internet. Our proxy materials are also available on our website at: www.vitalenergy.com. |
You may vote by any of the following four methods: (1)
Internet. Vote over the Internet at www.proxyvote.com, the website for Internet voting. Simply follow the instructions on the Notice, or if you received a proxy card by mail, follow the instructions on the proxy card, and you can confirm that your vote has been properly recorded. If you vote on the Internet, you can request electronic delivery of future proxy materials. Internet voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m. (Eastern Time) on May 25, 2022.24, 2023.
(2)
Telephone. Vote by telephone by following the instructions on the Notice, or if you received a proxy card, by following the instructions on the proxy card. Easy-to-follow voice prompts allow you to vote your shares and confirm that your vote has been properly recorded. Telephone voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m. (Eastern Time) on May 25, 2022.24, 2023.
(3)
Mail.Mail. If you received a proxy card by mail, vote by mail by completing, signing, dating and returning your proxy card in the pre-addressed, postage-paid envelope provided. If you vote by mail and your proxy card is returned unsigned, then your vote cannot be counted. If you vote by mail and the returned proxy card is signed without indicating how you want to vote, then your proxy will be voted as recommended by the Board of Directors. If mailed, your completed and signed proxy card must be received by May 25, 2022.24, 2023.
(4)
Meeting. If you are a stockholder of record as of March 29, 2022,28, 2023, you may attend and vote at the Annual Meeting on May 26, 2022.25, 2023.
If you hold your Company shares in a brokerage account, your ability to vote over the Internet or by telephone depends on your broker’s voting process. Please follow the directions on your proxy card or the voting instruction card from your broker carefully. The Board of Directors recommends that you vote using one of the first three methods discussed above, as it is not practical for most stockholders to attend and vote at the Annual Meeting. Using one of the first three methods discussed above to vote will not limit your right to vote at the Annual Meeting if you later decide to attend in person.
How can I vote my shares in person at the Annual Meeting?
A.
Stockholders of Record. If your shares are registered directly in your name with the American Stock Transfer and Trust Company (“AST”), our “transfer agent,” you are considered the stockholder of record with respect to those shares, and the Notice or proxy materials are being mailed to you. As the stockholder of record, you have the right to vote in person at the Annual Meeting. If you choose to do so, you can bring the proxy card or vote using the ballot provided at the Annual Meeting. Even if you plan to attend the Annual Meeting, we recommend that you vote your shares in advance as described above so that your vote will be counted if you decide later not to attend the Annual Meeting.
Beneficial Owners. Most of our stockholders hold their shares in street name through a broker, bank or other nominee rather than directly in their own name. In that case, you are considered the beneficial owner of shares held in street name, and the proxy materials are being forwarded to you together with a voting instruction card. As the beneficial owner, you are also invited to attend the Annual Meeting. Because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the Annual Meeting unless you obtain a “legal proxy” from the broker, bank or nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting. You will need to contact your broker, bank or nominee to obtain a legal proxy, and you will need to bring it to the Annual Meeting in order to vote in person.
Laredo Petroleum, Inc. 2022 Proxy Statement |91
PROXY STATEMENT QUESTIONS & ANSWERS
Q.
How does the Board of Directors recommend that I vote?
A.
Our Board of Directors recommends that you vote:
| Item | | | Board’s
recommendation | | 88 | 1Vital Energy, Inc. 2023 Proxy Statement |
| | | The | | | | Q. | How can I vote my shares in person at the Annual Meeting? | | A. | Stockholders of Record. If your shares are registered directly in your name with the American Stock Transfer and Trust Company, an Equiniti Company (“AST”), our “transfer agent,” you are considered the stockholder of record with respect to those shares, and the Notice or proxy materials are being mailed to you. As the stockholder of record, you have the right to vote in person at the Annual Meeting. If you choose to do so, you can bring the proxy card or vote using the ballot provided at the Annual Meeting. Even if you plan to attend the Annual Meeting, we recommend that you vote your shares in advance as described above so that your vote will be counted if you decide later not to attend the Annual Meeting. Beneficial Owners. Most of our stockholders hold their shares in street name through a broker, bank or other nominee rather than directly in their own name. In that case, you are considered the beneficial owner of shares held in street name, and the proxy materials are being forwarded to you together with a voting instruction card. As the beneficial owner, you are also invited to attend the Annual Meeting. Because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the Annual Meeting unless you obtain a “legal proxy” from the broker, bank or nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting. You will need to contact your broker, bank or nominee to obtain a legal proxy, and you will need to bring it to the Annual Meeting in order to vote in person. |
| | | | | | | Q. | What happens if additional matters are presented at the Annual Meeting? | | A. | Other than the four items of business described in this Proxy Statement, we are not aware of any other business to be acted upon at the Annual Meeting. If you grant a proxy, the persons named as proxies will have the discretion to vote your shares on any additional matters properly presented for a vote at the Annual Meeting. | | | | Q. | What happens if I do not give specific voting instructions? | | A. | If you are a stockholder of record, and vote without giving specific voting instructions, the proxyholders will vote your shares in the manner recommended by our Board of Directors on all matters presented in this Proxy Statement, and, with respect to any other matters that may properly come before the Annual Meeting, as the proxyholders may determine in their discretion. If you are the beneficial owner of shares held in the name of a broker, bank or other nominee and do not provide that broker, bank or other nominee with voting instructions in the proxy card, your broker may vote your shares only with respect to certain matters considered routine. For any matters that are not routine for which you do not provide voting instructions in the proxy card, your shares will constitute “broker non-votes” and will not be counted as a vote cast on that proposal. With respect to the matters being voted on at the Annual Meeting, your broker may not vote on the election of the Company’s nominees to the Board of Directors. | | | FOR | | | 2 | | | Ratification of the selection of Grant Thornton LLP as our independent registered public accounting firm for the year ending December 31, 2022. | | | FOR | | | 3 | | | The advisory resolution approvingdirectors and the compensation of our named executive officers as disclosedif you do not furnish instructions for these matters. Thus, assuming that a quorum is obtained, such broker non-votes will not affect the outcome of these matters. Your broker may, however, vote in this Proxy Statement. | | | FOR | its discretion on the ratification of the appointment of our independent public accounting firm. | | 4 | | | Approval of an amendment to the Amended and Restated Certificate of Incorporation increasing the number of authorized shares of common stock. | | | FOR | |
Q.
What is the voting requirement to approve each of the items?
A.
| Item | | | Voting requirements | | | Abstentions &
broker non-votes | | Q. | 1What is the quorum requirement for the Annual Meeting? | | | Election of directors | | A. | •
The persons receiving aA majority of the votes cast “FOR” their electionCompany’s outstanding shares entitled to vote at the Annual Meeting as of the Record Date must be present, in person or by proxy, at the Annual Meeting in order to hold the Annual Meeting and conduct business. This is called a quorum. Your shares will be elected.counted for purposes of determining if there is a quorum, whether representing votes for, against, withheld or abstained, if you:
| | | •
are present and vote at the Annual Meeting; or Abstentions and broker•properly submit a proxy card or vote over the Internet or by telephone.
Broker non-votes if any, are not counted as votes cast and will have no effect onpresent for the outcomepurpose of this proposal.
| | | 2 | | | Ratification of appointment of independent public accounting firm | | | •
To be approved bydetermining the stockholders, this item must receive the “FOR” voteexistence of a majority of the votes cast on this proposalquorum at the Annual Meeting. If a quorum is not present, the chairman of the Annual Meeting may adjourn the meeting to another place, if any, date, or time.
| | |
| | | | | | | Proxy Statement Questions & Answers | 89 |
| | | | | | | Q. | How can I change my vote after I return my proxy card? | | A. | •
If you are a stockholder of record, there are three ways you can change your vote or revoke your proxy after you have sent in your proxy card.
Abstentions are•First, you may send a written notice stating that you would like to revoke your proxy to Vital Energy, Inc. c/o Corporate Secretary Santa Fe Plaza, 521 E. 2nd Street, Suite 1000, Tulsa, Oklahoma 74120.
•Second, you may complete and submit another valid proxy by mail, telephone or over the Internet that is later dated and if mailed, is properly signed, or if submitted by telephone or over the Internet is received by 11:59 p.m. Eastern Time on May 24, 2023. Any earlier proxies will be revoked automatically. •Third, you may attend the Annual Meeting and vote in person. Any earlier proxy will be revoked. However, attending the Annual Meeting without voting in person will not counted as votes castrevoke your proxy. If you hold your shares through a broker, bank or other nominee and you have instructed the broker, bank or other nominee to vote your shares, you must follow directions from your broker, bank or other nominee to change your vote. | | | | Q. | Who will tabulate the votes? | | A. | The Board of Directors has appointed our transfer agent, AST, to certify the tabulated vote and AST will have no effect ona representative to act as the outcomeindependent inspector of this proposal. As this proposal is considered routine under NYSE rules, thereelections for the Annual Meeting. AST will be no broker non-votes on this proposal.responsible for:
| | | 3 | | | Advisory vote approving(i)determining the compensation of our named executive officers | | | •
To be approved by the stockholders, this item must receive the “FOR” votepresence of a majority ofquorum at the Annual Meeting,
(ii)receiving all votes cast on this proposaland ballots, whether by proxy or in person, with regard to all matters voted upon at the Annual Meeting, (iii)counting and tabulating all such votes and ballots, and (iv)determining and reporting the results with regard to all such matters voted upon at the Annual Meeting.
| | | | Q. | •
Abstentions and broker non-votes, if any, are not counted as votes cast and will have no effect onWhere can I find the outcome of this proposal. Thevoting results of the votesAnnual Meeting?
| | A. | We intend to announce preliminary voting results at the Annual Meeting and publish final results in a Current Report on Form 8-K to be filed with the SEC within four business days following the Annual Meeting. | | | | Q. | How can I obtain a separate set of proxy materials? | | A. | We have adopted a procedure approved by the SEC known as “householding.” Under this procedure, multiple stockholders residing at the same address have the convenience of receiving a single copy of our Annual Report and Proxy Statement, unless they have notified us that they want to continue receiving multiple copies. Householding allows us to reduce the environmental impact of providing proxy materials as well as printing and mailing costs. If you received a householded mailing this year and you would like to have additional copies of the Annual Report and/or Proxy Statement mailed to you, or you would like to revoke your consent to the householding of documents, please submit your request to Vital Energy, Inc. c/o Corporate Secretary Santa Fe Plaza, 521 E. 2nd, Suite 1000, Tulsa, Oklahoma 74120, or by calling (918) 513-4570. Unfortunately, householding for bank and brokerage accounts is limited to accounts within the same bank or brokerage firm. For example, if you and your spouse each have an account containing our common stock at different brokerage firms, your household will receive two copies of our Annual Meeting materials—one from each brokerage firm. To reduce the number of duplicate sets of materials your household receives, you may wish to enroll some or all of your accounts in our electronic delivery program. | | |
| | | | | | | 90 | Vital Energy, Inc. 2023 Proxy Statement |
| | | | | | | Q. | Who pays for the cost of this proxy solicitation? | | A. | We will pay for the costs of the solicitation of proxies. We may reimburse brokerage firms and other persons for expenses incurred in forwarding the voting materials to their customers who are beneficial owners and obtaining their voting instructions. Vital has retained the services of Georgeson LLC (“Georgeson”) to aid in the solicitation of proxies from banks, brokers, nominees and intermediaries. Vital will pay Georgeson a fee of approximately $15,000 for its services, plus reasonable out of pocket expenses. In addition to soliciting proxies by mail, our Board of Directors, officers and employees may solicit proxies on our behalf, without additional compensation, personally or by telephone. Stockholders voting over the Internet should understand that there may be costs associated with electronic access, such as the usage charges from telephone companies and Internet access providers, that must be borne by the stockholder. | | | | Q. | What is the deadline to propose actions for consideration at next year’s annual meeting? | | A. | Stockholders who, in accordance with Rule 14a-8 under the Exchange Act, wish to present proposals for inclusion in the proxy materials to be distributed in connection with the 2024 annual meeting of stockholders, must submit their proposals so that they are received at our principal executive offices no later than December 8, 2023, or, in the event the Company’s 2024 annual meeting is advanced or delayed more than 30 days from the date of the Annual Meeting, within a reasonable time before the Company begins to print and mail the proxy materials for the 2024 Annual Meeting. |
| | | | | | | | | | In addition, stockholders who wish to introduce a proposal arefrom the floor of the 2023 Annual Meeting of stockholders (outside the processes of Rule 14a-8), must submit that proposal in writing to the Company’s Corporate Secretary at our principal executive offices no earlier than January 22, 2024 and no later than February 21, 2024, or, in the event the Company’s 2024 annual meeting of stockholders is advanced or delayed more than 30 days from the date of the anniversary of the Annual Meeting, not bindinglater than the later of (i) the 90th day before the 2024 annual meeting or (ii) the 10th day following the day on which public announcement of the date of the 2024 annual meeting is first made by the Company. To be in proper form, a stockholder’s notice must be timely delivered to: | | | | | | | | c/o Vital Energy, Inc. Santa Fe Plaza 521 E. 2nd Street Suite 1000 Tulsa, Oklahoma 74120 | | | | | | | | | It must include the information required by our Bylaws with respect to each proposal submitted. The Company may refuse to consider any proposal that is not timely or otherwise fails to meet the requirements of our bylaws or the SEC’s rules with respect to the submission of proposals. You may obtain a copy of our bylaws by accessing our website (www.vitalenergy.com) or submitting a request to the address listed above. | | | |
| | | | | | | Proxy Statement Questions & Answers | 91 |
| | | | | | | | | | Q. | How do I nominate a candidate for election as a director? | | A. | Stockholders may nominate directors in accordance with the Company Bylaws. Stockholders who wish to nominate a candidate for election as a director at our 2024 annual meeting must submit their nomination in writing to the Company’s Corporate Secretary at our principal executive offices no earlier than January 22, 2024 and no later than February 21, 2024, or, in the event the Company’s 2024 annual meeting of stockholders is advanced or delayed more than 30 days from the date of the Annual Meeting, not later than the later of (i) the 90th day before the 2024 annual meeting or (ii) the 10th day following the day on which public announcement of the date of the 2024 annual meeting is first made by the Company. In the event that the number of directors to be elected to the Board of Directors whetheris increased and there has been no public announcement naming all of the nominees for director or indicating the increase made by the Company at least 10 days before the last day a stockholder may deliver a notice of nomination in accordance with the preceding sentence, a stockholder’s notice will be considered timely, but only with respect to nominees for any new positions created by such increase, if it is received by the Corporate Secretary at the principal executive offices of the Company not later than the resolutionclose of business on the 10th day following the day on which such public announcement is passed under these voting standards.
| | | 4 | | | Approval of an amendment tofirst made by the Amended and Restated Certificate of Incorporation increasing the number of authorized shares of common stock. | | | •
Company.
To be approved by the stockholders, this itemin proper form, a stockholder’s notice must receive the ‘FOR’ vote of a majority of the shares entitled to vote on this proposal at the Annual Meeting.
| | | •
Abstentions and broker non-votes will have the same effect as a vote against this proposal.
| |
92| Laredo Petroleum,be timely delivered to: Vital Energy, Inc. 2022 Proxy Statement
PROXY STATEMENT QUESTIONS & ANSWERS
Q.
What happens if additional matters are presented at the Annual Meeting?
A.
Other than the four items of business described in this Proxy Statement, we are not aware of any other business to be acted upon at the Annual Meeting. If you grant a proxy, the persons named as proxies will have the discretion to vote your shares on any additional matters properly presented for a vote at the Annual Meeting.
Q.
What happens if I do not give specific voting instructions?
A.
If you are a stockholder of record, and vote without giving specific voting instructions, the proxyholders will vote your shares in the manner recommended by our Board of Directors on all matters presented in this Proxy Statement, and, with respect to any other matters that may properly come before the Annual Meeting, as the proxyholders may determine in their discretion.
If you are the beneficial owner of shares held in the name of a broker, bank or other nominee and do not provide that broker, bank or other nominee with voting instructions in the proxy card, your broker may vote your shares only with respect to certain matters considered routine. For any matters that are not routine for which you do not provide voting instructions in the proxy card, your shares will constitute “broker non-votes” and will not be counted as a vote cast on that proposal. With respect to the matters being voted on at the Annual Meeting, your broker may not vote on the election of directors and the compensation of our named executive officers if you do not furnish instructions for these matters. Thus, assuming that a quorum is obtained, such broker non-votes will not affect the outcome of these matters. Your broker may, however, vote in its discretion on the ratification of the appointment of our independent public accounting firm.
Q.
What is the quorum requirement for the Annual Meeting?
A.
A majority of the Company’s outstanding shares entitled to vote at the Annual Meeting as of the Record Date must be present, in person or by proxy, at the Annual Meeting in order to hold the Annual Meeting and conduct business. This is called a quorum. Your shares will be counted for purposes of determining if there is a quorum, whether representing votes for, against, withheld or abstained, if you:
•
are present and vote at the Annual Meeting; or
•
properly submit a proxy card or vote over the Internet or by telephone.
Broker non-votes are counted as present for the purpose of determining the existence of a quorum at the Annual Meeting. If a quorum is not present, the chairman of the Annual Meeting may adjourn the meeting to another place, if any, date, or time.
Q.
How can I change my vote after I return my proxy card?
A.
If you are a stockholder of record, there are three ways you can change your vote or revoke your proxy after you have sent in your proxy card.
•
First, you may send a written notice stating that you would like to revoke your proxy to Laredo Petroleum, Inc. c/o Corporate Secretary 15 W. Sixth Street, Suite 900 Tulsa, Oklahoma 74119.
•
Second, you may complete and submit another valid proxy by mail, telephone or over the Internet that is later dated and if mailed, is properly signed, or if submitted by telephone or over the Internet is received by 11:59 p.m. Eastern Time on May 25, 2022. Any earlier proxies will be revoked automatically.
•
Third, you may attend the Annual Meeting and vote in person. Any earlier proxy will be revoked. However, attending the Annual Meeting without voting in person will not revoke your proxy.
If you hold your shares through a broker, bank or other nominee and you have instructed the broker, bank or other nominee to vote your shares, you must follow directions from your broker, bank or other nominee to change your vote.
Laredo Petroleum, Inc. 2022 Proxy Statement |93
PROXY STATEMENT QUESTIONS & ANSWERS
Q.
Who will tabulate the votes?
A.
The Board of Directors has appointed our transfer agent, AST, to certify the tabulated vote and AST will have a representative to act as the independent inspector of elections for the Annual Meeting. AST will be responsible for:
(i)
determining the presence of a quorum at the Annual Meeting,
(ii)
receiving all votes and ballots, whether by proxy or in person, with regard to all matters voted upon at the Annual Meeting,
(iii)
counting and tabulating all such votes and ballots, and
(iv)
determining and reporting the results with regard to all such matters voted upon at the Annual Meeting.
Q.
Where can I find the voting results of the Annual Meeting?
A.
We intend to announce preliminary voting results at the Annual Meeting and publish final results in a Current Report on Form 8-K to be filed with the SEC within four business days following the Annual Meeting.
Q.
How can I obtain a separate set of proxy materials?
A.
We have adopted a procedure approved by the SEC known as “householding.” Under this procedure, multiple stockholders residing at the same address have the convenience of receiving a single copy of our Annual Report and Proxy Statement, unless they have notified us that they want to continue receiving multiple copies. Householding allows us to reduce the environmental impact of providing proxy materials as well as printing and mailing costs.
If you received a householded mailing this year and you would like to have additional copies of the Annual Report and/or Proxy Statement mailed to you, or you would like to revoke your consent to the householding of documents, please submit your request to Laredo Petroleum, Inc. c/o Corporate Secretary 15 W. Sixth Street, Suite 900 Tulsa, Oklahoma 74119, or by calling (918) 513-4570.
Unfortunately, householding for bank and brokerage accounts is limited to accounts within the same bank or brokerage firm. For example, if you and your spouse each have an account containing our common stock at different brokerage firms, your household will receive two copies of our Annual Meeting materials—one from each brokerage firm. To reduce the number of duplicate sets of materials your household receives, you may wish to enroll some or all of your accounts in our electronic delivery program.
Q.
Who pays for the cost of this proxy solicitation?
A.
We will pay for the costs of the solicitation of proxies. We may reimburse brokerage firms and other persons for expenses incurred in forwarding the voting materials to their customers who are beneficial owners and obtaining their voting instructions. Laredo has retained the services of Georgeson LLC (“Georgeson”) to aid in the solicitation of proxies from banks, brokers, nominees and intermediaries. Laredo will pay Georgeson a fee of approximately $15,000 for its services, plus reasonable out of pocket expenses. In addition to soliciting proxies by mail, our Board of Directors, officers and employees may solicit proxies on our behalf, without additional compensation, personally or by telephone. Stockholders voting over the Internet should understand that there may be costs associated with electronic access, such as the usage charges from telephone companies and Internet access providers, that must be borne by the stockholder.
94| Laredo Petroleum, Inc. 2022 Proxy Statement
PROXY STATEMENT QUESTIONS & ANSWERS
Q.
What is the deadline to propose actions for consideration at next year’s annual meeting?
A.
Stockholders who, in accordance with Rule 14a-8 under the Exchange Act, wish to present proposals for inclusion in the proxy materials to be distributed in connection with the 2023 annual meeting of stockholders, must submit their proposals so that they are received at our principal executive offices no later than December 8, 2022, or, in the event the Company’s 2023 annual meeting is advanced or delayed more than 30 days from the date of the Annual Meeting, within a reasonable time before the Company begins to print and mail the proxy materials for the 2022 Annual Meeting.
In addition, stockholders who wish to introduce a proposal from the floor of the 2022 Annual Meeting of stockholders (outside the processes of Rule 14a-8), must submit that proposal in writing to the Company’s Corporate Secretary at our principal executive offices no earlier than January 20, 2023 and no later than February 21, 2023, or, in the event the Company’s 2023 annual meeting of stockholders is advanced or delayed more than 30 days from the date of the anniversary of the Annual Meeting, not later than the later of (i) the 90th day before the 2023 annual meeting or (ii) the 10th day following the day on which public announcement of the date of the 2023 annual meeting is first made by the Company.
To be in proper form, a stockholder’s notice must be timely delivered to:
| | Laredo Petroleum, Inc.
c/o Corporate Secretary
15 W. Sixth Santa Fe Plaza, 521 E. 2nd Street,
Suite 900
1000, Tulsa, Oklahoma 7411974120.
| | Any stockholder notice of nomination must include the information required by our bylaws with respect to the nomination and all other information regarding the proposed nominee and the nominating stockholder required by Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. The Company may refuse to consider any nomination that is not timely or otherwise fails to meet the requirements of our bylaws or the SEC’s rules with respect to the submission of director nominations. A written statement from the proposed nominee consenting to be named as a candidate and, if nominated and elected, to serve as a director should accompany any stockholder nomination. |
It must include the information required by our Bylaws with respect to each proposal submitted. The Company may refuse to consider any proposal that is not timely or otherwise fails to meet the requirements of our bylaws or the SEC’s rules with respect to the submission of proposals.
You may obtain a copy of our bylaws by accessing our website (www.laredopetro.com) or submitting a request to the address listed above.
Q.
How do I nominate a candidate for election as a director?
A.
Stockholders who wish to nominate a candidate for election as a director at our 2023 annual meeting must submit their nomination in writing to the Company’s Corporate Secretary at our principal executive offices no earlier than January 20, 2023 and no later than February 21, 2023, or, in the event the Company’s 2023 annual meeting of stockholders is advanced or delayed more than 30 days from the date of the Annual Meeting, not later than the later of (i) the 90th day before the 2023 annual meeting or (ii) the 10th day following the day on which public announcement of the date of the 2023 annual meeting is first made by the Company.
In the event that the number of directors to be elected to the Board of Directors is increased and there has been no public announcement naming all of the nominees for director or indicating the increase made by the Company at least 10 days before the last day a stockholder may deliver a notice of nomination in accordance with the preceding sentence, a stockholder’s notice will be considered timely, but only with respect to nominees for any new positions created by such increase, if it is received by the Corporate Secretary at the principal executive offices of the Company not later than the close of business on the 10th day following the day on which such public announcement is first made by the Company.
To be in proper form, a stockholder’s notice must be timely delivered to: Laredo Petroleum, Inc. c/o Corporate Secretary 15 W. Sixth Street, Suite 900 Tulsa, Oklahoma 74119.
Laredo Petroleum, Inc. 2022 Proxy Statement |95
PROXY STATEMENT QUESTIONS & ANSWERS
It must include the information required by our bylaws with respect to the nomination and all other information regarding the proposed nominee and the nominating stockholder required by Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. The Company may refuse to consider any nomination that is not timely or otherwise fails to meet the requirements of our bylaws or the SEC’s rules with respect to the submission of director nominations. A written statement from the proposed nominee consenting to be named as a candidate and, if nominated and elected, to serve as a director should accompany any stockholder nomination.
In addition to the above, to comply with the universal proxy rules (once effective), stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 27, 2023.
Q.
How can I communicate with the Board of Directors?
A.
Stockholders or other interested parties can contact any director, any committee of the Board of Directors, or the Company’s non-management directors as a group, by writing to the Corporate Secretary at the address above.
Comments or complaints relating to the Company’s accounting, internal accounting controls or auditing matters will also be referred to members of the Audit Committee. All such communications will be forwarded to the appropriate member(s) of the Board of Directors.
| | | | | | | In addition to the above, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that complies with the additional requirements of Rule 14a-19(b) under the Exchange Act. | | | | Q. | How can I communicate with the Board of Directors? | | A. | Stockholders or other interested parties can contact any director, any committee of the Board of Directors, or the Company’s non-management directors as a group, by writing to the Corporate Secretary at the address above. Comments or complaints relating to the Company’s accounting, internal accounting controls or auditing matters will also be referred to members of the Audit Committee. All such communications will be forwarded to the appropriate member(s) of the Board of Directors. | | | | | | This Question & Answer section is only meant to give an overview of the proxy statement. For more information, please refer to the material contained in the preceding pages. | | |
96| Laredo Petroleum, Inc. 2022 Proxy Statement
| | | | ADDITIONAL INFORMATION | | | 92 | Vital Energy, Inc. 2023 Proxy Statement |
Additional Information Solicitation of Proxies Solicitation of proxies may be made over the Internet, by mail, personal interview or telephone by officers, directors and regular employees of the Company. The Company may also request banking institutions, brokerage firms, custodians, nominees and fiduciaries to forward solicitation material to the beneficial owners of the common stock that those companies or persons hold of record, and the Company will reimburse the forwarding expenses. Stockholder List In accordance with the Delaware General Corporation Law, the Company will maintain at its corporate offices in Tulsa, Oklahoma, a list of the stockholders entitled to vote at the Annual Meeting. The list will be open to the examination of any stockholder, for purposes germane to the Annual Meeting, during ordinary business hours for 10 days before the Annual Meeting. Proxy Materials, Annual Report and Other Information | | | | Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on May 26, 2022 | | | | | 25, 2023 A Copy of the Proxy Statement, the Proxy Card and the 20212022 Annual Report are Available free of Charge
at http://materials.proxyvote.com/516806 | | |
A copy of the 20212022 Annual Report, as filed with the SEC, will be sent to any stockholder without charge upon written request. One copy of the Notice of Annual Meeting, this Proxy Statement and our 20212022 Annual Report (the “Proxy Materials”) will be sent to stockholders who share an address, unless they have notified the Company that they want to continue receiving multiple packages. A copy of the Proxy Materials will also be sent upon written or oral request to any stockholder of a shared address to which a single copy of the Proxy Materials was delivered. If two or more stockholders with a shared address are currently receiving only one copy of the Proxy Materials, then the stockholders may request to receive multiple packages in the future, or if a stockholder is currently receiving multiple packages of the Proxy Materials, then the stockholder may request to receive a single copy in the future. Such requests may be made by writing to: | | | | | | | | | | | | Laredo Petroleum, Inc.
c/o Corporate Secretary
15 W. SixthVital Energy, Inc.
Santa Fe Plaza
521 E. 2nd Street
Suite 900
1000
Tulsa, Oklahoma 74120
| | | | or by calling
(918) 513-4570 | | | |
The 20212022 Annual Report is also available at the SEC’s website in its EDGAR database at www.sec.gov. Laredo Petroleum, Inc. 2022 Proxy Statement |97
Internet and Phone Voting Internet and phone voting procedures are designed to authenticate stockholder identities, to allow stockholders to give their voting instructions and to confirm that stockholders’ instructions have been recorded properly. Stockholders voting by Internet should remember that the stockholder must bear costs associated with electronic access, such as usage charges from Internet access providers and telephone companies. For shares of stock that are registered in a street name (the stockholder owns shares in the name of a bank, broker or other holder of record on the books of the Company’s transfer agent), you will receive instructions with your proxy materials that you must follow in order to have your shares voted. Please review your proxy or voting instruction card to determine whether you can vote electronically or by phone. SUBMIT A PROXY BY INTERNET—Submit a Proxy by Internet—www.proxyvote.com
For shares of stock that are registered in your name, you may vote by Internet or phone using the following procedures. To vote by Internet, please access www.proxyvote.com, and enter your 16 digit control number located in the upper right-hand portion of your proxy material. Votes submitted by Internet or phone must be received by 11:59 p.m., Eastern Time, on May 25, 2022.24, 2023. The giving of such a proxy will not affect your right to vote in person should you decide to attend the Annual Meeting. SUBMIT A PROXY BY PHONE—Submit a Proxy by Phone—1-800-690-6903
To vote by phone, please dial 1-800-690-6903 and enter your 16 digit control number located in the upper right-hand portion of your proxy material. Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Daylight Time on May 25, 2022.24, 2023. VOTE BY MAILVote by Mail
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided. Electronic Delivery of Future Proxy Materials If you would like to reduce the costs incurred by us in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. | | | | It is important that proxies be returned promptly.Whether or not you expect to attend the meeting in person, you are urged to vote by Internet, by phone or, if you have received paper copies of the proxy material, by completing, signing and returning the proxy in the enclosed postage-paid, addressed envelope. | | |
| | | | By Order of the Board of Directors, | | | | | | | | | | | | Mark D. Denny
Senior Vice President, Secretary and General Counsel | |
Tulsa, Oklahoma
April 7, 20226, 2023 98| Laredo Petroleum, Inc. 2022 Proxy Statement
| | | | ANNEX A | | | 94 | Vital Energy, Inc. 2023 Proxy Statement |
ANNEX A—NON-GAAP FINANCIAL MEASURESAnnex A
Annex A—Non-GAAP Financial Measures The non-GAAP financial measures of Adjusted EBITDAFree Cash Flow, Consolidated EBITDAX and Net Debt, as defined by us, may not be comparable to similarly titled measures used by other companies. Therefore, these non-GAAP financial measures should be considered in conjunction with net income or loss and other financial measures prepared in accordance with GAAP. Adjusted EBITDAFree Cash Flow, Consolidated EBITDAX and Net Debt should not be considered in isolation or as a substitute for GAAP measures, such as net income or loss, operating income or loss or any other GAAP measure of leverage or financial performance. Adjusted EBITDA
Adjusted EBITDAFree Cash Flow (Unaudited)
Free Cash Flow is a non-GAAP financial measure that we define as net cash provided by operating activities (GAAP) before changes in operating assets and liabilities, net, less incurred capital expenditures, excluding non-budgeted acquisition costs. Management believes Free Cash Flow is useful to management and investors in evaluating operating trends in our business that are affected by production, commodity prices, operating costs and other related factors. There are significant limitations to the use of Free Cash Flow as a measure of performance, including the lack of comparability due to the different methods of calculating Free Cash Flow reported by different companies. For a reconciliation of Free Cash Flow (i) for the fiscal years ended December 31, 2022 and 2021, please see page 57 of our Annual Report on Form 10-K for the year ended December 31, 2022, and (ii) for the year ended December 31, 2020, please see pages 64 and 65 of our Annual Report on Form 10-K for the year ended December 31, 2021. Consolidated EBITDAX (Unaudited) Consolidated EBITDAX is a non-GAAP financial measure defined in the Company's Senior Secured Credit Facility as net income or loss (GAAP) plus adjustments for share-settled equity-based compensation,compensation; depletion, depreciation and amortization,amortization; impairment expense, mark-to-market on derivatives, premiums paid or received for commodity derivatives that matured during the period, accretion expense,expense; gains or losses on disposal of assets,assets; mark-to-market on derivatives; accretion expense; interest expense,expense; income taxes and other non-recurring income and expenses. Adjusted EBITDA provides no information regarding a company’s capital structure, borrowings, interest costs, capital expenditures, working capital movement or tax position. Adjusted EBITDA does not represent funds available for future discretionary use because it excludes funds required for debt service, capital expenditures, working capital, income taxes, franchise taxes and other commitments and obligations. However, our management believes Adjusted EBITDA is useful to an investor in evaluating our operating performance because this measure: •
is widely used by investors in the oil and natural gas industry to measure a company’s operating performance without regard to items that can vary substantially from company to company depending upon accounting methods, the book value of assets, capital structure and the method by which assets were acquired, among other factors;
•
helps investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our capital structure from our operating structure; and
•
Consolidated EBITDAX is used by ourthe Company’s management for various purposes, including as a measure of operating performance and compliance under the Company's Senior Secured Credit Facility. Additional information on the calculation of Consolidated EBITDAX can be found in presentationsthe Company's Tenth Amendment to our board of directors andthe Senior Secured Credit Facility as a basis for strategic planning and forecasting.filed with the SEC on November 3, 2022.
There are significant limitations to the use of Adjusted EBITDAConsolidated EBITDAX as a measure of performance, including the inability to analyze the effect of certain recurring and non-recurring items that materially affect our net income or loss and the lack of comparability of results of operations to different companies due to the different methods of calculating Adjusted EBITDAConsolidated EBITDAX reported by different companies. Our measurements of Adjusted EBITDA for financial reporting as compared to compliance under our debt agreements differ.
The following table presents a reconciliation of net income (loss) (GAAP) to Adjusted EBITDAConsolidated EBITDAX (non-GAAP) (i) for the fiscal years ended December 31,periods presented: | | | | | | | | | | | | | | | | | | | | | | (in thousands) | Six months ended December 31, 2021 | (Annualized) Six months ended December 31, 2021(1) | Year ended December 31, 2022 | | Net income | | $ | 353,108 | | | $ | 706,216 | | | $ | 631,512 | | | Plus: | | | | | | | | Share-settled equity-based compensation, net | | 3,877 | | | 7,754 | | | 8,403 | | | Depletion, depreciation and amortization | | 137,270 | | | 274,540 | | | 311,640 | | | Impairment expense | | — | | | — | | | 40 | | | Organizational restructuring expenses | | — | | | — | | | 10,420 | | | (Gain) loss on disposal of assets, net | | (86,298) | | | (172,596) | | | 1,079 | | | Mark-to-market on derivatives: | | | | | | | | Loss on derivatives, net | | 80,868 | | | 161,736 | | | 298,723 | | | Settlements paid for matured derivatives, net | | (222,087) | | | (444,174) | | | (486,753) | | | Settlements received for contingent consideration | | — | | | — | | | 2,457 | | | Accretion expense | | 1,932 | | | 3,864 | | | 3,879 | | | Interest expense | | 61,569 | | | 123,138 | | | 125,121 | | | Loss extinguishment of debt, net | | — | | | — | | | 1,459 | | | Income tax expense | | 5,729 | | | 11,458 | | | 5,502 | | | Consolidated EBITDAX (non-GAAP) | | $ | 335,968 | | | $ | 671,936 | | | $ | 913,482 | |
(1)Represents the second half of 2021 and 2020, please see pages 65 and 66 of our Annual Report on Form 10-K for the year ended December 31, 2021, and (ii) for the year ended December 31, 2019, please see pages 62 and 63 of our Annual Report on Form 10-K for the year ended December 31, 2020.annualized due to significant acquisitions in 2021. Net Debt (Unaudited) Net Debt, a non-GAAP financial measure, is calculated as the face value of long-term debt plus any outstanding letters of credit, less cash and cash equivalents.equivalents, where cash and cash equivalents are capped at $50 million when there are borrowings on the Senior Secured Credit Facility. Management believes Net Debt is useful to management and investors in determining the Company’s leverage position since the Company has the ability, and may decide, to use a portion of its cash and cash equivalents to reduce debt. Net Debt as of December 31, 2021, December 31, 20202022 and December 31, 20192021 was $1.387 billion, $1.145$1.080 billion and $1.134$1.438 billion, respectively.
| | | | | | | 96 | Vital Energy, Inc. 2023 Proxy Statement |
Annex B SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF LAREDO PETROLEUM HOLDINGS, INC. VITAL ENERGY, INC. (Originally incorporated on August 12, 2011) FIRST: The name of the corporation is Laredo Petroleum HoldingsVital Energy, Inc. 2022 Proxy Statement |A-1
(hereinafter referred to as the “Corporation”). SECOND: The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, County of New Castle, Wilmington, Delaware, 19801. The name of the registered agent of the Corporation at that address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law. FOURTH: A. The total number of shares of all classes of stock which the Corporation shall have authority to issue is five hundred million (500,000,000)90,000,000, consisting of four hundred and fifty million (450,000,000)40,000,000 shares of Common Stockcommon stock, par value one cent ($.010.01) per share (the “Common Stock”), and fifty million (50,000,000) shares of Preferred Stockpreferred stock, par value one cent ($.010.01) per share (the “Preferred Stock”). B. The board of directors is authorized, subject to any limitations prescribed by law, to provide for the issuance of shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware (such certificate being hereinafter referred to as a “Preferred Stock Designation”), to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences, and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any Preferred Stock Designation. C. Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any Preferred Stock Designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation (including any Preferred Stock Designation relating to any series of Preferred Stock). FIFTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders: A. The business and affairs of the Corporation shall be managed by or under the direction of the board of directors. In addition to the powers and authority expressly conferred upon them by statute or by this Certificate of Incorporation or the bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by written ballot unless the bylaws so provide. C. Special meetings of stockholders of the Corporation may be called only by the board of directors acting pursuant to a resolution adopted by a majority of the Whole Board. For purposes of this Certificate of Incorporation, the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships. D. An annual meeting of stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the board of directors shall fix. SIXTH: A. The number of directors shall be fixed from time to time exclusively by the board of directors pursuant to a resolution adopted by a majority of the Whole Board. B. Until the Triggering Event (as defined below), and subjectSubject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, at each annual meeting of stockholders, directors shall be elected for a term of one year ending on the date of the office to expire at the third succeeding annual meeting of stockholders following the annual meeting at which the director was elected, with each director to hold office until his or her successor shall have been duly elected and qualified. Upon the tenth business day after the earlier of (i) the public announcement, after the consummation of the initial public offering of the Common Stock (the “IPO”), by the Corporation or affiliates of Warburg Pincus LLC that, or (ii) the public disclosure, after the IPO, of facts by the Corporation or affiliates of Warburg Pincus LLC indicating that, affiliates of Warburg Pincus LLC no longer beneficially own more than fifty percent (50%) of the outstanding Common Stock (the “Triggering Event”) and subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the board of directors, other than those directors who may be elected by the holders of any series of preferred stock under specified circumstances, shall be divided into three classes, with the term of office of the first class to expire at the first annual meeting of stockholders following the Triggering Event, the term of office of the second class to expire at the second annual meeting of stockholders following the Triggering Event and the term of office of the third class to expire at the third annual meeting of stockholders following the Triggering Event, with each director to hold office until his or her successor shall have been duly elected and qualified, and the board of directors shall be authorized to assign members of the board of directors already in office, other than those directors who may be elected by the holders of any series of Preferred Stock under specified circumstances, to such classes at the time such classification becomes effective. At each annual meeting of stockholders following the Triggering Event, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified. C. If authorized by a resolution of the board of directors, directors may be elected by the stockholders to fill any vacancy on the board of directors, regardless of how such vacancy shall have been created. D. A majority of the Whole Board shall constitute a quorum for all purposes at any meeting of the board of directors, and, except as otherwise expressly required by law or by this Certificate of Incorporation, all matters shall be determined by the affirmative vote of a majority of the directors present at any meeting at which a quorum is present. E. 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, disqualification, removal from office or other cause shall, unless otherwise required by law or by resolution of the board of directors, be filled only by a majority vote of the directors then in office, though less than a quorum (and not by stockholders), and directors so chosen shall serve for a term expiring (i) if the Triggering Event has not occurred, at the succeeding annual meeting of stockholders and (ii) if the Triggering Event has occurred, at the annual meeting of stockholders at which the term of office of the class to which they have been chosen expires, in either case with each director to hold office until his or her successor shall have been duly elected and qualified. No decrease in the authorized number of directors shall shorten the term of any incumbent director.
| | | | | | | 98 | Vital Energy, Inc. 2023 Proxy Statement |
F. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the bylaws of the Corporation. G. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director, or the entire board of directors, may be removed from office at any time, with or without cause if the Triggering Event has not occurred, and only for cause if the Triggering Event has occurred, but in either caseand only by the affirmative vote of the holders of at least seventy-five percent (75%) of the voting power of all of the then-outstanding shares of capital stock of the Corporation then entitled to vote at an election of directors, voting together as a single class. SEVENTH: The board of directors is expressly empowered to adopt, amend or repeal bylaws of the Corporation. Any adoption, amendment or repeal of the bylaws of the Corporation by the board of directors shall require the approval of a majority of the Whole Board. The stockholders shall also have power to adopt, amend or repeal the bylaws of the Corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least seventy-five percent (75%) of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class, shall be required to adopt, amend or repeal any provision of the bylaws of the Corporation. EIGHTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of the foregoing paragraph shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. All references in this Article EIGHTH to a director shall also be deemed to refer to any such director acting in his or her capacity as a Continuing Director (as defined below). NINTH: Subject to the rights of the holders of any series of Preferred Stock, any action required or permitted to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding capital stock of the Corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of the capital stock of the Corporation entitled to vote thereon were present and voted; provided, however, that, following the IPO, on and after the date on which affiliates of Warburg Pincus LLC cease to beneficially own more than fifty percent (50%) of the outstanding Common Stock, any action required or permitted to be taken by stockholders may be effected only at a duly called annual or special meeting of stockholders and may not be effected by a written consent or consents by stockholders in lieu of such a meeting. TENTH: The Corporation reserves the right to amend or repeal any provision contained in this Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation; provided, however, that, notwithstanding any other provision of this Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of this corporation required by law or by this Certificate of Incorporation, and the affirmative vote of the holders of at least seventy-five percent (75%) of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class, shall be required to amend or repeal this Article TENTH, Sections C or D of Article FIFTH, Article SIXTH, Article SEVENTH,or Article EIGHTH or Article ELEVENTH.
ELEVENTH:[RESERVED] ELEVENTH:To the fullest extent permitted by applicable law, the Corporation, on behalf of itself and its subsidiaries, renounces any interest or expectancy of the Corporation and its subsidiaries in any business opportunity, transaction or other matter in which Warburg Pincus LLC or any private fund that it manages or advises, any of their officers, directors, partners, employees, and any portfolio company in which such entities or persons have an equity interest (other than the Corporation and its subsidiaries) (each, a “Specified Party”) participates or desires or seeks to participate in and that involves any aspect of the energy business or industry, even if the opportunity is one that the Corporation or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so and each such Specified Party shall have no duty to communicate or offer such business opportunity to the Corporation and, to the fullest extent permitted by applicable law, shall not be liable to the Corporation or any of its subsidiaries or any stockholder for breach of any fiduciary or other duty, as a director or officer or controlling stockholder or otherwise, by reason of the fact that such Specified Party pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to the Corporation or its subsidiaries. Notwithstanding the foregoing, the Corporation, on behalf of itself and its subsidiaries, does not hereby renounce any interest or expectancy it or its subsidiaries may have in any business opportunity, transaction or other matter that is offered in writing solely to (1) a director or officer of the Corporation or its subsidiaries who is not also a Specified Party, or (2) a Specified Party who is a director, officer or employee of the Corporation and who is offered such opportunity solely in his or her capacity as a director, officer or employee of the Corporation. Neither the amendment nor repeal of this Article ELEVENTH, nor the adoption of any provision of this Certificate of Incorporation or the bylaws of the Corporation, nor, to the fullest extent permitted by Delaware law, any modification of law, shall adversely affect any right or protection of any person granted pursuant hereto existing at, or arising out of or related to any event, act or omission that occurred prior to, the time of such amendment, repeal, adoption or modification. If any provision or provisions of this Article ELEVENTH shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (a) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article ELEVENTH (including, without limitation, each portion of any paragraph of this Article ELEVENTH containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) to the fullest extent possible, the provisions of this Article ELEVENTH (including, without limitation, each such portion of any paragraph of this Article ELEVENTH containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service to or for the benefit of the Corporation to the fullest extent permitted by law. This Article ELEVENTH shall not limit any protections or defenses available to, or indemnification rights of, any director or officer of the Corporation under this Certificate of Incorporation or applicable law. Any person or entity purchasing or otherwise acquiring any interest in any securities of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article ELEVENTH. TWELFTH: Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action asserting a claim arising pursuant to, or a claim with respect to the interpretation or application of, any provision of the Delaware General Corporation Law, this Certificate of Incorporation or the bylaws of the Corporation or (d) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article TWELFTH.
| | | | | | | 100 | Vital Energy, Inc. 2023 Proxy Statement |
THIRTEENTH: The board of directors is expressly authorized to cause the Corporation to issue rights pursuant to Section 157 of the Delaware General Corporation Law and, in connection therewith, to enter into any agreements necessary or convenient for such issuance, and to enter into other agreements necessary and convenient to the conduct of the business of the Corporation. Any such agreement may include provisions limiting, in certain circumstances, the ability of the board of directors of the Corporation to redeem the securities issued pursuant thereto or to take other action thereunder or in connection therewith unless there is a specified number or percentage of Continuing Directors then in office. Pursuant to Section 141(a) of the Delaware General Corporation Law, the Continuing Directors shall have the power and authority to make all decisions and determinations, and exercise or perform such other acts, that any such agreement provides that such Continuing Directors shall make, exercise or perform. For purposes of this Certificate of Incorporation and any such agreement, the term “Continuing Directors” shall mean (1) those directors who were members of the board of directors of the Corporation at the time the Corporation entered into such agreement and any director who subsequently becomes a member of the board of directors, if such director’s nomination for election to the board of directors is recommended or approved by the majority vote of the Continuing Directors then in office and (2) such other members of the board of directors, if any, designated in, or in the manner provided in, such agreement as Continuing Directors. IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of the Certificate of Incorporation of this Corporation, and which has been duly adopted in accordance with Sections 228, 242 and 245 of the Delaware General Corporation Law, has been executed by its duly authorized officer this 19th day of December, 20112023.
| | | | | | LAREDO PETROLEUM HOLDINGSVITAL ENERGY, INC. | | | | By: | | | Randy A. FoutchJason Pigott | | ChairmanPresident and Chief Executive Officer |
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