ITEM 11. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This compensation discussion and analysis provides information about our compensation objectives and policies for our named executive officers. The named executive officers and the individuals included in our Summary Compensation Table below are:
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Scott Smith, our President and Chief Executive Officer;
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Richard Robert, our Executive Vice President, Chief Financial Officer and Secretary; and
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Britt Pence, our Executive Vice President of Operations.
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Objectives and Summary of Our Executive Compensation Program
The compensation committee of our Board of Directors administers our executive compensation plans and agreements and makes compensation-related determinations regarding our executive officers. Our primary goal with respect to executive compensation has been to attract and retain the most talented and dedicated executives possible. Through our FY 2016 Employment Agreements with our named executive officers (effective January 1, 2016, for Messrs. Smith, Robert and Pence), as defined below, we have linked annual cash incentives to the achievement of specified performance objectives in an effort to align executives’ incentives with the creation of unitholder value. We also align executives’ interests with the interests of our unitholders through our use of long-term equity incentive awards under our Long-Term Incentive Plan (“LTIP”). Please refer to “Elements of Compensation” and “2016 Executive Compensation Components” for additional information regarding our annual cash incentive and long-term equity incentive programs.
In 2014, we held our second unitholder advisory vote under Section 14A of the Exchange Act on the compensation paid to our named executive officers for 2013, which resulted in over 90% of the votes cast approving such compensation. As recommended by our Board of Directors, a majority of unitholders expressed their preference for an advisory vote on executive compensation occurring every three years, and we have implemented that recommendation. As a result, our third unitholder advisory vote on executive compensation will occur as part of the 2017 Annual Meeting. In evaluating our executive compensation program for 2015, 2016 and 2017, our compensation committee did not make any changes to our executive compensation program or policies as a result of the 2014 “say on pay” advisory vote and, given the support unitholders expressed for our compensation programs, generally elected to apply the same principles in determining the types and amounts of compensation to be paid to our named executive officers for such years. The compensation committee intends to monitor the results of future “say on pay” advisory votes when evaluating the effectiveness of our executive compensation policies and practices, particularly in the event of a negative vote or significant changes in the percentage of favorable votes with regard to any such proposal.
The Compensation-Setting Process
Compensation Committee Meetings
. Our compensation committee meets periodically throughout each year as required to carry out its duties. The chairman of the compensation committee works with our Chief Executive Officer to establish each meeting agenda.
The compensation committee has established an annual process for determining executive compensation. For each fiscal year, the compensation committee will review the base salaries of the named executive officers to determine whether any increase is appropriate. In addition, the compensation committee makes equity award grants under the LTIP to the named
executive officers for each fiscal year, either in the form of restricted unit grants or phantom unit grants. Pursuant to the terms of the FY 2016 Employment Agreements with the named executive officers, which are described below under “—Employment Agreements,” base salary changes will be effective January 1, and equity award grants will be made effective January 1 of the following year, and annual performance-based cash bonuses will be made from 2016 forward.
The compensation committee typically meets at least once per year in the presence of our Chief Executive Officer and our Chief Financial Officer. Depending upon the agenda for a particular meeting, the compensation committee may also invite other directors to participate in compensation committee meetings. The compensation committee also meets in executive session without management. The chairman of the compensation committee works with our Chief Executive Officer and with its independent compensation consultant, Longnecker & Associates (“Longnecker”), to assemble meeting materials, which are distributed to compensation committee members for review in advance of each meeting.
Role of Executive Officers
. Except with respect to his own compensation, our Chief Executive Officer, with advice from our other executive officers as appropriate, plays a significant role in the compensation committee’s establishment of compensation levels for our executive officers. The most significant aspects of his role in the process are:
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evaluating performance of the other named executive officers; and
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recommending base salary levels and LTIP awards.
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With respect to compensation for the named executive officers, (other than our Chief Executive Officer), the compensation committee meets with our Chief Executive Officer outside the presence of all our other executive officers. The compensation committee meets outside the presence of all of our executive officers to consider appropriate compensation for our Chief Executive Officer.
Role of Compensation Consultant
. When the compensation committee has chosen to employ an independent compensation consultant, it has chosen Longnecker as its consultant since 2008. In 2015, the compensation committee solicited the services of Longnecker to conduct an annual competitive market analysis of the base salary levels of our named executive officers’. The peer group (“Peer Group”) that Longnecker surveyed for its November 2015 analysis consisted of the following companies:
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Breitburn Energy Partners LP
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Memorial Production Partners LP
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Our compensation committee evaluates individual executive performance with a goal of setting targeted total direct compensation (base salary plus targeted annual incentives plus long term equity incentives) for our named executive officers over time at levels up to the 75th percentile of executives in other companies of similar size and stage of development engaged in the acquisition and development of mature, long-lived natural gas and oil properties, while also considering our relative performance and our own strategic goals. In past years Longnecker has assisted the compensation committee with this analysis. For the 2014 and 2015 years, in light of our historic long term equity incentive granting practices, our total unitholder return performance in recent years and our desire to retain key members of our executive team, the compensation committee did not increase the base salary of the Chief Executive Officer or Chief Financial Officer, yet remained committed to the long term equity incentive opportunity grants that were set forth within the employment agreements that were then in effect. For 2016 to 2018, the FY 2016 Employment Agreements, effective as of January 1, 2016 and described below commit us to make performance-based annual bonuses and equity awards (see “Employment Agreements” below).
Elements of Compensation
We have determined that our executives’ compensation should consist of the following elements:
Base Salary
. We provide our named executive officers and other employees with a base salary to provide them with a reasonable base level of monthly income relative to their role and responsibilities they perform during the fiscal year. Salary levels are typically considered annually as part of our performance review process as well as upon a promotion or other change in job responsibility. Merit-based increases to salaries of our executives are based on the compensation committee’s assessment of the individual’s performance and available survey data for our Peer Group. During its review of base salaries for executives, the compensation committee will primarily consider:
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market data to be provided by outside consultants;
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internal review of the executive’s compensation, both individually and relative to other executive officers; and
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individual performance of the executive.
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Annual Cash Incentive Compensation
. Annual cash incentive compensation is intended to compensate officers for achieving financial and operational goals and for achieving individual annual performance objectives. Our annual cash incentive compensation program links annual cash incentives with the achievement of specified performance objectives in an effort to align executives’ incentives with creation of unitholder value. Currently, a portion of the annual cash incentive award for each named executive officer is tied to specified company performance objectives and a portion of the annual cash incentive award is discretionary and tied to individual performance. Individual performance objectives may vary depending on the individual executive, but relate generally to strategic factors such as expansion of our operations and to financial factors such as improving our results of operations and increasing our monthly cash distributions. The actual amount of incentive compensation for each year is determined following a review of company performance and each executive’s individual performance and contribution to our strategic goals conducted during the first quarter of the following year, subject to the formula-based changes described below that took effect in 2016.
LTIP Awards
. We believe that long-term performance is achieved through an ownership culture that encourages long-term performance by our executive officers through the use of unit-based awards. We adopted the LTIP prior to the consummation of our initial public offering. Our LTIP was adopted to incentivize and reward employees, consultants, directors and employees who perform services for us. The LTIP does not provide for formulaic or automatic grants of any awards, however, the FY 2016 Employment Agreements with our named executive officers do provide for annual equity awards, as described beginning on page 11. It is a traditional omnibus plan that permits the grant of various types of awards (units, options, appreciation rights, restricted units and phantom units) as determined by our compensation committee, in its sole discretion, subject to the formula-based changes described below that took effect in 2016.
The compensation committee has the authority under the LTIP to award incentive compensation to our executive officers in such amounts and on such terms as the compensation committee determines in its sole discretion. The compensation
committee considers data provided by Longnecker in determining which individuals who perform services (directly or indirectly) for our benefit will receive awards, the type of award or awards, the amount and the performance and vesting terms of such awards. Through the year ended December 31, 2016, only unit options, restricted units and phantom units (including appreciation-only awards more akin to unit appreciation rights) have been granted under the LTIP and these awards occurred at levels required under the FY 2016 Employment Agreements entered into with our named executive officers.
Through the year ended December 31, 2016, outstanding restricted units and phantom units (including appreciation-only awards) under the LTIP were eligible to receive cash distributions paid on certain of the units awarded. These cash distributions were paid to the award holders at the same time distributions were paid to unitholders generally. Alternatively, participants could have elected to defer all or any portion of the distributions with respect to certain awards.
Other Compensation
. Each named executive officer is eligible to participate in all benefit plans and programs that are or in the future may be available to our other executive employees, including any profit-sharing plan, thrift plan, health insurance or health care plan, disability insurance, pension plan, supplemental retirement plan, vacation and sick leave plan, and other similar plans. The compensation committee in its discretion may revise, amend or add to an officer’s executive benefits and perquisites as it deems advisable. We believe that these benefits and perquisites are typically provided to senior executives of comparable companies in our industry.
Perquisites
We believe in a simple, straight-forward compensation program and as such, named executive officers are not provided unique perquisites or other personal benefits. The compensation committee periodically reviews the use of potential perquisites that could result in personal benefits to our named executive officers. Consistent with the compensation committee’s strategy, no perquisites or other personal benefits exceed or are expected to exceed $10,000 annually for any of our named executive officers.
Retirement Savings Plan
All employees, including our named executive officers, may participate in our Retirement Savings Plan, or 401(k) Plan. We provide this plan to help our employees save for retirement in a tax-efficient manner. Each employee may currently make pre-tax contributions of up to $18,000 (for 2016) of their base salary if they are under 50 years old and $24,000 (for 2016) of their base salary if they are over 50 years old. We make “safe harbor” matching contributions to the 401(k) Plan equaling up to 6% of compensation (subject to certain adjustments) for each eligible employee, including the named executive officers (up to a maximum amount of $15,900 for 2016). All contributions are fully vested. All amounts that we contributed to the 401(k) Plan for 2016 on behalf of our named executive officers are disclosed in the “Summary Compensation Table.”
Nondiscriminatory Health and Welfare Benefits
All eligible employees, including our named executive officers, may participate in our health and welfare benefit programs, including medical, dental and vision care coverage, disability insurance and life insurance.
Employment Agreements
Certain terms of our named executive officers’ compensation are governed by employment agreements. We believe that these employment agreements assist us in attracting and retaining talented and dedicated executives by clearly setting forth the terms of employment and providing certainty to both parties. We maintain employment agreements with our named executive officers to ensure they will perform their roles for an extended period of time.
We entered into amended employment agreements (the “FY 2016 Employment Agreements”) with Messrs. Smith, Robert and Pence on March 18, 2016, which were effective January 1, 2016, in each case, to set forth the revised terms of each executive’s employment relationship with us after considering then-current market conditions, the executives’ then-current level of compensation, the recommendations of our Chief Executive Officer (with respect to the compensation of Mr. Robert
and Mr. Pence) and the recommendations for executive compensation as contained in Longnecker’s executive compensation review from December 2015.
In addition to establishing minimum base salaries and annual performance-based bonus opportunities, the FY 2016 Employment Agreements also provided the named executive officers with annual equity-based compensation awards, consisting of restricted units and/or phantom units granted under the LTIP. Each of the executives is eligible to receive annual equity-based compensation awards having an aggregate fair market value equal to the executive's current annual base salary times a set multiplier, which is five and a half (5.5) times in the case of Mr. Smith, four (4.0) times in the case of Mr. Robert, and three and a half (3.5) times in the case of Mr. Pence. These annual equity-based compensation award grants are intended to reward these individuals for their service with Vanguard and to align the interests of management with those of our unitholders. Our executive officers’ FY 2016 Employment Agreements also provided the executives with certain other benefits, including reimbursement of business and entertainment expenses. The initial term of the FY 2016 Employment Agreements with Messrs. Smith, Robert and Pence ends on January 1, 2019.
2016 Executive Compensation Components
For the year ended December 31, 2016, the principal components of compensation for our named executive officers determined by the FY 2016 Employment Agreements were:
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Short-term compensation:
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annual incentive compensation awards; and
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distributions on restricted units and phantom unit awards
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Long-term equity compensation:
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awards of restricted units
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Retirement and other benefits
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Our compensation committee believes that a large amount of “at-risk” compensation is appropriate to retain and motivate our named executive officers in providing future services to us. In addition, our compensation committee seeks to provide a mix of compensation elements that is similar to the mix of compensation elements provided by other companies within our general peer group. We do not allocate cash or non-cash compensation, or short-term or long-term compensation, to the executives under any specific formula (other than in accordance with the FY 2016 Employment Agreements), but instead take into consideration all factors that we think are appropriate to consider at the time that compensation decisions are being made.
Base Salary
The 2015 Longnecker Report concluded that, in comparison to Chief Executive Officer base salaries at the Peer Group companies, our Chief Executive Officer’s base salary was, on average, approximately 93% of the base salaries of comparable executive officers at companies in the 25th percentile of our Peer Group and 77% of the base salaries of comparable executive officers at companies in the 50th percentile of our Peer Group. The 2015 Longnecker Report also concluded that our Chief Financial Officer were receiving a base salary that generally aligned with the base salaries of chief financial officers at companies in the 75th percentile of our Peer Group. As a result of this review and the individual contributions and responsibilities of our named executive officers during the year, the compensation committee determined that it was appropriate to increase the base salaries of our named executive officers for 2016 in order to align their targeted total direct compensation with the market 75th percentile. The table below reflects the base salary rates for our named executive officers:
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Named Executive Officer
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Base Salary as of January 1, 2016
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Base Salary as of January 1, 2017
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Base Salary as of January 1, 2018
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Scott W. Smith
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$600,000
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$650,000
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$700,000
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Richard A. Robert
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$470,000
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$490,000
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$510,000
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Britt Pence
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$440,000
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$450,000
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$460,000
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Annual Cash Incentive Compensation
The annual cash incentive awards for our named executive officers for 2016 were based on the annual cash incentive compensation program established by our Board of Directors and set forth in each named executive officer’s FY 2016 Employment Agreement. Potential annual cash incentive awards are comprised of four parts: (i) Adjusted EBITDA Results (Actual to Forecast) (“AER”); (ii) Production Results (Actual to Forecast) (“PR); (iii) Lease Operating Expenses (Actual to Forecast) (“LOE”); and (iv) Cash General and Administrative Expenses (Actual to Forecast) (“G&A”). The four components each individually comprise 25% of the aggregate potential annual bonus. The annual cash incentive awards are not subject to a minimum payout, but the maximum aggregate payout may not exceed two times an executive officer’s base salary. The chart below illustrates the target bonus opportunity for each named executive officer with respect to each of the four bonus components:
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Target Bonus Opportunities
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Target Bonus Opportunity for AER Component
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Target Bonus Opportunity for PR Component
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Target Bonus Opportunity for LOE Component
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Target Bonus Opportunity for G&A Component
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Scott W. Smith
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$150,000
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$150,000
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$150,000
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$150,000
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Richard A. Robert
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$117,500
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$117,500
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$117,500
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$117,500
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Britt Pence
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$110,000
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$110,000
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$110,000
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$110,000
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The AER component is calculated by comparing the actual Adjusted EBITDA Results to the forecast. The 2016 targets were as follows for this component of the bonus:
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Percentage of Target Bonus Opportunity for AER Component Earned
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12.5%
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18.75%
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25%
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31.25%
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37.5%
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43.75%
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50%
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AER (in MM)
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>
$332.4
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$343.0
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>
$353.6
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>
$364.2
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$374.8
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>
$385.4
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>
$396.0
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The PR component is calculated by comparing the actual Production Results to the forecast. The 2016 targets were as follows for this component of the bonus:
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Percentage of Target Bonus Opportunity for PR Component Earned
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12.5%
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18.75%
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25%
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31.25%
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37.5%
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43.75%
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50%
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PR (Mcfe/d)
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<419.9
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428.7
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437.4
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446.1
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454.9
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>
463.62
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472.4
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The LOE component is calculated by comparing the actual lease operating expenses to the forecast. The 2016 targets were as follows for this component of the bonus:
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Percentage of Target Bonus Opportunity for LOE Component Earned
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12.5%
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18.75%
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25%
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31.25%
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37.5%
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43.75%
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50%
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LOE (in MM)
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>
$172.2
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>$168.9
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<
$165.6
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<
$162.3
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<
$159.0
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<
$155.7
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<
$152.4
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The G&A component is calculated by comparing the actual cash general and administrative expenses to the forecast. The 2016 targets were as follows for this component of the bonus:
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Percentage of Target Bonus Opportunity for G&A Component Earned
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12.5%
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18.75%
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25%
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31.25%
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37.5%
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43.75%
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50%
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G&A (in MM)
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<
$43.1
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<
$42.2
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$41.4
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$40.6
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$39.7
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$38.9
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$38.1
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For 2016, the Board of Directors did not use a discretionary multiplier to determine bonuses, due to its determination that its formula-based approach provided suitable and appropriate executive compensation.
For 2016, our achievement with respect to the specified performance goals and the amounts awarded to the named executive officers for each of the four components of the annual cash incentive bonus are reflected in the table below:
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Executive Officer
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AER Bonus Component
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PR Bonus Component
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LOE Bonus Component
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G&A Bonus Component
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Total Bonus Amount
(2)
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Performance Achieved
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Bonus Multiplier
(1)
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Bonus Amount
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Performance Achieved
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Bonus Multiplier
(1)
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Bonus Amount
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Performance Achieved
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Bonus Multiplier
(1)
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Bonus Amount
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Performance Achieved
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Bonus Multiplier
(1)
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Bonus Amount
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Scott W. Smith
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$395.8
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43.75%
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$262.5
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432.7
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18.75%
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$112.5
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$159.7
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31.25%
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$187.5
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$35.0
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50%
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$300.0
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$862,500
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Richard A. Robert
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$395.8
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43.75%
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$205.6
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432.7
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18.75%
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$88.1
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$159.7
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31.25%
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$146.9
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$35.0
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50%
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$235.0
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$675,600
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Britt Pence
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$395.8
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43.75%
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$192.5
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432.7
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18.75%
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$82.5
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$159.7
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31.25%
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$137.5
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$35.0
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50%
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$220.0
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$632,500
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(1) For each component, the “Bonus Multiplier” equals the percentage of Target Bonus Opportunity (identified in the chart above entitled “Target Bonus Opportunities” for each component) earned with respect to such component.
(2) The 2016 bonus was calculated quarterly on a cumulative basis for each of the four components and was paid out in cash following the public release of quarterly earnings. As a result of the ongoing Chapter 11 Cases, we have no authority to pay the fourth quarter bonuses to the named executive officers. Therefore, of the total calculated annual bonus amounts reflected in the table above, only $703,125, $550,782 and $515,625 were paid to Messrs. Smith, Robert and Pence, respectively, for the first three quarters of 2016.
Cash Distributions on Unvested Restricted Unit Awards and Payments on Phantom Unit Awards
For the year ended December 31, 2016, participants, including our named executive officers, who held outstanding restricted unit grants or phantom unit grants (including phantom units that are designed as appreciation vehicles and act as unit appreciation rights) received current distributions paid on the units awarded, with the underlying units being retained in our custody and subject to restrictions on sale or transfer until the restrictions lapse (in the case of restricted units) or the awards are settled (in the case of phantom units). Effective for awards made after January 1, 2016, distribution equivalent rights for the foregoing awards provide that 50% of any distributions with respect to their units would be paid immediately, with the
remainder being paid as vesting occurred. Alternatively, with respect to certain phantom unit awards,
participants could elect to defer all or any portion of these distributions until payment of the underlying award. Each of our named executive officers received the following cash distributions on their unvested restricted units and their phantom unit awards during 2016:
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Name
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2016 Distributions on Unvested Restricted Units
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2016 Payment on Phantom Units
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Scott W. Smith
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$
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4,500
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$
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61,082
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Richard A. Robert
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$
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3,375
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$
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36,939
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Britt Pence
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$
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—
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$
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28,970
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Long-Term Incentive Compensation
In keeping with our philosophy that compensation should incentivize executives and create long-term value for our unitholders, we provide a significant portion of our named executive officers’ compensation in the form of long-term equity incentive compensation. We typically grant long-term equity awards under the LTIP to our named executive officers each year; however, pursuant to the FY 2016 Employment Agreements (and the agreements that preceded them), equity awards are made effective January 1 of the year following the performance year. As a result, the annual equity awards for the 2016 performance year were made on January 1, 2017, and, in accordance with SEC rules, will be reported in the Summary Compensation Table as 2017 compensation in our fiscal year 2017 Form 10-K or the proxy statement for our 2018 Annual Meeting of Unitholders. The awards that are reflected in our Summary Compensation Table for the 2016 year relate to the awards that we granted on January 4, 2016, but which were granted with respect to the 2015 performance year.
As described above under “—Employment Agreements,” each of our named executive officers is eligible to receive an annual equity award with an aggregate fair market value equal to the executive’s annual base salary rate (on the date of grant) multiplied by a specified multiplier. Accordingly, on January 1, 2016 with respect to the 2015 performance year, and on January 1, 2017 with respect to the 2016 performance year, the named executive officers each received an award of restricted units with an aggregate fair market value on the date of grant equal to (i) five and a half (5.5) times base salary, in the case of Mr. Smith, (ii) four (4) times base salary, in the case of Mr. Robert, and (iii) three and a half (3.5) times base salary, in the case of Mr. Pence. The restricted units vest in three substantially equal annual installments on the first three anniversaries of the date of grant of the awards, subject to continued employment by the executive. Each executive is entitled to receive distribution equivalent rights with respect to the restricted units, subject to immediate payout of 5% of unit distributions and to the remainder being subject to the same vesting requirements as the underlying restricted units and will be paid at the time the restricted units vest.
Termination Arrangements and Change in Control Provisions
The FY 2016 Employment Agreements with our named executive officers provide for compensation to be paid under certain conditions, such as following a change in control, upon a termination by us “without cause” or by the executive for “good reason” or due to the executive’s death or disability, each as defined in the applicable agreement. In addition, the vesting of outstanding restricted unit and phantom unit awards granted under our LTIP may be accelerated, and payments of certain previously vested phantom units may be triggered, in the event of certain occurrences, such as a change in control or specified terminations of employment. These provisions are designed to meet the following objectives:
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Change in Control
. In certain scenarios, the potential for merger or being acquired may be in the best interests of our unitholders. As a result, we provide compensation to certain executives following a change in control transaction to promote the ability of the officer to act in the best interests of our unitholders. None of our named executive officers is entitled to receive a gross up payment for any potential excise taxes that may be imposed on any change in control payment.
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Termination Without Cause or For Good Reason
. If we terminate the employment of an executive officer “without cause” or the executive officer terminates his employment for “good reason” (in each case, as defined in the applicable
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agreement), we are obligated to pay the executive certain compensation and other benefits as described in greater detail in “Potential Payments upon Termination or Change in Control” below. Both parties have mutually agreed to severance terms that would be in place prior to any termination event. This provides us with more flexibility to make a change in senior management if such a change is in the best interests of us and our unitholders.
Risk Considerations in our Overall Compensation Program
We believe that our compensation program is structured in such a way as to discourage excessive risk-taking. In making this determination, we considered various aspects of our compensation program, including the mix of fixed and performance-based compensation for management and other key employees. Our performance-based compensation awards are designed to reward both short- and long-term performance. By linking a portion of total compensation to our long-term performance, we mitigate any short-term risk that could be detrimental to our long-term best interests and the creation of unitholders value. Our equity-based performance awards are subject to multi-year vesting periods and derive their value from our total performance, which we believe further encourages decision-making that is in the long-term best interests of us and our unitholders. We believe that in the aggregate, our compensation program discourages any risk-taking that could be detrimental to the long-term interests of Vanguard, our performance, or our unit price. In conclusion, we believe that our compensation policies and practices for all employees, including executive officers, do not create risks that are reasonably likely to have a material adverse effect on us.
Tax and Accounting Implications
Accounting for Unit-Based Compensation
We account for unit-based payments for all awards under our LTIP in accordance with the requirements of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. The compensation committee reviews the FASB ASC Topic 718 grant date value in connection with granting equity awards.
Tax Considerations of Executive Compensation
Section 162(m) of the Internal Revenue Code and the regulations that accompany it provide that the deductibility of compensation paid to certain executive officers may be limited in certain circumstances. As a limited liability company, we are not subject to Section 162(m).
Section 409A of the Internal Revenue Code governs the payment of deferred compensation. Failure to comply with the requirements of Section 409A can result in an additional 20% tax (and late payment penalties) on noncompliant payments to executives, and we intend that payments under our FY 2016 Employment Agreements and the LTIP comply with, or are exempt from, the payment restrictions of Section 409A or the regulations thereunder.
Compensation-Related Governance Practices
Unit Ownership Guidelines
We believe that broad-based unit ownership by our employees, including our named executive officers, is effective in increasing the alignment between the interests of our employees and our unitholders. We do not, however, have a formal requirement for unit ownership by any group of employees or directors.
Clawback Policy
To date, we have not adopted a formal clawback policy to recoup incentive based compensation upon the occurrence of a financial restatement, misconduct, or other specified events. However, the compensation committee recognizes the practical, administrative and other implications of implementing and enforcing a clawback policy and intends to adopt such a policy in compliance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 once additional guidance is promulgated and finalized by the SEC.
Securities Trading Policy
All of our officers, employees and directors are subject to our Insider Trading Policy, which, among other things, prohibits officers, employees and directors from engaging in certain short-term or speculative transactions involving our securities.
Compensation Committee Report
The 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 Form 10-K/A.
Loren Singletary, Chairman
Bruce W. McCullough
Richard Anderson
Notwithstanding anything to the contrary set forth in any of our previous or future filings under the Securities Act or the Securities Exchange Act that might incorporate this Form 10-K/A or future filings with the SEC, in whole or in part, the preceding report shall not be deemed to be “soliciting material” or to be “filed” with the SEC or incorporated by reference into any filing except to the extent the foregoing report is specifically incorporated by reference therein.
2016 Summary Compensation Table
The following table sets forth certain information with respect to the compensation paid to our named executive officers for the fiscal years ended December 31, 2016, 2015 and 2014.
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Name and Principal Position
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Year
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Salary
(1)
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Bonus
(2)
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Unit
Awards
(3)
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Non-Equity Incentive Plan Compensation
(4)
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All Other Compensation
(5)
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Total
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Scott W. Smith
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2016
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$
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600,000
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$
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0
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$
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3,300,001
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$
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862,500
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$
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15,900
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$
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4,778,401
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President, Chief
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2015
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$
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550,000
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$
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137,500
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$
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2,750,004
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$
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137,500
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$
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1,420
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$
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3,576,424
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Executive Officer and Director
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2014
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$
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550,000
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$
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137,500
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$
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2,749,995
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$
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412,500
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$
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15,600
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$
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3,865,595
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Richard A. Robert
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2016
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$
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470,000
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$
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0
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$
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1,879,999
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$
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675,625
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$
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15,900
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$
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3,041,524
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Executive Vice President, Chief
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2015
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$
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450,000
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$
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112,500
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$
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1,574,996
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$
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112,500
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$
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1,361
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$
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2,251,357
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Financial Officer, Secretary and Director
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2014
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$
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450,000
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$
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112,500
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$
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1,575,010
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$
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337,500
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$
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15,600
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$
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2,490,610
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Britt Pence
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2016
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$
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440,000
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$
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0
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$
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1,539,998
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$
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632,500
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$
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15,900
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$
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2,628,398
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Executive Vice President of
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2015
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$
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404,250
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$
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101,063
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$
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1,111,684
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$
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101,063
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$
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15,900
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$
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1,733,960
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Operations
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2014
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$
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394,625
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$
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101,062
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$
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1,058,764
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$
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303,188
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$
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15,600
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$
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1,873,239
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(1)
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The Board of Directors approved the option for the executive officers to receive Vanguard common units in lieu of their 2015 cash compensation. Messrs. Smith and Robert elected this option and under the plan received four quarterly grants of Vanguard common units instead of their 2015 full cash compensation. Effective July 1, 2014, Mr. Pence’s annual salary increased from $385,000 to $404,250.
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(2)
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Represents amounts paid for 2014 and 2015 pursuant to our annual cash incentive program with respect to the individual performance component determined at the sole discretion of our Board of Directors. There was no individual performance bonus component for the fiscal year ended 2016 for our named executive officers. Other payments made pursuant to the annual cash incentive program with respect to the AER, PR, G&A and LOE components are included in the “Non-Equity Incentive Plan Compensation” column.
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(3)
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The amounts in this column reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of restricted unit awards and full-value phantom unit awards granted pursuant to the LTIP, disregarding the estimate of forfeitures. The only equity awards granted to our named executive officer in 2016 were phantom unit awards granted to Messrs. Smith, Robert and Pence with respect to the 2015 performance year. Assumptions used in the calculation of the restricted unit awards granted in 2016 are included in footnote 10 to our audited financial statements for the fiscal year ended December 31, 2016, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Awards granted with respect to the 2016 performance year were not granted until the 2017 year, therefore they will be reflected in next year’s Summary Compensation Table as applicable.
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(4) Represents amounts paid for 2016 pursuant to our annual cash incentive program with respect to the AER, PR, LOE and G&A components. Other payments made pursuant to the annual cash incentive program with respect to the individual performance component for fiscal years ended 2014 and 2015 were determined at the sole discretion of our Board of Directors are included in the “Bonus” column.
(5) Amount shown for each named executive officer is the amount received in the form of matching contributions to our 401(k) Plan.
Grants of Plan Based Awards
The following table sets forth certain information regarding the restricted units we granted under our LTIP and the non-equity incentive plan portion of our annual cash incentive awards granted to the named executive officers in the year ended December 31, 2016.
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Estimated future payouts under
non-equity incentive plan awards
(1)
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Name
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Grant Date
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Threshold
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Target
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Maximum
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All Other Unit Awards; Number of Units
(2)
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Grant Date Fair Value of Unit Awards ($)
(3)
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Scott W. Smith
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1/4/2016
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1,107,383
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$
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3,300,001
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Annual Bonus
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—
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$
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600,000
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$
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1,200,000
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Richard A. Robert
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1/4/2016
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630,872
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$
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1,879,999
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Annual Bonus
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—
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$
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470,000
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$
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940,000
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Britt Pence
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1/1/2016
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516,778
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$
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1,539,998
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Annual Bonus
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—
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$
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440,000
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$
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880,000
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(1)
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Represents the potential payouts with respect to the AER, PR, LOE and G&A components of the 2016 awards granted under our annual cash incentive compensation program. The target payout under each of the AER, PR, LOE and G&A components for 2016 was 25% of base salary, making the cumulative target equal to 100% of base salary. The maximum payout under each of the AER, PR, LOE and G&A components for 2016 was 50% of target, and the overall maximum that may be paid out under the annual cash incentive compensation program to each named executive officer for 2016 was two (2) times the officer’s base salary. These awards were subject to achieving certain performance targets, as described in greater detail under “2016 Executive Compensation Components—Annual Cash Incentive Compensation.” The amounts actually paid with respect to these components are set forth in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for 2016. As previously noted, amounts reported in the table above do not include amounts potentially payable with respect to the individual performance portion of the annual cash incentive awards that is determined in the sole discretion of the Board of Directors. The amounts actually paid with respect to the individual performance portion of the awards are reported in the “Bonus” column of the Summary Compensation Table for 2016.
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(2) All awards reflected in this column are phantom unit grants.
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(3)
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Represents the aggregate grant date fair value of the phantom unit awards made to the named executive officers in fiscal year 2016 computed in accordance with FASB ASC Topic 718, disregarding the estimate of forfeitures. The value ultimately realized by the executive upon the actual vesting or payment of the awards may be greater or less than the FASB ASC Topic 718 value. The phantom unit awards reflected in this table were granted with respect to the 2015 performance year; awards granted with respect to the 2016 performance year were not granted until the 2017 year and will be reflected in next year’s Grants of Plan Based Awards Table as applicable.
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Outstanding Equity Awards at December 31, 2016
The following table provides the number and value of outstanding restricted unit and phantom unit awards held by our named executive officers as of December 31, 2016, including awards that were granted prior to 2016.
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Unit Awards
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Name
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Number of Unvested Units
(1)
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Market Value of Unvested Units ($)
(2)
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Scott W. Smith
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1,350,089
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$
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904,560
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Richard A. Robert
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780,830
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$
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523,156
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Britt Pence
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590,911
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$
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395,910
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(1)
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Each named executive officer’s outstanding restricted units vest in equal one-third installments on each annual anniversary of the grant date, except for (a) the 50,000 and 37,500 restricted units granted to Mr. Smith and Mr. Robert, respectively, on November 15, 2013, which vest in full on the fifth anniversary of the grant date. The full-value phantom unit awards that were granted on August 1, 2012 to each named executive officer vest in equal one-fifth installments annually beginning May 18, 2013 and each anniversary thereof. The full-value phantom unit awards that were granted on January 1, 2016 and January 4, 2016 vest in equal one-third installments on the annual anniversary of the grant date. The table below reflects the number of unvested unit awards for each named executive officer as of December 31, 2016.
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(2) Based on the closing sales price of our common units on December 30, 2016 of $0.67.
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Name
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Grant Date
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Type of Award
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Number of Units
Granted
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Number of Unvested
Units
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Scott W. Smith
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11/15/13
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Restricted Units
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50,000
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50,000
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01/01/14
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Restricted Units
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93,157
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31,052
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01/01/15
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Restricted Units
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182,482
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121,654
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08/01/12
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Phantom Units
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200,000
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40,000
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01/01/16
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Phantom Units
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1,107,383
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1,107,383
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Total
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1,350,089
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Richard A. Robert
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11/15/13
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Restricted Units
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37,500
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37,500
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01/01/14
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Restricted Units
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53,354
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17,784
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01/01/15
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Restricted Units
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104,512
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69,674
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08/01/12
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Phantom Units
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125,000
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25,000
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01/04/16
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Phantom Units
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630,872
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630,872
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Total
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780,830
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Britt Pence
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01/01/14
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Restricted Units
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35,866
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11,955
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01/01/15
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Restricted Units
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73,768
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49,178
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08/01/12
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Phantom Units
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65,000
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13,000
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01/01/16
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Phantom Units
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516,778
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516,778
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Total
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590,911
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Option Exercises and Units Vested Table
The following table sets forth information for each named executive officer on option award exercises and unit award vesting on an aggregated basis during the fiscal year ended December 31, 2016.
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Unit Awards
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Name
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Number of Units
Acquired on
Vesting (#)
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Value Realized
on Vesting ($)
(1)
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Scott W. Smith
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131,880
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$
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335,402
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Richard A. Robert
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77,622
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$
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195,313
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Britt Pence
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49,545
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$
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128,924
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(1) The value realized on vesting of the restricted unit awards and full-value phantom unit awards is computed by multiplying the number of units vesting by the market price of the underlying units as of the vesting date, as reflected in the following table:
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Name
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Grant Date
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Type of Award
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Number of Units Vesting
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Vesting
Date
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Market Price Per Unit (a)
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Total
Value
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Scott W. Smith
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01/01/14
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Restricted Unit
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31,052
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01/01/16
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$
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2.98
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$
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92,535
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01/01/15
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Restricted Unit
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60,828
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01/01/16
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$
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2.98
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$
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181,267
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08/01/12
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Phantom Unit
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40,000
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05/18/16
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$
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1.54
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$
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61,600
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Total
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131,880
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$
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335,402
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Richard A. Robert
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01/01/14
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Restricted Unit
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17,784
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01/01/16
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$
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2.98
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$
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52,996
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01/01/15
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Restricted Unit
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34,838
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01/01/16
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$
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2.98
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$
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103,817
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08/01/12
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Phantom Unit
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25,000
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05/18/16
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$
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1.54
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$
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38,500
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Total
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77,622
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$
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195,313
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Britt Pence
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01/01/14
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Restricted Unit
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11,955
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01/01/16
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$
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2.98
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$
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35,626
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01/01/15
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Restricted Unit
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24,590
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01/01/16
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$
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2.98
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$
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73,278
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08/01/12
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Phantom Unit
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13,000
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05/18/16
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$
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1.54
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$
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20,020
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Total
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49,545
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$
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128,924
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(a)
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The market price per unit is equal to the closing price of our common units on the most recent trading day prior to the vesting date.
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Pension Benefits
We do not provide pension benefits for our named executive officers or other employees. Retirement benefits are provided through the 401(k) Plan, as discussed previously.
Non-Qualified Deferred Compensation
We do not sponsor or maintain a non-qualified deferred compensation plan that requires disclosure pursuant to SEC rules. The 401(k) Plan is a deferred compensation arrangement under Section 401(k) of the Internal Revenue Code and a qualified plan under Section 401(a) of the Internal Revenue Code.
Potential Payments Upon Termination or Change in Control
Except as otherwise described below, the FY 2016 Employment Agreements and LTIP equity award agreements for each of our executive officers provide for substantially similar trigger events upon certain terminations of employment of our executive officers and/or the occurrence of a change in control, and for substantially similar payments upon such trigger events.
Termination of Employment Trigger Events
An executive officer’s employment will terminate upon the executive’s death or upon the executive’s “disability,” which is defined as his becoming unable to substantially perform his duties as an employee as a result of sickness or injury, and shall have remained unable to perform any such duties for a period of more than 180 consecutive days in any 12-month period.
We, by action of our Board of Directors, may also terminate an executive’s employment at any time for “cause,” which means: (1) the executive officer’s commission of theft, embezzlement, any other act of dishonesty relating to his employment with us or any willful and material violation of any law, rules or regulation applicable to us, including, but not limited to, those laws, rules or regulations established by the SEC, or any self-regulatory organization having jurisdiction or authority over the executive officer or us; (2) the executive officer’s conviction of, or plea of guilty or nolo contendere to, any felony or of any other crime involving fraud, dishonesty or moral turpitude; (3) a determination by the Board of Directors that the executive officer has materially breached the FY 2016 Employment Agreement (other than during any period of disability) where such breach is not remedied within 10 days after written demand by the Board of Directors for substantial performance is actually received by the executive officer which specifically identifies the manner in which the Board of Directors believes the executive officer has so breached; or (4) the executive officer’s willful and continued failure to perform his reasonable and customary duties pursuant to his position with us which such failure is not remedied within 10 days after written demand by the Board of Directors for substantial performance is actually received by the executive officer which specifically identifies the nature of such failure. We also may terminate an executive’s FY 2016 Employment Agreement for any other reason, including without “cause,” in the sole discretion of our Board of Directors.
The executive may terminate his employment for “good reason,” which means: (1) the assignment to the executive officer of duties and responsibilities that are materially inconsistent with those normally associated with his position; (2) a material reduction in the executive officer’s base salary; (3) the executive officer’s removal from his position as stated in his FY 2016 Employment Agreement, other than for cause or by death or disability, to a position not at least equivalent in authority and duties; (4) the relocation of the executive officer’s principal place of business to a location 50 or more miles from its location as of the effective date of his FY 2016 Employment Agreement without the executive officer’s written consent; (5) a material breach by us of his FY 2016 Employment Agreement, which materially adversely affects the executive officer; and (6) our failure to make any material payment to the executive officer as required to be made under the terms of his FY 2016 Employment Agreement, provided in each of the foregoing instances that the breach is not cured within 30 days after the executive officer provides written notice to us which provides in reasonable detail the nature of the alleged good reason event. Finally, the executive officer may terminate his FY 2016 Employment Agreement for any other reason, in his sole discretion.
Payments Made Upon Termination
Regardless of the manner in which an executive officer’s employment terminates, the executive will be entitled to receive amounts earned (but unpaid) during his term of employment. Such amounts include:
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•
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earned, but unpaid base salary;
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•
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non-equity incentive compensation earned during the prior fiscal year (provided the executive was continuously employed for the full prior fiscal year);
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•
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a pro-rated amount of accrued but unused vacation pay; and
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•
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Any unpaid reimbursements for qualifying business expenses incurred prior to the termination of employment (collectively, the “Accrued Obligations”).
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Termination Due to Disability
. If the executive officer’s employment is terminated due to his disability, then in addition to any Accrued Obligations he may be owed, the executive will be entitled to receive on the date of termination a payment equal to the executive officer’s base salary for 12 months. Additionally, any unvested restricted units held by the executive officer, as well as any unvested phantom units and any other awards that are outstanding at the time of the termination of employment that were granted pursuant to the LTIP that have been granted to our executive officer, will become fully vested and unrestricted, pursuant to the terms of the relevant award agreements, upon a termination of employment due to the officer’s disability.
Termination Due to Death
. If the executive officer’s employment is terminated due to his death, then in addition to any Accrued Obligations he may be owed, the executive, his beneficiary or his estate, as applicable, will be entitled to receive on the date of termination a payment equal to the executive officer’s base salary for 12 months. Additionally, any unvested restricted units held by the executive officer, as well as any unvested phantom unit awards and any other awards that are outstanding at the time of the termination of employment that were granted pursuant to the LTIP that have been granted to our executive officers, will become fully vested and unrestricted, pursuant to the terms of the relevant award agreements, upon a termination of employment due to the officer’s death.
Termination for Good Reason
. If the executive terminates his employment for good reason or is terminated by us without cause, then in addition to any Accrued Obligations he may be owed, we shall pay the executive officer a severance payment equal to the executive’s base salary for 36 months. Additionally, any unvested restricted units held by the executive officer, as well as any unvested phantom unit awards and any other awards that are outstanding at the time of the termination of employment that were granted pursuant to the LTIP that have been granted to our executive officers, will become fully vested and unrestricted, pursuant to the terms of the relevant award agreements, upon a termination of employment by the officer due to good reason or by us without cause.
Termination for Cause or Other Than for Good Reason
. Upon termination by us for cause or by the executive other than for good reason (each as defined above), the executive officer is only entitled to any Accrued Obligations that may be due to him at the time of termination under his FY 2016 Employment Agreement. Additionally, (a) upon any termination of employment by us for cause, any unvested or vested restricted units or unvested or vested phantom units held by the executive officer that have not previously been settled, as well as any unvested appreciation-only phantom units that are held by Messrs. Smith and Robert, will be forfeited to us, and (b) upon any termination of employment by the executive for a reason other than good reason, any unvested restricted units or unvested phantom units held by the officers will be forfeited, and vested restricted units or vested phantom units will be settled in accordance with the terms of the relevant award agreements.
Payments Made Under Phantom Units
. For any termination of employment for any reason other than a termination by us for cause (as defined above), any vested and outstanding phantom units granted annually to the executive officers pursuant to their FY 2016 Employment Agreements (including appreciation-only awards) held by any of the executive officers shall be paid in either cash or units pursuant to the terms of the relevant annual phantom unit award agreement, along with a lump sum cash payment of any deferred distribution equivalent rights granted tandem to such phantom units, on the six month anniversary of the officer’s termination of employment, if such a delay would be necessary to avoid the imposition of additional taxes to the executive under Section 409A of the Internal Revenue Code.
Payments Made upon a Change in Control
Under Messrs. Smith, Robert and Pence’s FY 2016 Employment Agreements, the occurrence of a change in control will entitle each executive officer to (i) a lump sum cash payment in an amount equal to two times the sum of (A) such executive officer’s then-current annual base salary, (B) the annual bonus paid or payable with respect to the calendar year preceding the year in which the change in control occurs and (ii) the accelerated vesting of any unvested restricted units held by the executive officer, as well as any unvested phantom unit awards and any other awards that are outstanding at the time of the change in control that were granted pursuant to the LTIP, such awards to be settled in accordance with the terms and conditions of the LTIP and the applicable individual award. None of our named executive officers is entitled to receive a gross
-
up payment for any potential excise taxes that may be imposed on any change in control payment.
Estimated Payments to Executives
Assuming that a change in control occurred on December 31, 2016 and/or each executive was terminated under each of the above circumstances on December 31, 2016, and the closing price of our units on December 30, 2016 (which was the last trading day of the 2016 fiscal year) was equal to $0.67 per unit, payments and benefits owed to such executives would have an estimated value as set forth in the tables below. Actual payment amounts cannot be determined with any certainty until the termination or change in control event occurs in the future.
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Scott W. Smith
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Cash
Payments
(1)
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Value of Accelerated Vesting of Equity Awards
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Value of Settlement of Awards Upon Triggering Event
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Total
|
Without Cause or for Good Reason
|
$
|
1,800,000
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|
$
|
135,813
|
|
$
|
768,747
|
|
$
|
2,704,560
|
|
Change in Control
|
$
|
1,750,000
|
|
$
|
135,813
|
|
$
|
768,747
|
|
$
|
2,654,560
|
|
Death
|
$
|
600,000
|
|
$
|
135,813
|
|
$
|
768,747
|
|
$
|
1,504,560
|
|
Disability
|
$
|
600,000
|
|
$
|
135,813
|
|
$
|
768,747
|
|
$
|
1,504,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard A. Robert
|
Cash
Payments
(1)
|
Value of Accelerated Vesting of Equity Awards
|
Value of Settlement of Awards Upon Triggering Event
|
Total
|
Without Cause or for Good Reason
|
$
|
1,410,000
|
|
$
|
83,722
|
|
$
|
439,434
|
|
$
|
1,933,156
|
|
Change in Control
|
$
|
1,390,000
|
|
$
|
83,722
|
|
$
|
439,434
|
|
$
|
1,913,156
|
|
Death
|
$
|
470,000
|
|
$
|
83,722
|
|
$
|
439,434
|
|
$
|
993,156
|
|
Disability
|
$
|
470,000
|
|
$
|
83,722
|
|
$
|
439,434
|
|
$
|
993,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Britt Pence
|
Cash
Payments
(1)
|
Value of Accelerated Vesting of Equity Awards
|
Value of Settlement of Awards Upon Triggering Event
|
Total
|
Without Cause or for Good Reason
|
$
|
1,320,000
|
|
$
|
40,959
|
|
$
|
354,951
|
|
$
|
1,715,910
|
|
Change in Control
|
$
|
1,284,250
|
|
$
|
40,959
|
|
$
|
354,951
|
|
$
|
1,680,160
|
|
Death
|
$
|
440,000
|
|
$
|
40,959
|
|
$
|
354,951
|
|
$
|
835,910
|
|
Disability
|
$
|
440,000
|
|
$
|
40,959
|
|
$
|
354,951
|
|
$
|
835,910
|
|
|
|
(1)
|
Under Messrs. Smith, Robert and Pence’s FY 2016 Employment Agreements, the occurrence of a change in control will entitle each executive officer to a lump sum cash payment of two times the sum of such executive officer’s (i) then current base salary and (ii) annual bonus paid or payable with respect to the calendar year preceding the year in which the change in control occurs. For purposes of these tables we have used the value of the annual bonus as well as the non-equity incentive plan compensation award provided to the executives with respect to the 2015 year to calculate the cash payment that could have become payable on December 31, 2016.
|
Non-Competition Provisions
Each executive’s FY 2016 Employment Agreement contains certain confidentiality, non-solicitation and non-competition provisions. Each executive agrees, during his term of employment and following his termination date, not to disclose Vanguard's confidential information. If an executive’s termination is as a result of the executive’s voluntary termination without “good reason” or of a termination by us for “cause,” for a period of sixty days from the date of termination, the executive will not, directly or indirectly:
|
|
•
|
engage in any capacity (i) in any business directly competitive with the business in which we are engaged or (ii) with an entity that is otherwise directly competitive with us within the states in which we do business;
|
|
|
•
|
perform for any entity engaged in any business directly competitive with the business in which we are engaged any duty the executive has performed for us that involved the executive’s access to, or knowledge or application of, our confidential information;
|
|
|
•
|
induce or attempt to induce any of our customers, suppliers, licensees or other business relations to cease doing business with us or in any way interfere with the relationship between us and any such customer, supplier, licensee or business relation;
|
|
|
•
|
induce or attempt to induce any of our customers, suppliers, licensees or other business relations with whom the executive had direct business contact in dealings in the course of his employment with us to cease doing business with us or in any way interfere with the relationship between us and any such customer, supplier, licensee or business relation; or
|
|
|
•
|
solicit with the purpose of hiring or hire any person who is or, within 180 days after such person ceased to be our employee, was our employee.
|
Following an executive’s termination as a result of an executive’s voluntary termination without “good reason” or a termination by us for “cause,” the executive may have investments in securities which are issued by an entity involved in or conducting business that is directly competitive with our business, provided that the executive, directly or indirectly, does not own more than 5% of the outstanding equity or voting securities of such an entity. The executive is also not prohibited from owning an interest in any entity which conducts business that is directly competitive with our business if such interest was owned by the executive when the executive’s FY 2016 Employment Agreement was executed. In both instances, this right exists only to the extent the executive does not have the right to direct the activities of such business entity.
Director Compensation
We use a combination of cash and unit-based incentive compensation to attract and retain qualified candidates to serve on our Board of Directors. In setting independent director compensation, we consider the significant amount of time that directors expend in fulfilling their duties to us, as well as the skill-level required by us of members of our Board of Directors.
In 2016, each independent member of our Board of Directors received an equity grant under our LTIP of 41,946 phantom units valued at $125,000 at the time of such grant for his service as a member of our Board of Directors for the year. These phantom units become 100% vested on the one year anniversary of the date of grant, provided the director has continuously remained a member of our Board of Directors through that date. In addition, the Board of Directors approved the compensation committee’s recommendation to increase the amount of cash compensation paid to the independent members of our Board of Directors from $15,000 per quarter in 2015 to $31,250 per quarter in 2016.
Each member of our Board of Directors is reimbursed for out-of-pocket expenses in connection with attending meetings of the Board of Directors or committees. Each director is fully indemnified by us for actions associated with being a member of our Board of Directors to the extent permitted under Delaware law and as provided in our LLC Agreement and in accordance with the indemnification agreements.
2016 Director Summary Compensation Table
The table below summarizes the compensation paid by us to our independent directors for the fiscal year ended December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
Name
(1)
|
Fees Earned or Paid
|
|
Unit Awards
Cash Value
(2)
|
Total ($)
|
W. Richard Anderson
|
$
|
125,000
|
|
|
$
|
125,000
|
|
$
|
250,000
|
|
Bruce W. McCullough
|
$
|
125,000
|
|
|
$
|
125,000
|
|
$
|
250,000
|
|
Loren Singletary
|
$
|
125,000
|
|
|
$
|
125,000
|
|
$
|
250,000
|
|
|
|
(1)
|
Messrs. Smith and Robert are not included in this table as they are also executive officers and receive no additional compensation for their service as directors. All compensation provided to or earned by Messrs. Smith and Robert for 2016 is reported in the Summary Compensation Table above.
|
|
|
(2)
|
Each independent Board member was granted 41,946 phantom units on January 4, 2016 as part of their annual compensation package. These phantom units became 100% vested on the one year anniversary of the date of grant, provided the director continuously remained a member of our Board of Directors through that date. Any unvested units will be forfeited upon termination of services for any reason, unless otherwise waived. The value reported above reflects the aggregate grant date fair value of phantom unit awards granted in 2016 computed in accordance with FASB ASC Topic 718, disregarding any estimate of forfeitures. Assumptions used in the calculation of these amounts are included in footnote 10 to our audited financial statements for the fiscal year ended December 31, 2016, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. As of December 31, 2016, Messrs. Anderson, McCullough and Singletary each held 41,946 unvested phantom units, which became 100% vested on January 4, 2017. Upon vesting, Messrs. Anderson, McCullough and Singletary each received a cash payment totaling $32,717.88, the fair market value of the phantom units, based on the January 3, 2017 closing price of $0.78 per unit.
|