UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant
x
Filed by a Party other than the Registrant
o
Check the appropriate box:
o
Preliminary proxy statement.
o
Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2)).
x
Definitive Proxy Statement.
o
Definitive Additional Materials.
o
Soliciting Material Pursuant to Rule 14a-12.
NORTHERN OIL AND GAS, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
x
No fee required.
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1)
Title of each class of securities to which transaction applies:
2)
Aggregate number of securities to which transaction applies:
3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
4)
Proposed maximum aggregate value of transaction:
5)
Total fee paid:
o
Fee paid previously with preliminary materials:
o
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
1)
Amount Previously Paid:
2)
Form, Schedule or Registration Statement No.:
3)
Filing Party:
4)
Date Filed:
601 Carlson Pkwy ● Suite 990
Minnetonka, Minnesota 55305
April
22
, 201
9
Dear Stockholder:
We are pleased to invite you to attend the 201
9
Annual Meeting of Stockholders of Northern Oil and Gas, Inc., a Delaware corporation (
the “Company,” “we,” “our” or “us”)
,
to be held at the
JW Marriott Minneapolis, 2141 Lindau Lane, Minneapolis, Minnesota 55425
, on
May
23, 201
9
, commencing at 8:30 a.m. Central Time.
The formal notice of the meeting and proxy statement follow this cover letter. Enclosed with this proxy statement are your proxy card, a return envelope and a copy of our Annual Report on Form 10-K, for the year ended December 31, 201
8
.
We hope you are able to attend the meeting.
Thank you.
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Northern Oil and Gas, Inc.
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Bahram Akradi
Chairman of the Board of Directors
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NORTHERN OIL AND GAS, INC.
601 Carlson Pkwy ● Suite 990
Minnetonka, Minnesota 55305
NOTICE OF 201
9
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
M
AY
23, 201
9
To the Stockholders of Northern Oil and Gas, Inc.:
Notice is hereby given that the 201
9
Annual Meeting of Stockholders of Northern Oil and Gas, Inc., a Delaware corporation
(
the “Company,” “we,” “our” or “us”)
,
will be held at the
JW Marriott Minneapolis, 2141 Lindau Lane, Minneapolis, Minnesota 55425
, on
May
23, 201
9
, at 8:30 a.m. Central Time (the “Annual Meeting”). The Annual Meeting is being held for the following purposes:
1.
To
elect
e
i
ght directors to serve until the Annual Meeting of Stockholders in 20
20
;
2.
To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 201
9
;
and
3.
To approve, on an advisory basis, the compensation paid to our named executive officers.
Only stockholders of record at the close of business on
March
28, 201
9
, are entitled to notice of, and to vote at, the Annual Meeting, or any adjournment(s) or postponement(s) thereof.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting.
The following proxy materials and information are available for you to review online at
www.
northernoil.com
/annual-meet
ing
: (i) our notice of annual meeting and proxy statement (which includes directions on how to attend and vote your shares at the Annual Meeting); (ii) our Annual Report on Form 10-K for the year ended December 31, 201
8
; and (iii) our form of proxy card.
Your vote is important. You may vote your shares in person at the Annual Meeting, via the Internet, by telephone or by mail. Please refer to the section “Voting Instructions” for detailed voting instructions. If you choose to vote in person at the Annual Meeting, via the Internet or by telephone, you do not need to mail in a proxy card or other voting instructions. Whether or not you are able to attend the meeting in person, we urge you to vote your shares as promptly as possible.
Due to space limitations, attendance is limited to stockholders and one guest each. Admission to the Annual Meeting is on a first-come, first-served basis. A valid government-issued picture identification and proof of stock ownership as of the record date may be required in order to attend the meeting. If you hold Northern Oil and Gas, Inc. stock through a broker, bank, trust or other nominee, please bring a copy of a statement reflecting your stock ownership as of the record date. If you plan to attend as the proxy of a stockholder or to vote in person, you must present a legal proxy. Cameras, recording devices and other electronic devices are not permitted.
We look forward to seeing you at the Annual Meeting.
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On behalf of the Board of Directors
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Bahram Akradi
Chairman of the Board of Directors
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Minnetonka, Minnesota
April
22
, 201
9
TABLE OF CONTENTS
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Page
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THE ANNUAL MEETING
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VOTING INSTRUCTIONS
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CORPORATE GOVERNANCE
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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PROPOSAL 1: ELECTION OF DIRECTORS
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PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
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AUDIT COMMITTEE REPORT
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PROPOSAL 3: ADVISORY VOTE TO APPROVE THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS
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EXECUTIVE COMPENSATION
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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NORTHERN OIL AND GAS, INC. FORM 10-K
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HOUSEHOLDING
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STOCKHOLDER PROPOSALS FOR 2020 ANNUAL MEETING
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OTHER MATTERS
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NORTHERN OIL AND GAS, INC.
601 Carlson Pkwy ● Suite 990
Minnetonka, Minnesota 55305
PROXY STATEMENT
201
9
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
MAY
23, 201
9
THE ANNUAL MEETING
We are furnishing you this proxy statement in connection with the solicitation of proxies by our board of directors in connection with the Annual Meeting that will be held Thursday,
May
23, 201
9
at 8:30 a.m. Central Time, at the
JW Marriott Minneapolis, 2141 Lindau Lane, Minneapolis, Minnesota 55425.
No cameras or recording equipment will be permitted at the Annual Meeting.
Definitive copies of this proxy statement and related proxy card are first being sent on or about
April
22
, 201
9
to all stockholders of record at the close of business on
March
28, 201
9
(the “record date”). On the record date, there were
376,793,280
shares of our common stock outstanding and entitled to vote at the Annual Meeting, which were held by approximately
290
holders of record.
Quorum; Abstentions; Broker Non-Votes
A quorum is necessary to hold a valid meeting. The presence in person or represented by proxy of holders of a majority of the shares entitled to vote is required to constitute a quorum to hold the Annual Meeting. Based on the proposals to be voted upon, abstentions and broker non-votes will be counted as present for establishing a quorum, but
will
not count
towards approval of the proposal to which such abstention or non-vote relates. A broker “non-vote” occurs when shares are held by a broker and (i) the broker does not have discretionary authority to vote on a particular matter and (ii) the broker has not received voting instructions from its customer.
If a valid proxy is provided and the stockholder has not indicated how the shares are to be voted at the Annual Meeting, the shares represented by such proxy will be considered present at the Annual Meeting for purposes of determining a quorum and will be voted in accordance with the board of director’s recommendation on each proposal presented at the Annual Meeting. If a valid proxy is provided and the stockholder has withheld authority to vote for one or more nominees, or voted against or abstained from voting on the ratification of our independent registered public accountant
, the shares represented by such proxy will be considered present at the Annual Meeting for purposes of determining a quorum and for purposes of calculating the vote, but will not be considered to have been voted in favor of such matter.
VOTING INSTRUCTIONS
You are entitled to one vote for each share of common stock that you own as of the close of business on the record date. Please carefully read the instructions below on how to vote your shares. Because the instructions vary depending on how you hold your shares, it is important that you follow the instructions that apply to your particular situation.
If Your Shares are Held in Your Name
Stockholders of Record
. If your shares are registered directly in your name with the company’s transfer agent, you are considered the stockholder of record with respect to those shares, and your proxy materials, proxy card or other voting instructions
ar
e
being sent directly to you by our agent. As a stockholder of record, you have the right to vote by proxy or to vote in person at the Annual Meeting.
Voting by Proxy
. Even if you plan to attend the Annual Meeting, please vote as soon as possible by Internet, phone or mail in accordance with the instructions provided to you on your proxy materials or proxy card from our agent.
Voting in Person at the Annual Meeting
. If you plan to attend the Annual Meeting, you can vote in person. In order to vote at the Annual Meeting, you will need to bring
evidence of your share ownership with you to the Annual Meeting.
Multiple
P
roxy
C
ards
.
If you receive more than one proxy card, it likely means that you have multiple accounts with the transfer agent. Please vote all of the shares.
Revoking your Proxy
. As long as your shares are registered in your name, you may revoke your proxy at any time before it is exercised at the Annual Meeting. There are several ways you can do this:
•
by filing a written notice of revocation with our corporate secretary prior to commencement of the Annual Meeting;
•
by submitting another proper proxy with a more recent date than that of the proxy first given by signing, dating and returning a proxy card to our company by mail; or
•
by attending the Annual Meeting and voting in person.
If Your Shares are Held in “Street Name”
Beneficial Owners
. If your shares are held in a brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name.” The broker or nominee is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker how to vote.
Voting by Proxy
. If your shares are registered in the name of your broker or nominee, you will receive instructions from such broker or nominee that you must follow in order for your shares to be voted. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker or nominee does not have discretionary authority to vote.
Voting in Person at the Annual Meeting
. If you plan to attend the Annual Meeting and vote in person, you should contact your broker or nominee to obtain a legal proxy or “broker’s proxy card” and bring it and your account statement or other evidence of your share ownership with you to the Annual Meeting.
Multiple Proxy Cards.
If you receive more than one broker proxy card or voting instruction card, it likely means that you have multiple accounts with one or more holders of record. Please vote all of the shares.
Revoking your Proxy
. If your shares are held in street name, you must contact your holder of record to revoke your proxy
or voting instructions, as applicable
.
Voting Procedures
By granting us your proxy, you authorize the individuals named on the proxy card or other instructions to represent you and vote your shares in the manner you indicate at the Annual Meeting or at any adjournment or postponement thereof. Shares represented by a proxy properly submitted prior to the Annual Meeting will be voted at the Annual Meeting in the manner specified on such proxy. If you return a proxy card but do not specify how you want to vote your shares at the Annual Meeting, your shares will be voted in accordance with the recommendation of our board of directors on each proposal.
Tabulating the Vote
Broadridge Financial Solutions will tabulate votes in preparation for the Annual Meeting and will provide a third-party representative to act as inspector of election at the Annual Meeting. All votes received prior to the meeting date, and all votes cast at the Annual Meeting, will be tabulated by Broadridge Financial Solutions, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes.
Other Information
We will bear the cost of soliciting proxies. In addition to this notice by mail, we request and encourage brokers, custodians, nominees and others to supply proxy materials to stockholders and we will reimburse them for their expenses. Our officers and employees may, by letter, telephone, facsimile, electronic mail, or in person, make additional requests for the return of proxies, although we do not reimburse our own employees for soliciting proxies. We have engaged Morrow Sodali, LLC, 470 West Ave., Stamford, CT 06902, to assist us in the solicitation of proxies and provide related advice and informational support for a services fee and the reimbursement of customary disbursements that are not expected to exceed
$13,500
in the aggregate.
None of the items proposed for approval at the Annual Meeting are of the nature that the laws of the state of Delaware or our bylaws would provide a right of our stockholders to dissent and obtain appraisal of or payment for such stockholders’ common stock.
CORPORATE GOVERNANCE
Our Board of Directors and Committees
Meetings and Attendance
During the 201
8
fiscal year, our board of directors held
elev
en
meetings, our audit committee held four meetings, our compensation committee held
six
meetings and our nominating committee held three meetings. Each board member attended at least 75% of the aggregate of the board of directors meetings held in 201
8
and the audit, compensation and nominating committee meetings held in 201
8
for which he or she was a committee member.
Board Committees
The board of directors has standing audit, compensation and nominating committees. All three committees consist solely of independent directors. The table below shows the current membership of the committees and identifies our independent directors and nominees.
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Name
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Audit Committee
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Compensation Committee
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Nominating Committee
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Independent Directors
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Bahram Akradi
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✓*
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✓
+
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Lisa Bromiley
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✓*
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✓
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Roy Easley
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✓
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✓
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Michael Frantz
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✓
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✓
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Robert Grabb
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✓
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✓
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✓
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Jack King
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✓*
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✓
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Joseph Lenz
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✓
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✓
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Michael Popejoy
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✓
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✓
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___________________________
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*
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Denotes committee chairperson.
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+
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Mr. Akradi has served as chairman of the board of directors since January 2018.
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We have adopted written charters for each of these committees. Current copies of all committee charters appear on the
governance section of our website at
www.northernoil.com
and are available in print upon written request to Northern Oil and Gas, Inc., 601 Carlson Pkwy, Suite 990, Minnetonka, Minnesota 55305, Attention: Corporate Secretary.
Audit Committee and Financial Expert
The audit committee’s primary function is to assist our board of directors in its general oversight of our company’s corporate accounting, financial reporting, internal control and audit functions. The audit committee’s main duties include recommending a firm of independent certified public accountants to audit the annual financial statements, reviewing the independent auditor’s independence, the financial statements and their audit report and reviewing management’s administration of the system of internal accounting controls. Ms. Bromiley is an “audit committee financial expert” as defined in the applicable Securities and Exchange Commission (“SEC”) rules. Each of our current audit committee members and each member who served on the committee in 201
8
is considered to be an “independent director” as defined in the NYSE American Company Guide.
To assist the audit committee in fulfilling its duties, our management provides the committee with information and reports as needed and requested. Our audit committee
also has
access to our general counsel and has the ability to retain outside legal counsel or other experts at its sole discretion if it deems such action to be necessary.
Compensation Committee
Our compensation committee charter authorizes our compensation committee to review and approve annual base salary and incentive compensation levels, employment agreements and benefits of the chief executive officer and other key executives, as well as equity-based compensation awarded to any employee. The compensation committee charter provides that the committee may retain consultants and advisors to advise the committee on compensation issues requiring outside expertise. The compensation committee may also consult with our audit committee and our independent auditors for the purpose of reviewing any calculations required under any company incentive compensation plans.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee, including anyone who served as a member during 201
8
, is a former or current officer or employee of our company or is an executive officer of another company where an executive officer of our company serves as a director.
Nominating Committee
Our nominating committee charter provides that persons nominated for election or appointment as directors shall be evaluated by the nominating committee in light of their education, reputation, experience, independence, leadership qualities, personal integrity and such other criteria as the nominating committee deems relevant. The nominating committee does not have a specific policy as to considering diversity in identifying nominees for director, however seeking to build a board with diversity of experience and skills is one of the other criteria that the nominating committee may deem relevant in its evaluation.
Our nominating committee has adopted specific qualifications that they believe are necessary and appropriate for membership on our board of directors. The nominating committee identifies and evaluates nominees through internal discussions with committee members, management and other board members. The nominating committee meets annually to review board qualifications, assess whether our existing board members meet those qualifications and discuss whether any additional individuals should be nominated to serve on our board of directors.
Pursuant to procedures adopted by our nominating committee, stockholders who wish to recommend individuals for consideration by our nominating committee to become nominees for election to our board of directors may do so by submitting a written recommendation to our nominating committee, c/o Corporate Secretary, 601 Carlson Pkwy, Suite 990, Minnetonka, Minnesota 55305. Submissions must include a written recommendation and the reason for the recommendation, biographical information concerning the recommended individual, including age, a description of the recommended individual’s past five years of employment history and any past and current board memberships. The submission must be accompanied by a written consent of the individual to stand for election if nominated by our nominating committee and to serve if elected by our board of directors or our stockholders, as applicable. Alternatively, stockholders may directly nominate a person for election to our board of directors by complying with the procedures set forth in our bylaws, any applicable rules and regulations of the Securities and Exchange Commission and any applicable laws.
Our nominating committee charter provides that the nominating committee may retain consultants and advisors to assist it in the process of identifying and evaluating candidates. The nominating committee may also seek advice from our regular counsel or retain separate counsel to assist it in the execution of its responsibilities.
Director Independence
Our board has determined that Messrs. Akradi, Easley, Frantz, Grabb
,
King,
Lenz,
Popejoy
,
and Ms. Bromiley, representing
all
current directors and
director nominees,
are each
an “independent director” as defined in the NYSE American Company Guide.
In reaching this determination with respect to Messrs. Frantz and Popejoy, the board considered their employment relationships with TRT Holdings, Inc. (which, together with its affiliates, is a significant common stockholder of the company
and
has at times been a holder
of the company’s senior debt
) and determined, as it did for all other directors and nominees, that no relationship exists that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Board Leadership Structure and Role in Risk Oversight
Different individuals have served in
the roles of the chief executive officer and chairman of the board of our company since January 2016. This separation
recognizes
the differences between the two roles and the value of having the distinct and different perspectives and experiences of a separate chief executive officer and chairman of the board. The non-executive chairman is responsible for, among other things, developing the agenda and procedures for the board’s work, presiding over meetings of the full board and executive sessions of the independent directors, acting as a liaison between the non-management directors and management, coordinating the director recruitment process, leading succession planning efforts and facilitating communications with investors.
Our management is responsible for defining the various risks we face, formulating risk management policies and procedures and managing our risk exposure. The board’s responsibility is to monitor our risk management processes by informing itself concerning our material risks and evaluating whether management has reasonable controls in place to address the material risks. The audit committee of the board is primarily responsible for monitoring management’s responsibility in the area of risk oversight, and the non-executive chairman also plays a key role in this regard given his regular communications with management. Management regularly reports to our audit committee on risk management, which in turn reports on the matters discussed at the committee level to the full board. The audit committee and the full board focus on the material risks our company faces to assess whether management has reasonable controls in place to address these risks. The board believes this division of responsibilities provides an effective and efficient approach for addressing risk management.
Communications with Board Members
The board of directors has provided the following process for stockholders or other interested parties to send communications to the board, any committee of the board, or our non-management directors as a group, by writing to them c/o Corporate Secretary, Northern Oil and Gas, Inc., 601 Carlson Pkwy, Suite 990, Minnetonka, Minnesota 55305. Communications to individual directors, including the
c
hairman of the
b
oard, may also be made to such director at our address. All communications sent to the chair of the audit committee or to any individual director will be received directly by such individuals and will not be screened or reviewed by any company personnel. Any communications sent to the board of directors, or the non-management directors as a group, in the care of the Corporate Secretary will be reviewed by the Corporate Secretary to ensure that such communications relate to the business of our company before being reviewed by the board or the non-management directors, as applicable.
Code of Business Conduct and Ethics
The board of directors has adopted the Northern Oil and Gas, Inc. Code of Business Conduct and Ethics that applies to our directors and employees. A current copy of our Code of Business Conduct and Ethics can be found on the
governance section of our website at
www.northernoil.com
and is available in print upon written request to Northern Oil and Gas, Inc., 601 Carlson Pkwy, Suite 990, Minnetonka, Minnesota 55305, Attention: Corporate Secretary.
Board Member Attendance at Annual Meetings
We encourage all of our directors to attend the annual meeting of stockholders. We generally hold a board meeting coincident with the annual stockholders’ meeting to minimize director travel obligations and facilitate their attendance at the annual stockholders’ meeting. All of our
director nominees
attended our 201
8
annual meeting of stockholders. We anticipate that our directors will attend the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information, to the best of our knowledge, about the beneficial ownership of our common stock on
March
28, 201
9
, held by those persons known to beneficially own more than 5% of our capital stock, by our directors
,
director nominees,
executive officers, and by our directors
, director nominees
and executive officers as a group. The percentage of beneficial ownership for the following table is based on
376,
793,280
shares of common stock outstanding as of
March
28, 201
9
.
Beneficial ownership is determined in accordance with the rules of the SEC and does not necessarily indicate beneficial ownership for any other purpose. Under these rules, beneficial ownership includes those shares of common stock over which the stockholder has sole or shared voting or investment power. It also includes (unless footnoted) shares of common stock that the stockholder has a right to acquire within 60 days after
March
28, 201
9
through the exercise of any option or other right. The percentage ownership of the outstanding common stock, however, is based on the assumption, expressly required by the rules of the SEC, that only the person or entity whose ownership is being reported has converted options into shares of our common stock.
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Name
(1)
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Number of
Shares
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Percent of
Common Stock
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Certain Beneficial Owners:
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TRT Holdings, Inc.
(
2
)
4001 Maple Ave., Suite 600
Dallas, TX 75219
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73,713,619
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19.6
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%
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Crestview Partners III GP, L.P.
(
3
)
c/o Crestview Partners
590 Madison Avenue, 36th Floor
New York, NY 10022
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37,625,170
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10.0
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%
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Tailwater Capital LLC
(
4
)
2021
McKinney Avenue, Su
ite 1250
Dallas, TX 75201
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21,258,954
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5.6
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%
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Directors and Executive Officers:
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Bahram Akradi
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15,747,611
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4.2
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%
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Lisa Bromiley
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303,536
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*
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Roy Easley
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155,900
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*
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Michael Frantz
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231,548
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*
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Robert Grabb
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350,213
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*
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Jack King
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300,107
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*
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Joseph Lenz
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73,200
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*
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Michael Popejoy
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198,673
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*
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Chad Allen
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256,830
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*
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Adam Dirlam
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470,933
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*
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Brandon Elliott
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628,890
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*
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Nicholas O’Grady
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742,450
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*
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Michael Reger
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9,988,053
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2.6
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%
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Erik Romslo
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640,311
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*
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Thomas Stoelk
(5)
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1,106,446
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*
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Directors and Current Executive Officers as a Group (14 persons)
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30,088,255
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8.0
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%
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__________
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*
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Denotes less than 1% ownership.
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(1)
As used in this
table
, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared
investment
power
with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). The address of each member of management and each director is care of our company.
(2)
The information is based on
Amendment No. 15 to
Schedule 13D filed
on November 16, 2018, reporting ownership
of our common stock
as of the preceding day
,
by TRT Holdings, Inc.,
Cresta
Investments, LLC, Cresta Greenwood, LLC and Robert B. Rowling (the “Reporting Persons”)
. The Reporting Persons beneficially own, in the aggregate, 73,713,619 shares of our common stock. TRT Holdings, Inc. has sole voting power and sole dispositive power with respect to 61,274,808 shares. Cresta Investments, LLC has sole voting power and sole dispositive power with respect to 7,947,921 shares. Cresta Greenwood, LLC has sole voting power and sole dispositive power with respect to 1,344,223 shares. Mr. Rowling beneficially owns all 73,713,619 common shares held directly by TRT Holdings, Inc., Cresta Investments, LLC and Cresta Greenwood, LLC. Mr. Rowling beneficially owns the common shares held directly by TRT Holdings, Inc. due to his ownership of all of the shares of Class B Common Stock of TRT Holdings, Inc. Mr. Rowling beneficially owns the common shares held directly by Cresta Investments, LLC and Cresta Greenwood, LLC due to his direct and indirect ownership of 100% of the ownership interests in such entities.
(3)
The
information
is based on
Amendment No. 1 to Schedule 13G filed
with the SEC by Crestview Partners GP, L.P. on February 13, 2019, reporting ownership
of our common stock
as of December 31, 201
8, as supplemented by
reports
filed with the SEC pursuant to Section 16(b)
provided by
subseque
nt transactions through February 26, 2019. Amount reported
r
epresents shares of
our
c
ommon
s
tock
directly held by W Energy Partners LLC. Crestview W2 Holdings, L.P., in its
capacity
as a member of W Energy Partners LLC, may be deemed to have beneficial ownership of the shares of
c
ommon
s
tock directly held by W Energy Partners LLC. Crestview Partners III GP, L.P. exercises voting and dispositive power over the shares of
c
ommon
s
tock beneficially owned by Crestview W2 Holdings, L.P., which decisions are made by the investment committee of Crestview Partners III GP, L.P.
(4)
The
information is
b
ased
on
Amendment No. 1 to Schedule 13
G
reported to
the
SEC
on January 24, 2019,
reporting ownership
of our common stock
as of December 31, 2018,
filed by
Pivotal Williston Basin,
LP
(“Pivotal Williston”)
,
Pivotal Williston GP, LLC (“Pivotal Williston GP”),
Pivotal Petroleum Partners LP
(
“
Pivotal
”
)
,
TW PPP GP, LLC (“TW PPP GP”),
Tailwater E&P Opportunity Fund LP (“TW E&P Fund”),
TW GP E&P Fund, LP (“TW E&P Fund GP”),
TW GP E&P Fund GP, LLC (
“
TW E&P Fund GP of GP
”
)
,
Tailwater Capital LLC (“Tailwater”)
,
Jason H. Downie (“Downie”) and Edward Herring (“Herring”)
.
Pivotal Williston
is the record holder of 4,895,154 shares of
our
common stock
. Tailwater directly owns 100% of the equity interests in
TW E&
P Fund GP of GP
. TW E
&
P Fund GP of GP is the sole general partner of
TW E&
P Fund GP
. TW E&
P Fund GP is the sole general partner of
TW E&
P Fund
. TW E&
P Fund directly owns 100% of the equity interests in
TW PPP GP
. TW PPP GP is the sole general partner of
Pivotal
. Pivotal directly owns 100% of the equity interests in Pivotal Williston GP
. Pivotal Williston GP is the sole general partner of Pivotal Williston.
Downie
and
Herring
are the managing members of Tailwater. Therefore, Pivotal Williston, Pivotal Williston GP, Pivotal, TW PPP GP, TW E&
P Fund, TW E&
P Fund GP, TW E&
P Fund GP of GP, Tailwater, Downie and Herring may be deemed to share the right to direct the disposition of and may be deemed to share the power to vote or to direct the vote of the 4,895,154 shares of
our
c
ommon
s
tock held of record by Pivotal Williston
.
The information is based on Amendment No. 1 to Schedule 13G reported to the SEC on January 24, 2019, reporting ownership of our common stock as of December 31, 2018, filed by
Pivotal Williston Basin
II
, LP (“Pivotal Williston
II
”), Pivotal Williston GP
II
, LLC (“Pivotal Williston GP
II
”), Pivotal Petroleum Partners
II
LP (
“
Pivotal
II
”
), TW PPP GP
II
, LLC (“TW PPP GP
II
”), Tailwater E&P Opportunity Fund
II
LP (“TW E&P Fund
II
”), TW GP E&P Fund
II
, LP (“TW E&P Fund
II
GP”), TW GP E&P Fund GP
II
, LLC (
“
TW E&P Fund
II
GP of GP
”
), Tailwater Capital LLC (“Tailwater”), Jason H. Downie (“Downie”) and Edward Herring (“Herring”).
Pivotal Williston II
is the record holder of 16,363,800 shares of
our
common stock
. Tailwater directly owns 100% of the equity interests in
TW E&
P Fund II GP of GP
. TW E&
P Fund II GP of GP is the sole general partner of
TW E&
P Fund II GP
. TW E&
P Fund II GP is the sole general partner of
TW E&
P Fund II
. TW E&
P Fund II directly owns 100% of the equity interests in
TW PPP GP II
. TW PPP GP II is the sole general partner of
Pivotal II
. Pivotal II directly owns 100% of the equity interests in Pivotal Williston GP II
. Pivotal Williston GP II is the sole general partner of Pivotal Williston II.
Downie and Herring are the managing members of Tailwater. Therefore, Pivotal Williston II, Pivotal Williston GP II, Pivotal II, TW PPP GP II, TW E&
P Fund II, TW E&
P Fund II GP, TW E&
P Fund II GP of GP,Tailwater, Downie and Herring may be deemed to share the right to direct the disposition of and may be deemed to share the power to vote or to direct the vote of the 16,363,800 shares of
our
c
ommon
s
tock held of record by Pivotal Williston II
.
(5)
Mr.
Stoe
lk
resigned
all
positions
with the company on January 31, 2018.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our officers, directors and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Such officers, directors and stockholders are required by the SEC to furnish us with copies of all such reports. To our knowledge, based solely on a review of copies of reports filed with the SEC during the last fiscal year, all applicable Section 16(a) filing requirements were timely filed and met
,
except for
(i)
two
late filing
s for Mr. Grabb
in connec
tion with
one
gifting transaction and
one
sale transaction
, and (ii)
one late fi
ling
by
Crest
view Partners
III
GP, L.P.
related to
a
derivativ
e
transaction
.
PROPOSAL 1
ELECTION OF DIRECTORS
Our board of directors
is responsible for
overseeing
the management of the business and affairs of our company as provided by Delaware law. Directors are elected each year at the annual meeting by our stockholders. We do not have a classified board of directors. Eight directors will be elected at this year’s meeting. Each director’s term will last until the 20
20
Annual Meeting of Stockholders and until he or she is succeeded by another qualified director who has been elected. All the nominees
are currently directors of our company.
There are no familial relationships between any of our directors and executive officers.
Directors and Director Nominees
If a nominee is unavailable for election, the proxy holders may vote for another nominee proposed by the board of directors or the board may reduce the number of directors to be elected at the meeting.
On May 15, 2018, our company entered into an amended and restated letter agreement with Robert B. Rowling, Cresta Investments, LLC, Cresta Greenwood, LLC, TRT Holdings, Inc., Michael Frantz, Michael Popejoy, Ernie Easley and Bahram Akradi. Under the terms of the agreement, the company agreed to appoint Mr. Easley to the board promptly following execution of the agreement and, subject to certain conditions, to nominate Mr. Popejoy, Mr. Frantz and Mr. Easley for election to the board at the company
’
s annual meetings of stockholders.
Mr. Lenz was initially identified for election by an existing non-management director.
Set forth below is information furnished with respect to each current director and nominee for election as a director.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position(s)
|
Bahram Akradi
|
|
57
|
|
Director, Chairman of the Board
|
Lisa Bromiley
|
|
46
|
|
Director
|
Roy “Ernie” Easley
|
|
60
|
|
Director
|
Michael Frantz
|
|
34
|
|
Director
|
Robert Grabb
|
|
66
|
|
Director
|
Jack King
|
|
67
|
|
Director
|
Joseph Lenz
|
|
30
|
|
Director
|
Michael Popejoy
|
|
65
|
|
Director
|
Mr. Akradi
has served as a director since July 2017, was appointed lead independent director of our company in December 2017, and was appointed
non-executive
C
hairman of the
B
oard in January 2018. Mr. Akradi has served as Chairman of the Board, President, Chief Executive Officer and a director of LTF Holdings, Inc. and its wholly owned subsidiary, Life Time
, Inc.
(formerly Life Time Fi
tness, Inc.)
, since September 2015. Prior to that, for a period of more than five years, Mr. Akradi was Chairman of the Board, President, Chief Executive Officer and a director of Life Time
, Inc., which was a public company until it was taken private in 2015. Mr. Akradi holds a B.S. degree in Electrical Engineering from the University of Colorado.
Ms. Bromiley
has served as a director since September 2007. Ms. Bromiley has served as the Chief Financial Officer of BioUrja Group, a privately-held group of companies focused on global commodity trading, since February 2018. From August 2014 to February 2018, Ms. Bromiley served as the Chief Financial Officer of P3 Petroleum, LLC, an independent oil and gas exploration and production company focused in Texas, Louisiana and Mississippi. From 2010 to July 2014, Ms. Bromiley provided executive financial and accounting consulting services for mergers, acquisitions, bankruptcy reorganizations and raising capital with SolomonEdwardsGroup, LLC, a national CFO services firm, except from April 2012 to September 2013, when she served as Vice President of Business Development for Epsilon Energy Ltd., a public independent oil and gas
exploration company focused on the Marcellus Shale in Pennsylvania and Bakken Shale of Saskatchewan. Ms. Bromiley served as Chief Financial Officer and Treasurer of Platinum Energy Resources, Inc., a public independent oil and gas exploration and production company, from August 2008 to June 2009. She served as Chief Financial Officer of Flotek Industries, Inc., a public oilfield service company, from April 2004 to August 2008. Prior to joining Flotek, Ms. Bromiley worked in the energy audit practice of PricewaterhouseCoopers, LLP and worked for two Fortune 500 companies. Ms. Bromiley served in various accounting, finance, SEC reporting and risk management positions. Ms. Bromiley is a Certified Public Accountant. Ms. Bromiley is a member of the American Institute of Certified Public Accountants, KPMG Audit Committee Institute, Financial Executives International and National Association of Corporate Directors. Ms. Bromiley holds B.B.A. and Masters of Accountancy degrees from the University of Texas.
Mr. Easley
has served as a director since June 2018 and has served as Senior Vice President – Exploration and Development at CH4 Energy since November 2017. Previously, Mr. Easley has served in various roles, including all aspects of exploration & development and managing multi-disciplinary functions including land, reservoir, and drilling and completions professionals, at companies including BOPCO, L.P. (Vice President - Exploration and Development, from August 2012 to August 2017), Hunt Oil Company, Chieftain International, Tana Oil and Gas Corporation and Exxon Company, U.S.A. Mr. Easley has also been directly involved in the acquisition, development and divestiture of several large exploration projects in the United States.
Mr. E
asley
served on the board of di
rec
tors of Gre
e
nHunter Resources,
Inc. from 2012 to April 2016.
Mr. Easley holds a Bachelor of Science in Geological Sciences from the University of Texas at Austin.
Mr. Frantz
has served as a director since August 2016 and has served as the
Director
, Investments of TRT Holdings, Inc., a diversified private holding company based in Dallas, Texas, since February 2010. Mr. Frantz is the head of TRT Holdings investment team which is responsible for sourcing,
performing due diligence procedures
and managing new investment opportunities. Prior to TRT Holdings, Mr. Frantz was an Analyst with J.P. Morgan Asset Management from July 2008 to February 2010. Mr. Frantz currently serves on the
b
oard
of directors
of Care
Vet and the
Advisory Board of Dos Rios Partners. Mr. Frantz holds a B.A. degree in Business Administration, with a concentration in Finance and Accounting and a Masters in Professional Accounting from the University of Texas at Austin, McCombs School of Business.
Mr. Grabb
has served as a director since May 2007 and is a Registered Petroleum Geologist with over
40
years of experience in the oil and gas industry. Mr. Grabb provides both geological and industry expertise as it relates to our exploration prospects and drilling programs. Mr. Grabb has served as Vice President
-
Exploration and Geosciences for Sage Natural Resources, LLC since January 2018. He was the Senior Geological Advisor for Samson Energy, a large privately held exploration and production company headquartered in Tulsa, Oklahoma, from March 2014 to March 2016 and previously worked as the Exploration Manager for Samson Resources Company, from March 2007 to March 2014. Prior to that, Mr. Grabb served as a geologist for Newfield Exploration from April 2003 to March 2007. Mr. Grabb holds B.S. and M.S. degrees in geology from Montana State University. Mr. Grabb is also a member of the American Association of Petroleum Geologists and the Society of Petroleum Engineers.
Mr. King
has served as a director since May 2007 and has worked in various management positions, including land management, with Hancock Enterprises, a privately held independent oil and gas exploration and production company based in Billings, Montana, since 1983. Mr. King has been actively working in the Williston Basin and the Northern Rockies for over 30 years. Throughout his career Mr. King has been very involved in regional industry and local civic affairs, including his sixteen years of service on the Montana Board of Oil and Gas Conservation Commission as a Commissioner (Gubernatorial appointment), Board of the Montana Petroleum Association, Western Montana BLM Advisory Council, U of MT President’s Advisory Council, and the Finance Committee for the Montana Community Foundation. Mr. King was a founding member of the Board of Directors for Crown Butte Resources, Ltd., and served from 1987 to 1996. Mr. King holds a degree in Economics from the University of Montana.
Mr. Lenz
has
served as
a director
since August 201
8
. Mr. Lenz serves as a
Managing
Director at Angelo, Gordon & Co., a privately-held registered investment advisor, where he has worked since 2012. In his current role, Mr. Lenz is responsible for originating investments across a company’s capital structure, where he has significant experience with investments in the energy industry. Prior to joining Angelo Gordon, Mr. Lenz worked in the investment banking division at Morgan Stanley. Mr. Lenz previously served as a Board Observer with Vistra Energy. Mr. Lenz holds a B.A. degree from the University of Pennsylvania.
Mr. Popejoy
has served as a director since January 2017. Mr. Popejoy has been affiliated with TRT Holdings, Inc., a diversified private holding company based in Dallas, Texas, or with its subsidiary Tana Oil and Gas or Tana Exploration since 1984. From 2001 to present, Mr. Popejoy has served as the Senior Vice President of Energy for TRT Holdings, Inc., and a Manager of Tana Exploration. Prior to 2001, Mr. Popejoy served as a Vice President of Land and later as President of Tana Exploration. Mr. Popejoy holds a BBA degree in Petroleum Land Management from the University of Texas at Austin.
Each director brings a unique set of skills to our board of directors. The board of directors believes the directors as a group have the experience and skills in areas such as the oil and gas industry, finance, risk management and corporate governance that are necessary to effectively oversee our company. Set forth below are the conclusions reached by our board of directors as to why each director is qualified for service as a director of our company.
•
Mr. Akradi
has extensive experience as
the chairman of the board,
president and
chief executive officer of both public and private companies.
Mr. Akradi
provides us with strong
executive
leadership as well as expertise in the areas of
corporate
strategy, financial
management
and
fundraising through the
capital markets. In addition, Mr. Akradi brings the
perspective
of a significant stockholder to the board.
•
Ms. Bromiley
has extensive experience as a financial executive and leader within various companies across the oil and gas industry. Ms. Bromiley provides expertise in the areas of financial reporting, accounting, capital markets, internal controls and corporate governance.
•
Mr. Easley
has extensive business development and executive management experience in the oil and natural gas exploration and production industry.
•
Mr. Frantz
has valuable experience in business and financing and brings the
benefit
of a significant stakeholder to the board, as well as institutional knowledge in the oil and gas industry, through his involvement with TRT Holdings.
•
Mr. Grabb
is a registered petroleum geologist with over
4
0 years of experience in the oil and gas industry. Mr. Grabb provides both geological and industry expertise as it relates to our exploration prospects and drilling programs.
•
Mr. King
has over 30 years of experience in the oil and gas industry. Mr. King provides expertise in the areas of evaluating, acquiring and managing oil and gas interests, as well as our exploration prospects.
•
Mr. Lenz
has valuable experience in originating investments across a firm’s capital structure, which
benefit
s
the company in the areas of capital markets and finance alternatives.
•
Mr. Popejoy
has extensive experience in the oil and gas industry and brings the benefit of a significant stakeholder to the board through his involvement with TRT Holdings.
Required Vote
Election to our board of directors of each of the nominees named above requires the affirmative vote of a plurality of the voting power of the outstanding shares of our common stock present and entitled to vote on the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE “FOR” THE ELECTION OF ALL OF THE NOMINEES.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
The audit committee of our board of directors has appointed Deloitte & Touche LLP (“Deloitte) as our independent registered public accounting firm for the fiscal year ending December 31, 201
9
. A proposal to ratify that appointment will be presented to stockholders at the meeting. If stockholders do not ratify such appointment, the committee will consider selection of another independent registered public accounting firm. Even if the appointment is ratified, the committee may, in its sole discretion, direct the appointment of a different independent auditor at any time during the year if it determines that such change would be in
the
best interests
of the company
. Representatives of Deloitte are expected to be present at the meeting and they will have the opportunity to make a statement and be available to respond to appropriate questions.
Change in Accountants During 2018
Grant Thornton LLP (“Grant Thornton”) served as our independent registered public accountant firm for our fiscal years 2015 through 2017. On June 5, 2018, we received notice that Grant Thornton declined to stand for re-appointment as our independent registered public accounting firm for the fiscal year ending December 31, 2018. Neither of Grant Thornton’s reports on the financial statements of the
c
ompany for the fiscal years ended December 31, 2016
and
2017 contained an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. In connection with the audit of the
c
ompany’s financial statements for the fiscal years ended December 31, 2016 and 2017, and the subsequent interim period through June 5, 2018, (i) there were no disagreements with Grant Thornton on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Grant Thornton’s satisfaction, would have caused Grant Thornton to make reference, in connection with its opinion, to the subject matter of such disagreements and (ii) there was no “reportable event” as defined in Item 304(a)(1)(v) of Regulation S-K. We provided Grant Thornton with a copy of the foregoing disclosure and requested that Grant Thornton furnish the
c
ompany with a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with the above statements. A copy of the letter from Grant Thornton was attached as Exhibit 16.1 to the Current Report on Form 8-K that we filed with the Commission on June 7, 2018.
On July 9, 2018, the audit committee appointed Deloitte as our independent registered public accounting firm for the fiscal year ended December 31, 2018. Prior to their appointment, we did not consult with Deloitte with respect to any of the matters or reportable events set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K.
Registered Public Accountant Fees
Deloitte
served as our independent registered public accounting firm for the year
ended December 31, 201
8
,
and
Grant Thornton served as our independent registered public accounting firm for the year
ended December 31, 2017
. Aggregate fees for professional services rendered by
such f
irms
for the years ended December 31, 201
8
and 201
7
were as follows:
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|
|
|
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|
|
Fiscal Year Ended
|
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
|
Audit Fees
|
$
|
824,120
|
|
$
|
390,455
|
|
Audit-Related Fees
|
243,895
|
|
—
|
|
Tax Fees
|
41,170
|
(1)
|
9,984
|
(
1)
|
All Other Fees
|
—
|
|
—
|
|
Total
|
$
|
1,109,185
|
|
$
|
400,439
|
|
________________
(1)
Tax related fees in 201
8
and 201
7
consisted of fees related to analyzing potential net operating loss carryforward utilization limits.
Audit
and audit-related
fees were for professional services rendered for the audits of the financial statements, review of interim financial statements, reviews of income tax provisions, audits of statutory financial statements, comfort letters in connection with offerings, consents and the review of documents we filed with the SEC. The percentage of hours spent by
each of Delo
itte and
Grant Thornton on these services that were attributable to work performed by persons not employed by
Deloitte and
Grant Thornton, as applicable on a full-time permanent basis did not exceed 50%.
The audit committee of the board of directors has determined that the provision of services covered by the foregoing fees is compatible with maintaining the principal accountant’s independence.
Pre-Approval Policies and Procedures of Audit Committee
Our audit committee has adopted pre-approval policies and procedures to ensure the continued independence of our auditor. As a general rule, we will only engage our auditors for non-audit-related work if those services enhance and support the attest function of the audit or are an extension to the audit or audit-related services.
Our audit committee annually evaluates our auditors’ independence, professional capability and fees based on a variety of factors. The committee annually obtains from the auditor a formal written statement delineating all relationships between the auditor and our company, consistent with Independence Standards Board Standard 1 and engages in a dialogue with the auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the auditor.
The audit committee takes appropriate action to oversee the independence of the auditor, which includes review and approval of the auditors’ annual audit plan and audit scope including a description of key functions and/or locations to be audited, a general description of each of the non-audit services provided or to be provided and an estimate of audit and non-audit fees and costs for the year and actual versus estimated for the preceding year. The committee ascertains whether resources are reasonably allocated as to risk and exposure and makes any recommendations that might be required to more appropriately allocate the auditors’ efforts.
The audit committee appraises the efficiency and effectiveness of the audit efforts and of financial accounting and reporting systems through scheduled meetings with the auditors and ensures that management places no restrictions on the scope of audits or examinations. The lead audit partner will review with the committee the services the auditor expects to provide and the related fees, as appropriate. In addition, management will provide the committee with periodic updates of any non-audit services that the auditor has been asked to provide or may be asked to provide in the future.
The committee pre-approved all of the services we received from
Deloitte and
Grant Thornton during 201
8
.
Required Vote
The affirmative vote of the holders of the greater of (1) a majority of the shares of common stock present in person or by proxy at the meeting and entitled to vote or (2) a majority of the minimum number of shares entitled to vote that would constitute a quorum for the transaction of business at the meeting is required for approval of this Proposal 2.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE “FOR” THIS PROPOSAL 2.
AUDIT COMMITTEE REPORT
The audit committee of the board is composed of three non-employee directors who meet NYSE American independence requirements. Information as to these persons, as well as their duties, is provided under the caption “
Our Board of Directors and Committees
.” The committee met four times during 201
8
and reviewed a wide range of issues, including the objectivity of the financial reporting process and the adequacy of internal controls. In addition, the committee received reports and reviewed matters regarding ethical considerations and business conduct and monitored compliance with laws and regulations. Prior to filing our annual report on Form 10-K, the committee also met with our management and internal auditors and reviewed the current audit activities, plans and results of selected internal audits. The committee also met privately with the internal auditors and with representatives of our independent registered public accounting firm to encourage confidential discussions as to any accounting or auditing matters.
The audit committee has (a) reviewed and discussed with management and our independent registered public accounting firm our audited financial statements for the year ended December 31, 201
8
, management’s assessment of the effectiveness of our internal control over financial reporting, and our independent registered public accounting firm’s evaluation of our internal control over financial reporting; (b) discussed with our independent registered public accounting firm the matters required to be discussed by the applicable Public Company Accounting Oversight Board (the “PCAOB”) standards; and (c) received the written disclosures and the letter from our independent registered public accounting firm as required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence and discussed with representatives of our independent registered public accounting firm its independence.
Based on the review and discussions referred to above, the audit committee recommended to our board of directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 201
8
, including all amendments, for filing with the SEC.
The name of each person who serves as a member of our audit committee is set forth below.
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Lisa Bromiley (Chairperson)
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Robert Grabb
|
Roy Easley
|
P
R
O
P
O
S
A
L
3
ADVISORY VOTE TO APPROVE
THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS
In accordance with Section 14A of the Securities Exchange Act of 1934, as amended, and Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the following proposal, commonly known as a “Say on Pay” proposal, provides our stockholders with a separate nonbinding advisory vote to approve the compensation of our named executive officers. The named executive officers are the individuals identified in the Summary Compensation Table on
page
25
of this proxy statement. Because your vote on this proposal is advisory, it will not be binding upon us or our board of directors. However, the compensation committee will review the results of the vote carefully and will take the results of its review into account when making future executive officer compensation decisions.
The compensation of our named executive officers received substantial support and was approved, on an advisory basis, by approximately
99
%
of the votes cast “FOR” or “AGAINST” the corresponding proposal at the annual meeting of s
tock
holders held on
August
2
3
, 201
8
. The compensation committee and other members of our board believe that this vote reflected our stockholders’ strong support of the compensation decisions made by the compensation committee for our named executive officers for 201
7
.
Before you vote on the resolution below, please carefully review the entire
“Compensation Discussion and Analysis”
beginning on
page
16
and the tables, narrative disclosure and footnotes that follow the
“Compensation Discussion and Analysis.”
The
“Compensation Discussion and Analysis”
contains important information about our executive compensation program and philosophy. It also explains how and why the compensation committee made specific decisions about the named executive officers’ compensation for
201
8
.
The following resolution will be voted on at the Annual Meeting:
RESOLVED, that the stockholders of Northern Oil and Gas, Inc. hereby approve, on an advisory basis, the compensation of the named executive officers in the Compensation Discussion and Analysis, the compensation tables, and the other related tables and disclosure as disclosed in this proxy statement.
Required Vote
We will consider our stockholders to have approved our executive compensation if the number of votes cast “FOR” this Proposal
3
exceeds the number of votes cast “AGAINST” this Proposal
3
. With respect to this proposal, a stockholder who abstains and a stockholder who does not vote (including a broker non-vote) will have no effect on the outcome of this Proposal
3
.
THE BOARD OF DIRECTORS BELIEVES THAT
THE COMPENSATION OF OUR EXECUTIVE OFFICERS IS APPROPRIATE
AND RECOMMENDS A VOTE “FOR” THIS PROPOSAL
3
.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Named Executive Officers
This Compensation Discussion and Analysis provides information about the 201
8
compensation program for the following named executive officer
s, who were the only individuals
who
served as executive offic
ers during 2018
:
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Brandon Elliott
|
Chief Executive Officer
|
Nicholas O’Grady
|
Chief Financial Officer
|
Michael Reger
|
President
|
Erik Romslo
|
Executive Vice President, General Counsel & Secretary
|
Adam Dirlam
|
Executive Vice President, Land
|
Chad Allen
|
Chief Accounting Officer
|
Thomas Stoelk
|
Former Chief Financial Officer and Interim CEO (until January 31, 2018)
|
Executive Summary
2018 was a
trans
formational
year for our company.
We
s
ignificantly
strengthened
the
company through a
multi-
phase
balance sheet
rest
ructuring
during
the year
, and also generate
d
substantial growth
,
more
than doubl
ing
our production
in the fourth quarter of 2018 compared to
the fourth quarter of 201
7
. This growth was
driven
both
by
o
rganic
activity
and
via
significant
acquisitions
completed in the second half of the year
. The first
phase
of the balance sheet
restructuring
, which consisted of a large
debt
exchange
transaction and associated equity raise
,
was
in progress
early in 2018
. As a result,
the
compensation
committee waited un
til these
transactions c
losed in May 2018 before
adopting
our
compensation p
lans
and associated performance goals
for 2018.
For 2018, the compensation committee
sought to significantly reduce the proportion of compensation, com
pa
ny-wide,
that may be paid
in ca
sh and
increase
the proportion
derived from equity incentive awards.
As a result,
the total cash paid to our
board
of
directors for 2018 decreased by 65% compared to 2017. More significantly, the compensation committee
elim
in
a
ted
any
executive
cash bonus
prog
ram for
2018
, and the
2018 bonus program applicable to executive officers consist
ed
entirely of performance-based equity awards
.
This program consisted of
restricted stock awards
granted on June 1, 201
8, wi
th all shares
subject to performance-based vesting requirements. Half of the shares granted under the awards
were
subject to the company’s performance relative to Adjusted EBITDA goals, and the other half of such shares
were
subject to goals based on the company’s
stock price
performance
. Any shares earned as a result of the company’s performance relative to these goals will vest
over three years
in 2019, 2020 and 2021
, subject to typical service-based vesting conditions
.
We
achieved
the maximum
Adjusted EBITDA
performance goal
, and as a result
all
related
shares
were
earned
.
So far, we have
achieved the threshold stock price performance goal, a
nd as a result one-third of the related shares
were
earned
. The remaini
ng shares
subject to the higher
stock price performance goals
that have not yet been achieved
still have the potential to be earned
, depe
nding on the company
’
s stock price
performanc
e during the remainder of 2019.
Overview
Our compensation committee is responsible for establishing director and executive officer compensation, as well as policies and programs to insure that they are consistent with our compensation philosophy and principles of corporate governance. The compensation committee is authorized to make plan awards to our employees to recognize individual and company-wide achievements as the committee deems appropriate. Our compensation committee has historically reviewed and approved base salary and incentive compensation levels, employment agreements and benefits of executive officers and other key employees.
O
ur
compensation program
seeks
to reward our management for maximizing s
tock
holder value and ensuring the long-term stability of our company. Our compensation program is intended to reward individual accomplishments, team success and corporate results. It also recognizes the varying responsibilities and contributions of each employee and is intended to foster an ownership mentality among our management team.
The compensation committee believes it is important to rely in large part on performance relative to pre-determined performance goals in determining executive compensation. As such,
shares
earned by
our
executive officers under our
short- and
long-term equity incentive program
are largely driven by performance relative to pre-determined performance goals. However, the compensation committee does retain meaningful discretion to allow them to
make other
awards based on circumstances as they see fit.
In 201
8
, we held a stockholder advisory vote on the compensation paid to our named executive officers for
2017
, which resulted in approximately
99
% of the votes cast approving such compensation. Our compensation committee evaluated the results of last year’s advisory vote on executive compensation and, given the support expressed by s
tock
holders,
did
not
make
any specific changes to our executive compensation program as a result thereof.
Compensation Consultant and Peer Group
The compensation committee has from time to time engaged independent consultants to advise it on peer group executive compensation practices, potential compensation packages for existing or possible new executives, and in connection with other projects, including the selection of peer groups for executive compensation analysis purposes.
In 2018, the compensation committee
directly
engaged Pearl Meyer to
help develop a
peer group,
review the company’s compensation programs and advise on potential changes thereto (including with respect to establishing the 2018
and 20
19
executive compensation and director compensation programs).
During its engagement in 2018, Pearl Meyer, from time to time, may have contacted our named executive officers for information necessary to fulfill its assignment and may make reports and presentations to and on be
half of the compensation committee that our named executive officers also receive. The compensation committee determined that the work of Pearl Meyer and its employees for 2018 did not raise any conflic
t of interest.
The compensation committee has selected and made changes to our peer group over time primarily due to changes in the financial and operating profiles of our company and potential peer companies, as well as our compensation committee’s subjective determination
s
regarding the companies with whom we compete for executive talent and the most appropriate companies against which to compare our
performance
.
Prior to 2018
, the primary function that our peer group serve
d
in our executive compensation program
was
as the comparative group in calculating our company’s relative total s
tock
holder return for purposes of
pre-201
8
executive bonus
programs
.
For
the
2018
executive bonus program
,
our compensation committee did not utili
ze any
performance metrics
that were measure
d on a
relative
basis compared to a peer group
. However, with the assistance of Pe
arl Meyer
, the compensation committee
continued to review
detailed information regarding
the executive
compensation
programs of companies
in our current peer
group
.
The compensation committee does not seek to apply any particular benchmark
or target percentiles
relative to the peer group in setting compensation levels. However, the peer group
data
was
considered in connection with setting base salaries, developing our
executive compensation program,
determining the size of awards thereunder, and
for
other
similar
purposes
.
The
peer group
considered
by the compensation committee
in connection with establishing t
he 2018
compensation
program
consisted
of Abraxas Petroleum Corp.,
Bonanza Creek
Energy, Inc.,
Com
stock Resources
, Inc., Contango Oil & Gas
Company, Earthstone Energy
, Inc., Eclipse Resources Corp., Energy XXI Gulf
Coa
st, Inc.,
Halcon Resources Corp.,
HighPoint Resources Corp.,
Jones Energy, Inc.,
Lonestar Resources US Inc., Penn Virginia Corp.,
Resolute Energy Corp.,
Ring Energy
, Inc., Sand
R
idge
Energy
Inc
.,
Sil
verBow Resources, Inc.
and
W&T Offshor
e, Inc
.
The peer group considered by the compensation committee in connection with establishing the
2019
compensation program
consisted of Abraxas Petroleum Corp.,
Bonanza Creek Energy, Inc.,
Callon Petroleum Company, Carrizo Oil & Gas, Inc.,
Comstock Resources, Inc.,
Eclipse Resources Corp.,
EP Energy Corp.
, Halcon Resources Corp., HighPoint Resources Corp.,
Matador
Resources
Company
,
Oasis Petroleum Inc
., Penn Virginia Corp., Resolute Energy Corp., Ring Energy, Inc., SandRidge Energy Inc., SilverBow Resources, Inc.
, SM Energy
Company, SRC Energy
Inc.,
W&T Offshore, Inc.
and Whiting Petrol
eum Corp.
Role of Executives in Establishing Compensation
The compensation committee makes the final determination of all compensation paid to our named executive officers and directs all
compensation
decisions affecting our executive officers. However, management also plays a role in the determination of executive compensation levels. At the end of each year, management provides recommendations to the compensation committee regarding any discretionary items affecting
compensation for the year. Management also provides advance input on
t
he structure of our
incentive programs and performance goals to be used thereunder, as well as the selection of peer companies to be used by the compensation committee for executive compensation purposes. However, the compensation committee has no obligation to accept management’s recommendations, and meets regularly in executive session to discuss and
ultimately set executive compensation amounts and programs.
Our chief executive officer is not present during voting or deliberations regarding his compensation.
Compensation Philosophy
To recruit and retain the most qualified and competent individuals as senior executives, we strive to maintain a
compensation
program that is competitive in our market and with respect to the general profession of our executives. We remain committed to hiring and retaining qualified, motivated employees at all levels within the organization while ensuring that all forms of compensation are aligned with business needs. Our compensation program is intended to reward exceptional organizational and individual performance. Our compensation system is designed to support the successful attainment of our vision, values and business objectives.
The
following
compensation objectives are considered in setting the compensation components for our senior executives:
•
Attract and retain key executives responsible not only for our continued growth and profitability, but also for ensuring proper corporate governance and carrying out the goals and plans of our company;
•
Motivate management to enhance long-term stockholder value and to align our executives’ interests with those of our stockholders;
•
Correlate a portion of management’s compensation to measurable financial and operating performance;
•
Evaluate and rate performance relative to the existing market conditions during the measurement period; and
•
Set compensation and incentive levels that reflect competitive market practices.
The principal components of our executive compensation program have historically been base salary, annual short-term incentive bonuses and long-term incentive awards.
For 2018,
the compensation committee
elimin
ated
any cash bonus program, and essentially combined the short-term and long-term programs into a single pr
o
gram consisting of performance-based restr
icted stock awards, with the first tranche of potential vesting
occurring
in March
2019.
We have
sought to
blend
elements
of compensation
in order to formulate compensation packages
that
provide competitive pay, reward the achievement of financial, operational and strategic objectives on a short- and long-term basis, and align the interests of our executive officers and other senior personnel with those of our stockholders.
We have traditionally utilized stock incentives as a means to align the interests of our management with the interests of our stockholders and motivate our management to enhance s
tock
holder value. Stock issuances to-date have been designed to serve as both short-term rewards and long-term incentives. As a result, each of our named executive officers who have served with the company for at least one year holds a significant number of shares of our outstanding common stock.
Employment Agreements
We have traditionally employed our executive officers under written employment agreements governing certain terms and conditions of their employment. In the summer of 2018, we entered into new employment agreements with each of our current executive officers
(the
“
2018 Employment Agreements
”
)
.
The new employment agreements were initially
negotiated and
en
tered into with Mr. Reger and Mr. O
’
Grady
when they were hired to join the company as executive officers
in late May
2018. Shortly thereaf
ter, each of the other
current
executive officers entered into
subst
antially similar employment agreements
, with
limited differences
summarized below.
Mr
. Reger was
initially
hired
in May 2018
to serve as Chief Executive Officer
, but
in July 2018
we determined to
realign
executive job responsibilities in an effort to optimize the daily management of the company and better position the company to capitalize on growth opportunities.
Mr.
Reger
assumed
the title of President
to
focus his
efforts
on acquisition opportunities.
Mr.
Elliott
, who had been serving as
President,
assume
d
the title of
Chief Executive
Office
r,
primarily
responsible for the day-to-day operations of the company
as well as
investor relations
.
In connecti
on there
with, we entered into
a
2018 Employment Agreement with Mr. Elliott, and also entered into a
new employment agreement
with Mr. Reger
that
was
substantially similar to his existing
2018 Employment A
greement,
except for changes to reflect his new title and certain other matters.
This subsequent agreement is the version referred to in the summary of the 2018 Employment
A
greements
that follows
.
T
he 2018 Employment Agreements each provide for
an initial three-year term,
subject to earlier termination upon notice or certain other conditions, and with the potential for additional one year renewal terms.
Each
executive officer (
e
xcept
M
r. Reger) is entitled to a
minimum annualized
cash
base salary
of
$3
25
,000 for Mr. Elliott and Mr. Romslo, $270,000 for Mr. O
’
Grady,
$2
50,000 for Mr.
Dirlam
,
and $220,000 for Mr. Allen.
Under
Mr. Reger
’
s
employment agreement,
in lieu of a traditional
cash
base salary,
he instead requested and agreed to
receive
an annual restricted stock grant subject to time-based vesting to be negotiated in good faith by the parties annually
(see
“
Base Salaries
”
below)
.
Under the
2018
E
mployment
A
greements, each executive
is
also
entitled to an annual restricted stock grant subject to performance-based vesting,
to
be negotiated in good faith by the parties annually.
Such grants are expected to
serve as
the primary comp
onent of
our
executive bonus plan each
year.
For detail re
garding
the initial such
grants made for 2018,
s
ee
“
2018 Short- and Long-Term Equity Incentive Program
”
below
.
The
2018 Employment Agreements
also contain provisions
that
, among other things,
(i)
wil
l subject
the
executives to any “clawback” or similar policy hereafter adopted by the
c
ompany
to comply with applicable law
,
(ii)
prohibit
the executives
in certain circumstances
from competing with our company or soliciting any employees of our company for a specified period following termination of
their
employment
, (iii) en
titl
e
each executive to
perquisit
es
including a $20,000 annual vehicle
allowance and the company
’
s payment of each executive
’
s ma
xi
mum
employee
401
(k) contribution each
year
(not to exceed $25,000), in addition to
company matching
.
F
inally, the 2018 Employment Agreements
contain
change in control and severance provisions
which are
d
escribed
under
“
P
otential Payments upon Termination or Change in Contro
l
—
C
hange in Control and Severance Provisions
” below
.
Elements of Compensation
The total compensation and benefits program for our executive officers
currently
consist
s
of a combination of the following components:
•
base salaries;
•
annual short-
and long-
term
equity
incentive program;
•
discretionary
bonuses or
equity
awards;
•
retirement, health and welfare benefits;
•
perquisites; and
•
severance/change of control arrangements.
P
rior to 2018, the company maintained separate short-
and long-term incentive programs, consisting of a short-term
cash
incentive program, and a long-term
equity-based
incentive program. For 2018, the compensation committee
eliminated
any cash bonus program
and
implemented
a single program consisting of performance-based restricted stock awards
.
See
“
Short- and Long-Term Equity Incentive Program
” below
.
Base Salaries
We
generally
provide base salaries to compensate our senior executives and other employees for services performed during the fiscal year. This provides a level of financial certainty and stability in an industry with historical volatility and cyclicality. The base salaries are designed to reflect the experience, performance, responsibilities and contribution of the individual executive officers. This form of compensation is eligible for annual merit increases, and is initially established for each executive through individual negotiation. Thereafter, salaries are reviewed annually, based on a number of factors, both quantitative, including organizational and competitive analyses, and qualitative, including the compensation committee’s perception of the executive’s experience, performance and contribution to our business objectives and corporate values.
In light of the difficult industry environment and the challenges facing our company as we entered 2018, the compensation committee did not increase executive officer base salaries at the beginning of 2018. However, following the completion of the first phase of our balance sheet restructuring in May 2018, which was shortly followed by the hiring of Mr. Reger and Mr. O
’
Grady
and the
roll-
out
of
our current executive team, annualized cash base salaries for the remainder of 2018 were set as follows:
•
Mr. Elliott - increased from $286,000 to $300,000, and later increased to $325,000 upon appointment as CEO;
•
Mr. O
’
Grady - $270,000, as agreed upon hire;
•
Mr. Romslo - $325,000, which is unchanged from 2017;
•
Mr. Dirlam - $250,000, as agreed upon promotion to executive officer position; and
•
Mr. Allen - $220,000 as agreed in connection with 2018 Employment Agreement.
Under Mr. Reger
’
s
2018
E
mployment
A
greement, in lieu of a traditional cash base salary, he instead requested and agreed to receive an annual restricted stock grant subject to time-based vesting to be negotiated in good faith by the parties annually.
As a result, Mr. Reger is currently compe
nsated almost entirely
through equity
-based compensation. Receiving primar
ily equity-based comp
ensation is intended to strongly align the personal performance and
success
of Mr. Reger, who
is our founder and chairman emeritus
in addition to his current role as President,
with the interests and success of our s
tock
holders.
Mr. Reger’s initial
time-based
restricted stock
grant
in li
e
u of a cash base salary
was for 240,000 shares ($648,000 grant date fair value on June 1, 2018) vesting over the next twelve months.
On January 4, 2019, in connection with the compensation committee setting
the
executive compensation
program
for
2
019, Mr. Reger re
ceived
a
nother
time-based restricted stock grant in lieu of cash base
salary for
240,000 shares (
$653,110
grant date fair value on January 4, 2019)
, which
is scheduled to
vest over the twelve months
following the completion of vesting of his initial such award.
Short- and
L
ong-Term Equity Incentive Program
The combined purpose of
o
ur short-
and long
-
term
equity
incentive program
is
to provide variable
compensation
dependent upon the achievement of
company
performance objectives,
a
nd to
align
the interests of our executives with those of our s
tock
holders.
The 2018 program consists
of
restricted stock awards
subject to performance-based vesting conditions.
There is a short-term component, in
that the first tranche of vesting is scheduled to occur (subjec
t to achievement of performance conditions) short
ly after the end of
the
calendar year
in which the awards are made
. In addition,
s
ince equity awards may vest and grow in value over time,
the program also
is
intended to
incentivize company
performance over
the long-term
.
The quantitative
performance obj
ectives
selected each year are tailored by the compensation committee in an attempt to focus management’s attention and efforts on the matters deemed most critical to the company, and as a result may be different from year to year depending on the current environment and needs of the company. The performance level for each
performance objective
take into account prior year results and current year strategic objectives, planned projects and capital spending plans. We believe that they are set aggressively in light of these variables and require achievement of significant performance.
The
threshold, target and maximum
levels for the quantitative
performance goals
may provide for adjustments to account for the effects of certain circumstances that may arise during the year, such as
unexpected market conditions or
significant acquisitions or divestitures.
Restricted stock awards
under this program
represent awards of actual shares of our common stock that include vesting provisions which are contingent upon continued employment and
achievement of certain performance objectives. We believe that awards of restricted stock provide a significant incentive for executives to achieve and maintain high levels of performance over multi-year periods, and strengthen the connection between executive and stockholder interests. We believe that restricted shares are a powerful tool for helping us retain executive talent. The higher value of a share of restricted stock in comparison to a stock option allows us to issue fewer total shares in order to arrive at a competitive total long-term incentive award value. Furthermore, we believe that the use of restricted stock reflects competitive practice among companies with whom we compete for executive talent.
2018
Short- and
Long-Term Equity Incentive Program
The 2018
program consisted of restricted stock awards granted on June 1, 2018, with all shares subject to performance
-
based vesting requirements. Half of the shares granted under the awards were subject to the company’s performance relative to Adjusted EBITDA goals, and the other half of such shares were subject to goals based on the company’s stock price performance. Any shares earned as a result of the company’s performance relative to these goals will vest over three years in 2019, 2020 and 2021, subject to typical service-based vesting conditions.
The number of
restricted
sh
ares granted to Mr. Reger and Mr.
O
’
Grady was determined
via
negotiations
with the compensation committee
in connection with their
hir
ing
process
in May 2018
. In this regard, the compensation committee c
onsidered the peer group information and related analysis prepared by
its compensation consultant,
Pearl Mey
er.
The com
pensation committee
also
considered
such
information
in dete
rmining the
number of
restricted shares to be granted to the other executi
ve officers.
Based on the company
’
s stock price
range during the time the compen
sation committee was neg
otiati
ng with Mr. Rege
r and Mr. O
’
Grady, the compensation committee was assuming
an appro
ximately $2.50 per share value. Based on this
per share
val
ue
, the
number of shares
granted by the com
m
ittee
and the value these
awards
were intended to convey for threshold, target a
nd maximum performance r
elative to
the performance goals was as follows:
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|
|
|
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|
|
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|
|
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|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
|
Shares
|
Value
(1)
|
|
Shares
|
Value
(1)
|
|
Shares
|
Value
(1)
|
Michael Reger
|
|
300,000
|
$
|
750,000
|
|
600,000
|
$
|
1,500,000
|
|
900,000
|
$
|
2,250,000
|
Nicholas O’Grady
|
|
110,000
|
$
|
275,000
|
|
230,000
|
$
|
575,000
|
|
360,000
|
$
|
900,000
|
Brandon
Elliott
(
2
)
|
|
50,000
|
$
|
125,000
|
|
100,000
|
$
|
250,000
|
|
150,000
|
$
|
375,000
|
Erik Romslo
|
|
50,000
|
$
|
125,000
|
|
100,000
|
$
|
250,000
|
|
150,000
|
$
|
375,000
|
Adam Dirlam
|
|
40,000
|
$
|
100,000
|
|
80,000
|
$
|
200,000
|
|
120,000
|
$
|
300,000
|
Chad Allen
|
|
30,000
|
$
|
75,000
|
|
60,000
|
$
|
150,000
|
|
90,000
|
$
|
225,000
|
_________________
(1)
The v
alues in these column
s
reflect a consistent value of $2.50 per share regardless of the gr
ant dates and
do not re
flect the grant date fair values
of these
awards
computed in accordance with FASB ASC Topic 718
.
T
herefor
e
, the values
vary si
gnificantly from the values included in
t
ables below under
“
Summary Compe
nsation Table
”
and
“
Grants of Plan-Based Awards
”
.
(2)
Mr. Elliott
’
s ini
tial
June 1, 2018
award
of 40,000
, 80
,000 and
120
,000 shares for threshold, target and maximum, was increased to 50,000
, 100
,000, and 150,000
shares
, respecti
vely
,
on July 5
, 2018 in
connection with his appointment to t
he CEO position.
As noted above,
h
alf of the shares
under the awards were subject to the company’s performance relative to Adjusted EBITDA goals, and the other half of such shares were subject to goals based on the company’s stock price performance.
The Adjusted EBITDA goals targeted specified levels of annualized fourth quarter 2018
Adjusted
EBITDA,
which
was
chosen
to incentiv
ize
management
to gr
ow the company substantially in the second half
2018
.
The
stock price goals
ini
tially
targeted specified
ave
rage closing
stock prices
for the last 20 tradi
n
g days of 2018
. However, the awards included
language
obligatin
g the
compensation
committee, if the average closing price of NYMEX WTI cr
ude oil in the last 20 trading days of 2018
was
below $62.
5
0
, to
reconsider
in
good
faith
the perfor
m
a
nc
e
-based vesting crit
eria and, if determined
appropriate
in the sole discretion of the committee, to make any reasonable and equitable adjustments thereto that it so
determine
s
.
The compensation committee met
on December 19, 201
8, at a time
when
NYMEX
WTI oil pr
ices had declined s
ubstantially (
compare
$
65.81
per barrel on June 1, 2018 to
$
47.20
per
barrel
on December 19, 2018
),
resulting in a si
gnificant decline in energy stock
s including the
company
’
s. The committee noted that the company had perfor
med
extremely
well
since the original grant date of the
awards, closing on si
gnificant acquisitions and complet
ing additional steps of the company
’
s balance sheet restructuring
.
Nonetheless
,
it was apparent that
none of the
stock price goals w
ould
be achieved.
In light of the fact that this appeared to be driven by marke
t
forces outside of the company
’
s control, and based on
the company
’
s and management
’
s strong perfor
mance year-to-date, the comp
ensation committee determined to
modify the
awards by
extend
ing
the period over which the st
ock price performance goals could be achieved. Instead of requiring that the
company achieve
any s
tock price
performance
goals
base
d on the
a
verage closing price during the last 20 tr
ading days of 2018, the mo
dification allowed
100% of
the
related shares to be earned if the
company
achieve
d
the
stock price
goals over any c
o
nsecutive 20
t
rading days
ending on or before
June
30, 2019
. In addition, the modification allow
s
50% of any
related shares that are not earned
by
June 30, 2019 to st
ill
be earned if the company achieves the stock price goals over any consecutive 20 trading days
ending on or before
December 31, 2019.
The
following
table
set
s forth the sp
ecific
t
hreshold, target and maximum
performance
goals
selected
by the compensation committee, and the
com
pany
’
s perfor
mance r
elative t
o these goals.
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Performance Levels
|
|
|
|
|
|
|
|
|
2018 Performance Goals
(equally weighted)
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Actual Company Performance
|
|
Performance Level Earned
|
Fourth Quarter 2018 Annualized Adjusted EBITDA
(1)
|
|
$265m
|
|
|
$295m
|
|
|
$325m
|
|
|
$499m
|
|
|
Maximum
(3)
|
Stock Price Goals
(2)
|
|
$2.60/share
|
|
$2.90/share
|
|
$3.20/share
|
|
$2.61/share
|
|
Threshold
(
4
)
|
_________________
(1)
Ca
lculated as
the company
’
s Adjusted EBITDA for the fourth quarter of 2018, multiplied times four.
(2)
Initially
,
to be measured
against average closing price
of
the company’s
common stock
for the last 20 trading days of 2018. In December 2018, the compensation committee modified th
is feature of the
award
s
(
as described in
more
detail a
bove)
. The
share
price
levels
were not adjusted
, but
the modification allo
w
s them to
be achieved over any 20 trading day period ending on or before June 30, 2019. In addition, for any shares that haven
’
t been earned
by
June 30, 2019, 50% of such shares may still be earned if the associated share price goal is achieved for any 20 trading day period ending on or before December 31, 2019.
(3)
We
substantially increased
our
A
djusted EBITDA during 2018, from
$56.0 million
in t
he first quarter of 2018
(or $223.8 million on an annualized basis)
to
$
124.9 million
in the fourth quarter of 201
8
(or $499
.5 million
on an annualized basis)
. This
inc
rease
was
driven
by a
more than
doubling of the company
’
s production
from the first quarter to the fourth
quarter,
a large
portion
of which was due to
two significant ac
quisitions
(the Pivo
tal
and W Energy
acquis
i
tions)
that we
signed
in July 2018 and closed
by
the s
tart of the fourth quarter
.
As a result, the compan
y
’
s
actual
performance was substantially in excess of the
perfor
mance goals established on this metric.
(4)
The company achieved the threshold level of performance with an average closing stock price of $2.61 per share for the 20 trading days ended February 1, 2019. The target and maximum goals still may be achieved, as described in note 2 above.
As shown in t
he tab
le above, we
achieved the maximum Adjusted EBITDA
goal
and
have
so far
achieved
the threshold stock price
goal
. As a result, two-thirds of the max
imum number of shares have been earned
.
Of the shares tha
t have been earned,
o
ne
-third
vested on March 15, 2019
and
, subject to
typical
service-based vesting
conditions,
another
o
ne-third will
vest on each of March 15, 2020 and March 15, 202
1
. The
unearned shares
associated
with the target and maximum
stock price
goals
still have the potential to be earned, depending on the company
’
s stock price performance during the remainder of 2019.
2017 Long-Term Equity Incentive Program
In early 2017, the compensation committee adopted a 2017 long-term equity incentive program for purposes of determining the number of restricted shares to be issued in early 2018 to the participating executives
.
The first half of the pro
gram
consisted of a performance equity award to each participating executive officer
,
the value of which was included in 201
7 compensation
(as
described in
detail in
the company
’
s proxy statement for last year
’
s annual meeting
)
.
The second half of the program was left in the full discretion of the compensation committee to determine for each executive officer, based on any factors it deemed relevant, a potential additional restricted stock award with a maximum award value of 150% of 2017 annual base salary.
The compensation committee made its final determination of awards under this program on March 8, 2018. As to the
d
iscretionary portion
of this program,
which are
included in
2018 compensation
because
the gra
nt date of the awards
occurred
in 2018,
the comp
ensation committee
granted
restricted stock awards
to the named executive officers
as follows
: Mr
. Elliott
-
24,038 shares ($50,000 grant da
te fair value), Mr. Romslo -
7
28 shares ($1,515 grant date
fair value), and
Mr. Allen
-
24,038 shares ($50,000 grant date fair value)
.
The
shares under these awards are scheduled to vest in three equal installments
in M
arch
of
20
19, 2020 and 202
1.
2019 Short- and
Long-Term Equity Incentive Program
The compensation committee has adopted a 201
9
short- and
long-term equity incentive program that is
substantially s
imilar to the 2018 program, except the performance
go
als
are different for 2019
.
S
imilar to
2018
, the 2019
program consists of restricted stock awards made to
our executive officers, each of which is subject to performance-based vesting requirements. Half of the shares granted under the awards are subject to the company’s performance relative to
debt-adjusted cash flow per share
goals, and the other half of such shares are subject to goals based on the company’s average closing stock price for the last 20 trading days of 201
9
. Any shares earned as a result of the company’s performance relative to these goals will vest in three equal installments in
2020
, 2021
and 202
2
.
D
iscretionary Bonuses or Equity A
wards
In addition to the formalized
incentive programs
descr
ibed abov
e, the compensation committee may also approve the payment of discretionary bonuses or equity awards in recognition of significant
achievements, in light of retention
or sim
ilar
goals
, or
due to
other facto
rs
the committee deems rel
evant.
During 2018, the co
mpensation committee granted each of Mr. Elliott and Mr. Romslo 100,000
fully
vested shares of common stock
. In the case of Mr. Romslo, the aw
ard was made on June 1, 201
8
,
in recogni
tion of his
substantial efforts
in connection
with
our
refinancing
trans
actions
late in 201
7 and in the first half of 2018
.
In the case of Mr. Elliott, the award
was made on November 8, 2018, in recogni
tion of his
prior
appointment to
serve
as
CEO and
strong
performance in connection therewith.
Retirement, Health and Welfare Benefits
We offer a variety of retirement, health and welfare programs to all eligible employees. The named executive officers are eligible for the same broad-based benefit programs on the same basis as the rest of our employees. Our health and welfare programs include medical, dental and long and short term disability.
We maintain a 401(k) plan for our employees. Under the 401(k) plan, eligible employees may elect to contribute a portion of their eligible compensation on a pre-tax basis in accordance with the limitations imposed under the Internal Revenue Code of 1986, as amended, or the Code. We also provide a match contribution equal to 100% of an eligible employee’s deferral contribution, up to 8% of the employee’s earnings up to the maximum amount permitted under the Code.
Perquisites
Additional perquisites paid for named executive officers in
2018
include
vehicle
allowances and
payment of all 401(k) plan contributions
. Our costs associated with providing the foregoing benefits for named executive officers in 201
8
are reflected in the Summary Compensation Table and related disclosures below. The company does not allow any executive officer perquisites for tax gross-ups.
Severance/Change of Control Arrangements
We have agreements in place with certain executive officers providing for severance compensation in connection with certain triggering events relating to a change of control of our company and/or termination of employment. We have provided more information about these benefits below under
“Potential Payments upon Termination or Change in Control
.”
Policies as to Company Securities
Our insider trading policy provides that company directors, officers and employees (and certain other covered individuals) may not, among other things, pledge company securities, purchase or sell puts or calls to sell or buy our securities, engage in short sales with respect to our securities, buy our securities on margin, or otherwise hedge their ownership of our stock. We have not adopted any stock ownership guidelines or other holding period requirements applicable to our directors, officers and employees.
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, under the terms of our
equity compensation plans
, awards thereunder and any compensation associated therewith may be made subject to forfeiture, recovery by the company or other action pursuant to any compensation recovery policy adopted by the board of directors at any time, including in response to the requirements of Section 10D of the Exchange Act and any implementing rules and regulations thereunder, or as otherwise required by law, and any award agreement may be unilaterally amended by the compensation committee to comply with any such clawback policy. We are currently evaluating the practical, administrative and other implications of implementing and enforcing a clawback policy, and intend to adopt a clawback policy in compliance with Section 10D of the Exchange Act once additional guidance is promulgated by the SEC.
Compensation Committee Report
Compensation Committee Activities
The compensation committee of our board currently consists of three independent directors. As the compensation committee, we authorize and evaluate programs and, where appropriate, establish relevant performance criteria to determine management compensation. Our compensation committee charter grants the compensation committee full authority to review and approve annual base salary and incentive compensation levels, employment agreements and benefits of our executive officers. We adopt performance criteria to measure the performance of our executive management and determine the appropriateness of awarding year-end bonuses.
Review of Compensation Discussion and Analysis
The compensation committee has reviewed and discussed the compensation discussion and analysis presented on the preceding pages. Based on its review and discussions, the compensation committee recommended to the board of directors that the compensation discussion and analysis be included in this document.
The name of each person who serves as a member of our compensation committee is set forth below.
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Bahram Akradi (Chair)
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Joseph Lenz
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Michael Popejoy
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Risks Arising from Compensation Policies and Practices
We have evaluated the risks arising from our company-wide compensation policies and practices and do not believe that such risks are reasonably likely to have a material adverse effect on our company.
Summary Compensation Table
The table below shows compensation for our named executive officers for services in all capacities to our company during fiscal years 201
6
, 201
7
and 201
8
. Compensation, as reflected in this table and the tables which follow, is presented on the basis of rules of the SEC and does not necessarily represent the amount of compensation realized or which may be realized in the future, or the amount of compensation attributable to a particular year. This is particularly true with respect to certain stock-based awards or accruals reported in the Stock Awards column. For more information regarding our salary policies and executive compensation plans, please review the information above under the caption “Compensation Discussion and Analysis.”
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Name and Principal Position
(1)
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Year
|
|
Salary
($)
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Bonus
($)
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Stock Awards
($)
(
3
)
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Non-Equity Incentive Plan Compensation
($)
(
4
)
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All Other Compensation
($)
(
5
)
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Total Compensation
($)
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Brandon Elliott
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2018
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306,398
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—
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801,777
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|
—
|
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53,667
|
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1,161,841
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Chief Executive Office
r
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2017
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286,000
|
|
|
|
—
|
|
35,000
|
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52,516
|
|
373,516
|
|
|
2016
|
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275,000
|
|
|
|
366,667
|
|
226,875
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|
50,854
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919,396
|
|
|
|
|
|
|
|
|
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Nicholas O’Grady
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2018
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157,500
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—
|
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1,056,542
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|
—
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33,067
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1,247,108
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Chief Financial Officer
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Michael Reger
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2018
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378,000
|
(
2)
|
—
|
|
2,649,759
|
|
—
|
|
48,667
|
|
3,076,426
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President
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2016
|
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500,000
|
|
|
|
2,131,021
|
|
—
|
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95,564
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2,726,585
|
|
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Erik Romslo
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2018
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325,000
|
|
—
|
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713,142
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—
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54,917
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1,093,058
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EVP, General Counsel & Secretary
|
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2017
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325,000
|
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167,960
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50,000
|
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56,286
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599,246
|
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2016
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321,533
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|
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755,911
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321,533
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54,608
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1,453,585
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Adam Dirlam
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2018
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242,574
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—
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353,301
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—
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41,314
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637,190
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EVP,
Land
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Chad Allen
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2018
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214,231
|
|
—
|
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314,976
|
|
—
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41,795
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571,002
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Chief
Accounting
Officer
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Thomas Stoelk
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2018
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42,917
|
|
—
|
|
—
|
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—
|
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29,183
|
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72,100
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Former
C
FO
&
Interim CEO
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2017
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515,000
|
|
—
|
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403,853
|
|
—
|
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63,581
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982,434
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2016
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508,333
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250,000
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2,671,349
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508,333
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62,099
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4,000,114
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__________________
(1)
Mr. Elliott
jo
ined the company
in J
anuary 20
13,
serv
ing
in various role
s
between then and his appointment as
CEO
in
July 2018.
Mr. O
’
Grady joined the company as CFO in June 2018. Mr. Reger
departed t
he company in August 2016 and
re-
joined the
company as CEO in May 2018, and subsequently assumed
his position as President in July 2018
.
Mr. Romslo joined the company in 2011, and has served as an executive officer since 2013.
Mr.
Di
rlam joined the compa
ny in 20
09
,
serving
in various roles between then and his appointment as an executive officer in
2
018. Mr. Allen joined the company in 2013, and served in various roles between then and his appointment as an executive officer in 2018.
Mr. Stoelk
resigned
from the company
in January 2018, having served as
CFO since 2011 and Interim CEO since August 2016
.
(2)
In connection with
Mr. Reger
’
s employment agreement, he requested and agreed to rec
eive
shares of
restricted stock
in lieu of
a
cash
base salary. As a result, on June 1, 201
8
, Mr. Reger rec
eived a
n award of 240,000 sh
ares of restricted stock
vesting over one year
, with a
total
grant date
fair value of
$648,000.
The $378,000 reflected in the
S
ala
ry column for 2018 is 7/12ths of this amount
, for the
seven months of 2018 that Mr. Reger was employed by the company.
The remaining value of the award will be included
in the
S
alary column for 2019.
The full
award is
included
in
the Grants of Pl
an-Based Awards table below, but no
value
f
or this
award is
included in the Stock Awards column of this
Summary Compensation
T
able.
(3)
Amounts in the Stock Awards column reflect the aggregate grant date fair value of awards granted during the applicable year. Grant date fair values are computed in accordance with FASB ASC Topic 718 utilizing assumptions discussed in Note 6 to our financial statements for the fiscal year ended December 31, 2018 included in our Annual Report on Form 10-K for fiscal year 2018.
The grant date fair value
of
each
award
subject to
a
performance condi
tion
is
based on the probable outcome of the performance condition as of the grant date
, which for 2018 assumed
that the
highest level of performance condition
would be achieved
.
See the Grants of Plan-Based Awards table below for additional detail regarding the 2018 awards reflected in this column.
(4)
The
company did
not have any executive cash bonus plan in p
lace for 201
8.
Instead,
the
2018
executive
bonus plan
was entirely equit
y-based,
consi
st
ing
of
performance
-based
restricted stock award
s made
to
executives
during 2018,
wh
ich are included in the
Stock Awards column of th
is table.
For
additional
discussion, see
“
Compensation Discussion and Analysis—2018 Short- and Long-Term Equity Incentive Program
” above.
(5)
The All Other Compensation amounts reported for 201
8
include
solely
company
401(k) contributions and vehicle perquisites, as follows
for each individual
: (i)
for Mr. Elliott, 401(k) contributions by the company of $3
7
,000 and vehicle perquisites of $16,
667; (ii) for Mr. O
’
Grady,
401(k) contributions by the company of $
21
,
4
00 and vehicle perquisites of $1
1
,667
; (iii) for Mr. Reger, 401(k) contributions by the company of $37,000 and vehicle perquisites of $1
1
,667
; (iv
)
for Mr. Romslo, 401(k) contributions by the company of $3
7
,000 and vehicle perquisites of $
17,917
;
(v) for Mr. Dirlam,
401(k) contributions by the company of $
29
,
648
and vehicle perquisites of $
11
,
667
;
(vi) for Mr.
Allen
, 401(k) contributions by the company of $3
0
,
128
and vehicle perquisites of $
11,667
;
and (vii)
for Mr. Stoelk, 401(k) contributions by the company of $
27,933
and vehicle perquisites of $1
,
25
0
.
Grants of Plan-Based Awards
The following table sets forth grants of plan-based awards during the year ended December 31, 201
8
.
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Estimated
Future
Payouts Under
Equity Incentive Plan Awards
(
1
)
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All Other Stock Awards:
Number of Shares of Common
Stock
(#)
|
|
Grant Date
Fair Value of Stock Awards
($)
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Name
|
|
Grant
Date
|
|
Threshold
(#)
|
|
Target
(#)
|
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Maximum
(#)
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Brandon Elliott
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6-1-2018
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40,000
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80,000
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120,000
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353,301
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7-5-2018
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10,000
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20,000
|
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30,000
|
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100,475
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3-8-2018
|
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24,038
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50,000
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(
2
)
|
|
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11-8-2018
|
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100,000
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298,000
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(
3
)
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Nicholas O
’
Grady
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6-1-2018
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110,000
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230,000
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360,000
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1,056,542
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Michael Reger
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6-1-2018
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300,000
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600,000
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900,000
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2,649,759
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6-1-2018
|
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240,000
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648,000
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(
4
)
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Erik Romslo
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6-1-2018
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50,000
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|
100,000
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150,000
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441,627
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3-8-2018
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728
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1,515
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(
2
)
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6-1-2018
|
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100,000
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270,000
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(
5
)
|
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Adam Dirlam
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6-1-2018
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40,000
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80,000
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120,000
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353,301
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Chad Allen
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6-1-2018
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30,000
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60,000
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90,000
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264,976
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|
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3-8-2018
|
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24,038
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50,000
|
(
2
)
|
__________________
(1)
Reflects t
he performance-based restricted stock awards granted
to the named executive officers
under the
2018
shor
t- and long-term equity incentive program.
See “
Compensation Discussion and Analysi
s
—
201
8
Short- and
Long-Term Equity Incentive Program
” above.
The grant date fair value for each such award is computed based on the probabl
e
outcome of
any
applicable
performance
condi
tion as of the gra
nt date. In addition,
because t
he
Compensation
Committee modified such awards in December 2018,
the grant date fair value
reported for each such award includes the
following
additional
amounts of
incremental
fair value
computed as of the December 2018 modification date
in accordance with FASB ASC Topic 718
: (
i
) for Mr. Elliott,
$91,165 (6-1-2018 award) and $22,791 (7-5-2018 award), (ii) for Mr. O
’
Grady,
$271,637, (
iii) for Mr. Reger, $683,736, (iv) for Mr. Romslo, $113,956, (v) for Mr. Dirlam, $91,165, and (
vi) for Mr. Allen, $68,374.
(2)
Ref
le
cts
an
award
u
nder the discretionary p
ortion of the 201
7
Long
-Term Equity Incentive P
rogram.
See “
Compensation Discussion and Analysis—201
7
Long-Term Equity Incentive Program
” above.
(3)
Reflects
a
discretiona
ry
award to Mr. Elliott
in re
cognition of his
assumption
of
the CEO r
ole
and
strong performance in connection there
w
i
th
.
See “
Compensation Discussion and Analysis—
Discretionary Bonuses or Equity A
wards
” above.
(4)
Reflects a
n award to Mr. Reger of
restricted stock in lieu of
cash base salary
. See note
2 to the Summary Compensation Table, above.
(5)
Reflects a
discretionary
awar
d to Mr.
Romslo
in recognition of
his
substantial efforts in connecti
on with our refinancing transactions late in 201
7
and in the first half of 2018
.
See “
Compensation Discussion and Analysis—
Discretionary Bonuses or Equity Awards
” above.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth the outstanding equity awards to our named executive officers as of December 31, 201
8
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
Name
|
|
Number of
Shares That
Have Not
Vested
|
|
Market Value
of Shares That
Have Not
Vested
(1)
|
|
Equity Incentive
Plan Awards:
Number of
Unearned
Shares That
Have Not Vested
(
2
)
|
|
Equity Incentive
Plan Awards:
Market Value of
Unearned Shares
That Have Not
Vested
(1)
|
Brandon Elliott
|
|
116,832
|
(3)
|
$
|
264,040
|
|
50,000
|
|
$
|
113,000
|
Nicholas O
’
Grady
|
|
—
|
|
$
|
—
|
|
110,000
|
|
$
|
248,600
|
Michael Reger
|
|
120,000
|
(
4
)
|
$
|
271,200
|
|
300,000
|
|
$
|
678,000
|
Erik Romslo
|
|
195,714
|
(
5
)
|
$
|
442,314
|
|
50,000
|
|
$
|
113,000
|
Adam Dirlam
|
|
43,170
|
(
6
)
|
$
|
97,564
|
|
40,000
|
|
$
|
90,400
|
Chad Allen
|
|
38,610
|
(
7
)
|
$
|
87,259
|
|
30,000
|
|
$
|
67,800
|
____________________
(1)
The values in these columns are based on the $2.
26
closing price of our common stock on the NYSE American on December
31
, 201
8
, the last trading day of 201
8
.
(2)
The number of shares reported
in this column
for each individual
is based on ach
ieving threshold per
formanc
e goals
.
If earned,
such
shares would
be scheduled to
vest in three equal installments on March 15
th
of
2019
, 20
20 and 20
21.
(3)
Rest
ricted s
hares scheduled to vest as follows: (i)
71,427
shares on
March 15
, 2019, (ii)
37,393 shares on March
15
, 2020
, and (iii)
8,012 shares on March 15, 20
21
.
(4)
Restricted shares scheduled to vest as follows: (i)
6
0,000
shares on
February 1
, 2019,
and
(ii)
6
0,000 shares on May 1, 2019.
(5)
Restricted shares scheduled to vest as follows: (i)
89,313
shares on
March 15
, 2019, (ii)
20,000 shares on April 8, 2019
,
(iii)
50,377 shares on March 15, 2020, (i
v
)
20,000 shares on April 8, 20
20 and (v)
16,024
shares on March 15, 2021
.
(6)
Restricted shares scheduled to vest as follows: (i)
20,536
shares on
December 5
, 2019, (ii)
11,317 shares on December 13, 2019
, and (iii)
11,317 shares on December 13, 20
20
.
(7)
Restricted shares scheduled to vest as follows: (i)
8,01
3
shares on
March 15
, 2019, (ii)
14,572 on December 5, 2019
,
(iii)
8,013 shares on March 15, 20
20, and (iv) 8,01
2
shares on March 15, 20
21
.
Option Exercises and Stock Vested
Our named executive officers did not hold or exercise any stock options during the year ended December 31, 201
8
. The table below sets forth the number of shares of common stock acquired on vesting by our named executive officers during the year ended December 31, 201
8
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
Name
|
|
Number of Shares
Acquired on Vesting
|
|
Value Realized
on Vesting
(1)
|
Brandon Elliott
|
|
185,839
|
|
$
|
477,968
|
Nicholas O
’
Grady
|
|
—
|
|
$
|
—
|
Michael Reger
|
|
120,000
|
|
$
|
404,200
|
Erik Romslo
|
|
218,940
|
|
$
|
507,008
|
Adam Dirlam
|
|
48,794
|
|
$
|
124,306
|
Chad Allen
|
|
22,653
|
|
$
|
58,122
|
______________
(1)
Value
based on the closing price of our common stock on the NYSE American on each applicable vesting date.
Potential Payments upon Termination or Change in Control
Change in Control and Severance Provisions
In the summer of 2018, we entered into new employment agreements with each of our current executive officers.
The
se
agreements
contain change in control and
severance provisions entitling those individuals to certain payments under specified circumstances
, as des
cribed below
.
Similar
provisions under Mr
. S
toelk
’
s prior employment agreement are not described be
low, because h
e resigned his
employment with the company
in January 2018 and he was not entitled to any such payment in connection therewith.
The
2018
employment
agreements with
our current executive officers
contain double-trigger change in control provisions whereby, if the executive’s employment is terminated by the
c
ompany without “cause” or by
the executive
for “good reason” (in each case, as defined in his employment agreement) in connection with a change in control (or within twelve months after a change in control), then all outstanding unvested equity awards held by him
would
automatically vest, and the executive will be entitled to receive a cash payment equal to the sum of (i) $1.2 million for Mr. Reger, or two times base salary for
the other executive officers
, (ii) his annualized vehicle allowance, and (iii) twelve months of COBRA premiums to continue his existing group health and dental coverage. Each executive
would
be entitled to the same benefits described in the first sentence of this paragraph if his employment is terminated by the
c
ompany without
cause
or by him for
good reason
(
an
“
Involuntary Termination
”
)
.
Estimated Payments to Named Executive Officers
The compensation amounts included in the table below are estimates of the amounts that would have become payable to each named executive officer
u
nder the various triggering events described in the foregoing provisions, assuming in each case that the applicable event (whether a change-in-control and/or a termination of employment) occurred on the last business day of 201
8
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Payments/Benefits
|
|
Change in
Control
|
|
Involuntary
Termination
(1)
|
|
Involuntary Termination
in connection with a
Change in
Control
|
|
Brandon Elliott
|
|
|
|
|
|
|
|
Cash ($)
|
|
—
|
|
695,512
|
|
695,512
|
|
Stock Vesting ($)
(2)
|
|
—
|
|
603,040
|
|
603,040
|
|
Nicholas O
’
Grady
|
|
|
|
|
|
|
|
Cash ($)
|
|
—
|
|
582,670
|
|
582,670
|
|
Stock Vesting ($)
(2)
|
|
—
|
|
813,600
|
|
813,600
|
|
Michael Reger
|
|
|
|
|
|
|
|
Cash ($)
|
|
—
|
|
1,239,531
|
|
1,239,531
|
|
Stock Vesting ($)
(2)
|
|
—
|
|
2,305,200
|
|
2,305,200
|
|
Erik Romslo
|
|
|
|
|
|
|
|
Cash ($)
|
|
—
|
|
689,112
|
|
689,112
|
|
Stock Vesting ($)
(2)
|
|
90
,
400
(
3
)
|
|
781,314
|
|
781,314
|
|
Adam Dirlam
|
|
|
|
|
|
|
|
Cash ($)
|
|
—
|
|
525,494
|
|
525,494
|
|
Stock Vesting ($)
(2)
|
|
—
|
|
368,764
|
|
368,764
|
|
Chad Allen
|
|
|
|
|
|
|
|
Cash ($)
|
|
—
|
|
482,507
|
|
482,507
|
|
Stock Vesting ($)
(2)
|
|
—
|
|
290,659
|
|
290,659
|
|
__________________
(1)
“Involuntary termination” refers to a termination of employment either by the company without cause or by the employee for good reason.
(2)
Stock vesting values are based on the $
2.26
closing price of our common stock on the NYSE American on December
31,
201
8
, the last trading day of 201
8
.
(3)
Reflects unvested shares under a
“
single-trigger
”
re
stricted stock award granted to Mr. Romslo pursuant to a prior employment agreement entere
d into in April 2016.
Non-Employee
Director
Compensation
Director
compensation
elements
are designed to:
•
Ensure alignment with long-term stockholder interests;
•
Ensure we can attract and retain outstanding director candidates;
•
Recognize the substantial time commitments necessary to oversee the affairs of our company; and
•
Support the independence of thought and action expected of directors.
Non-employee director compensation levels are reviewed by the compensation committee each year, and resulting recommendations are presented to the full board for approval. Directors who are also employees receive no additional pay for serving as directors.
Non-employee directors receive compensation consisting of both cash and equity. A significant portion of director compensation is paid in equity to align director compensation with the long-term interests of stockholders. Non-employee directors are also reimbursed for reasonable expenses incurred to attend board meetings or other functions relating to their responsibilities as a director.
Effective
June 1,
2018, the Board approved the 2018 compensation program for our non-employee directors, which was designed to significantly reduce the cash compensation paid to our directors and instead increase the amount of equity compensation.
Th
e total cash paid to our director
s
for
2018
decreased by 65% compared to 2017.
As a result, the 2018 compensation program for our non-employee directors consist
ed
of the following: (i) for our non-executive chairman, an equity retainer consisting of 153,600 restricted shares and no cash retainer, (ii) for all other directors, an equity retainer consisting of 43,200 restricted shares and a $48,000 cash retainer, (iii) annual fees for service on our standing committees as follows: audit committee chair, $20,000 cash and 9,600 restricted shares; other audit committee members, $5,000 cash and 2,400 restricted shares; compensation committee chair, no cash and 19,200 restricted shares; other compensation committee members, $5,000 cash and 2,400 restricted shares; nominating committee chair, $10,000 cash and 4,800 restricted shares; other nominating committee members, $2,500 cash and 1,200 restricted shares; executive committee member, $20,000 cash and 9,600 shares. All of the restricted shares described in the foregoing sentence vest throughout the year
, and are the
“
Time-Based Awards
”
described in
N
ote
4 to the table below
. In addition, to help align the board of directors with our management team, the directors each received an additional performance-based restricted stock award (57,600 shares for the non-executive chairman, and 18,000 shares for each other director) that is subject to the same 2018 stock price goals applicable to the restricted stock awards to executives under the 2018
short- and
long-term equity incentive program described above.
These per
formance-based aw
ards were subsequently modified by the compensation committee in December 2018, in the same manner that the similar awards to exec
utives
were modi
fied.
See
“
Compensation Discussion and Analysis—2018 Short- and Long-Term Equity Incentive Program
” above
for further description o
f the stock price goals and modification.
Any shares earned by the directors as a result of the company’s performance relative to the stock price goals will vest in 2019.
These are the
“
Performance-Based Awards
”
described in Note 4 to the table below.
The following table contains compensation information for our non-employee directors for the year ended December 31,
201
8
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned or
Paid in Cash ($)
|
|
Stock
Awards ($)
(
4)(
5)(
6
)
|
|
Option
Awards ($)
(
7
)
|
|
Total ($)
|
Bahram Akradi
|
|
—
|
|
650,209
|
|
—
|
|
650,209
|
Lisa Bromiley
|
|
79,667
|
|
206,430
|
|
—
|
|
286,097
|
Roy Ernie Easley
(1)
|
|
42,583
|
|
120,418
|
|
—
|
|
163,001
|
Michael Frantz
|
|
69,458
|
|
203,190
|
|
—
|
|
272,649
|
Robert Grabb
|
|
55,500
|
|
183,750
|
|
—
|
|
239,250
|
Delos Cy Jamison
(
2
)
|
|
35,125
|
|
146,681
|
|
—
|
|
181,806
|
Jack King
|
|
80,083
|
|
212,910
|
|
—
|
|
292,994
|
J
oseph Lenz
(
3
)
|
|
—
|
|
—
|
|
—
|
|
—
|
Michael Popejoy
|
|
53,000
|
|
180,510
|
|
—
|
|
233,510
|
_____________
(1)
Mr.
Easley
was appoi
nted t
o
the board of directors on
June 1
, 201
8
.
(2)
Mr. Jamison
’
s term of service
as a d
irector
ended on August 23, 2018.
(3)
Mr.
Lenz
was
elected
to
the board of directors on
August 23, 2018
.
(4)
O
n
June 1, 2018, each
non-employee
director
serving on that date received
(i)
a restricted stock
award
subject to time-based vesting
(the
“
T
ime-Based
Award
”
) and (ii)
a restricted stock award subject to performance
-based vestin
g (the
“
Performance
-
Based Award
”
)
,
which was sub
sequently mod
ified in
December 2018 (the
“
Performance Award Modification
”
)
.
For
each
director, the
grant date fair value of each such equity award, and the incremental fair value associated with the Performance Award Modification, is set forth in the table
that follows
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
Time-Based
Award
|
|
Performance-Based
Award
|
|
Performance Award
Modification
|
Bahram Akradi
|
|
$
|
466,560
|
|
$
|
96,131
|
|
$
|
87,518
|
Lisa Bromiley
|
|
$
|
149,040
|
|
$
|
30,041
|
|
$
|
27,349
|
Roy Ernie Easley
|
|
$
|
86,940
|
|
$
|
17,524
|
|
$
|
15,954
|
Michael Frantz
|
|
$
|
145,800
|
|
$
|
30,041
|
|
$
|
27,349
|
Robert Grabb
|
|
$
|
126,360
|
|
$
|
30,041
|
|
$
|
27,349
|
Delos Cy Jamison
|
|
$
|
116,640
|
|
$
|
30,041
|
|
$
|
—
|
Jack King
|
|
$
|
155,520
|
|
$
|
30,041
|
|
$
|
27,349
|
Michael Popejoy
|
|
$
|
123,120
|
|
$
|
30,041
|
|
$
|
27,349
|
(5)
As of December 31, 2018,
each non-employee director ha
d the following number of unvested
shares outstanding pursuant to
the
Time-Based Awards
:
(i) Mr. Akradi
,
14,400
, (ii) M
s. Bromiley, 4,600
,
(iii) Mr. Easley, 4,600, (iv) Mr. Frantz, 4,500, (v) Mr. Grabb, 3,900, (vi) Mr. Jamison,
none
,
(vii) Mr. King, 4,80
0.
(6)
As of December 31, 2018, each non-employee director had the following number of unvested
and
unearned
shares outstanding pursuant to
the
Performance
-Based Awards: (i) Mr. Akradi,
57,600
, (ii) Ms. Bromiley,
18
,
000
, (iii) Mr. Easley,
10,50
0, (iv) Mr. Frantz,
18,000,
(v) Mr. Grabb,
18,000
,
(vi) Mr. Jamison,
none
, (vii) Mr. King,
18,000,
(viii) Mr. Lenz,
none
, and (ix)
Mr. Popejoy,
18,000
.
(7)
As of December 31, 201
8
,
no directors held any
stock options
.
CEO Pay Ratio
For 201
8
, the annual total compensation for our chief executive officer was $
1,161,841
, as reflected in the Summary Compensation Table appearing above. We estimate that the median employee annual total compensation was $
139,666
for 201
8
. This comparison results in a CEO Pay Ratio of
8.
3
to 1
. This ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K promulgated under the Exchange Act, and as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
As permitted under applicable SEC guidance, to identify a
n initial
median employee among our employee population workforce (excluding our chief executive officer)
for 201
7, the first year for which CEO Pay Ratio
disclosure was required
, we used actual 201
7
W-2 taxable income for the 201
7
calendar year as our consistently applied compensation measure for those who were employed on December 31, 201
7
.
Based on that, w
e selected an individual at the median of our employee population
.
Ou
r com
pany
did not experience any meaningful change in our employee population or employee compensation arrangements during 2018 that we reasonably believe would significantly impact our pay ratio disclosure and the initial median employee did not experience a significant change in compensation. Accordingly, we determined that the initial median employee continued to be representative and determined that individual’s annual total compensation for 2018
in the same manner that we used to determine the annual total compensation of our named executive officers for purposes of the Summary Compensation Table disclosed above
.
Securities Authorized for Issuance under Equity Compensation Plans
The following table summarizes certain information regarding our equity compensation plans, as of December 31, 201
8
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
|
Weighted-average exercise price of outstanding options, warrants and rights
|
|
Number of securities remaining available for future issuance under equity compensation plans
|
Equity compensation plans approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Equity Incentive Plan
|
|
—
|
|
—
|
|
15,669,775
|
Equity compensation plans not approved by security holders
|
|
—
|
|
—
|
|
—
|
Total
|
|
—
|
|
$
|
—
|
|
15,669,775
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Related Persons
Exchange Agreement
On January 31, 2018, we entered into an exchange agreement that was subsequently amended
(as amended, the “Exchange Agreement”) with holders (the “Supporting Noteholders”) of
approximately
$49
7 million, or 71%, of the aggregate principal amount of our outstanding
senior unsecured notes
due 2020 (the “
Unsecured
Notes”), pursuant to which the Supporting Noteholders agreed to exchange all of the
Unsecured
Notes held by each such Supporting Noteholder for approximately $155 million of our common stock and approximately $344 million in aggregate principal amount of new senior secured second lien notes due 2023 (the “Second Lien Notes”) (such
exchange, the “Exchange Transaction”). Closing under the Exchange Agreement occurred on May 15, 2018.
TRT Holdings, Inc. (“TRT”), Cresta Investments, LLC and Robert B. Rowling (together, the “TRT Noteholders”) are Supporting Noteholders and received, upon consummation of the Exchange Transaction, in the aggregate,
54.6 million shares of our common stock and
$125.3 million aggregate principal amount of Second Lien Notes in exchange for the $204.7 million of
Unsecured
Notes that they exchanged. Two of our directors, Mr. Frantz and Mr. Popejoy, are employed by TRT, and
the TRT Noteholders
beneficially owned in excess of 5% of our outstanding common stock when the Exchange Agreement was entered into.
Funds affiliated with Angelo, Gordon & Co. are Supporting Noteholders and received, upon consummation of the Exchange Transaction, in the aggregate,
11.5 million shares of our common stock and
$51.8 million aggregate principal amount of Second Lien Notes in exchange for the $69.0 million of
Unsecured
Notes that they exchanged. One of our director
s
,
Mr. Lenz, is employed by Angelo Gordon, although he was
not serving on
our board, nor
selected as a director nominee
,
until after the closing of the Exchange Agreement.
The obligations of the Supporting Noteholders under the Exchange Agreement were subject to the conditions set forth in the Exchange Agreement, which were satisfied at or prior to closing, including
(among others)
the successful completion of an equity transaction (the “Equity Raise”) compris
ing
$140.0 million in gross proceeds from the sale of our common stock, including the funding of up to $52.0 million of commitments received under the Subscription Agreements (as defined below)
.
Subscription Agreements and Equity Raise
On January 31, 2018, and in connection with the Exchange Transaction, the
c
ompany and Bahram Akradi (the Chairman of our board of directors), Michael Reger (who subsequently
re-
joined the company as an executive officer in May 2018), TRT and certain other investors each entered into subscription agreements (the “Subscription Agreements”) whereby such investors agreed to purchase up to $40.0 million of our common stock at a price per share equal to the lowest price per share in the Equity Raise, and subject to the closing of the Exchange Transaction. Pursuant to their respective Subscription Agreements, Mr. Akradi purchased $12.0 million of our common stock, Mr. Reger purchased $10.0 million of our common stock, and TRT purchased $10.0 million of our common stock. Based on the pricing of the Equity Raise, the lowest price of which was $1.50 per share, Mr. Akradi purchased 8.0 million shares, Mr. Reger purchased 6.7 million shares and TRT purchased 6.7 million shares. Mr. Akradi and TRT each beneficially owned in excess of 5% of our outstanding common stock when their respective Subscription Agreements were entered into.
On April 10, 2018, to satisfy, in part, our obligation to complete the Equity Raise, we completed an underwritten public offering (the “Offering”), whereby we sold 58
.7
million
shares of our common stock at a public offering price of $1.50 per share. As part of the Offering, Mr. Akradi purchased 1.0 million shares of our common stock from the underwriters of the Offering for an aggregate purchase price of $1.5 million. Mr. Akradi beneficially owned in excess of 5% of our outstanding common stock when he purchased such shares.
Registration Rights
In accordance with the terms of the Exchange Agreement, at the closing of the Exchange Transaction, we entered into registration rights agreements with (i) the Supporting Noteholders, including the TRT Noteholders, pursuant to which we agreed to file with the SEC a registration statement registering for resale the shares of common stock and the Second Lien Notes issued in the Exchange Transaction, and (ii) with the TRT Noteholders and an affiliate of TRT, pursuant to which we agreed to file with the SEC a registration statement registering for resale all of the shares of common stock held by the TRT Noteholders and such affiliate, excluding shares of common stock that the TRT Noteholders will receive pursuant to the Exchange Transaction.
O
ther Matters
Adam Dirlam became an executive officer of the
c
ompany upon his promotion to serve as the
c
ompany’s Executive Vice President of Land in June 2018. Katie Jackson, who is Mr. Dirlam’s spouse, is also employed with the
c
ompany as a Vice President of Acquisitions. During 201
8
, she received $
133,07
3
of total cash compensation and $3
8
,
482
worth of vesting on existing equity awards.
S
hare Repurchases
In November 2018, we repurchased shares of our common stock as follows: (i) an aggregate of 4,494,624 shares from Pivotal Williston Basin, L.P. and Pivota
l Williston Basin II, L.P. (collectively, the “Pivotal Entities”) for cash consideration of $13,933,334, and (ii) 2,865,329 shares from W Energy Partners LLC (“W Energy”) for cash consideration of $9,999,999. In January 2019, we repurchased an additional
3,653,650
shares from W Energy for cash consideration of $
11,066,664
. All of the repurchased shares were originally issued by our company as partial
consideration
for
acquisitions of oil and gas properties c
ompleted
during 2018 from the
Pivotal
Entities
and W Energy
. The Pivotal Entities and W Energy each beneficially owned in excess of 5% of the
c
ompany’s outstanding common stock at the time of their respective
share
repurchase transactions
(
but not at the time of the
oil and gas
property
acquisition trans
actions to which
each was
a party
)
.
Related Person Transaction Review Policy
Our board of directors has adopted a written related person transaction approval policy, which we refer to as our related person policy. Subject to the exceptions described below, our related person policy requires our audit committee to review and approve, ratify or disapprove of any proposed related person transaction. In reviewing a transaction, our audit committee will consider all relevant facts and circumstances, including (1) whether the terms are fair to the company, (2) whether the transaction is material to the company, (3) the role the related person played in arranging the transaction, (4) the structure of the transaction, (5) the interests of all related persons in the transaction, and (6) whether the transaction has the potential to influence the exercise of business judgment by the related person or others. Our audit committee will not approve or ratify a related person transaction unless it determines that, upon consideration of all relevant information, the transaction is beneficial to our company and the terms of the transaction are fair to our company. It will be our policy that directors interested in a related person transaction will recuse themselves from any vote relating to a related person transaction in which they have an interest. Under our related person policy, a related person includes any of our directors, director nominees, executive officers, any beneficial owner of more than 5% of our common stock and any immediate family member of any of the foregoing. Related person transactions exempt from our policy include (1) compensatory arrangements with our directors and executive officers that are approved by our compensation committee, (2) transactions available to all of our employees or stockholders on the same terms, (3) transactions with another entity if the related person’s interest in the transaction arises only from such person’s position as a director of, and/or beneficial owner of less than 5% in, such entity, (4) transactions with another entity if the related person’s interest in the transaction arises only from such person’s position as a limited partner with less than a 5% interest in such entity, and (5) transactions between us and a related person that, when aggregated with the amount of all other transactions between us and the related person or its affiliates, involve $10,000 or less in a year.
All of the transactions described above under “Transactions with Related Persons” were approved by our audit committee pursuant to the related person policy, except those transactions that did not involve a related person at the time the transaction was entered into.
NORTHERN OIL AND GAS, INC. FORM 10-K
A copy of our
annual report on
Form 10-K
for the year ended December 31, 20
18
(the
“
Annual Report
”
)
, has been made available concurrently with this
p
roxy
s
tatement to all stockholders entitled to notice of and to vote at the Annual Meeting. We will send a copy of our Annual Report
, or any exhibit thereto, as filed with the Securities and Exchange Commission, to any stockholder without charge, upon written request to Northern Oil and Gas, Inc., 601 Carlson Pkwy, Suite 990, Minnetonka, Minnesota 55305, Attention: Investor Relations.
HOUSEHOLDING
We have adopted a procedure approved by the SEC called “householding,” by which certain stockholders who do not participate in electronic delivery of proxy materials but who have the same address and appear to be members of the same family receive only one copy of our annual report and proxy statement. Each stockholder participating in householding continues to receive a separate proxy card. Householding reduces both the environmental impact of our annual meetings and our mailing and printing expenses.
If you would like to change your householding election, request that a single copy of the proxy materials be sent to your address, or request a separate copy of the proxy materials, please contact Broadridge Financial Solutions, Inc., by calling (866) 540-7095 or by writing to Broadridge Householding Department, 51 Mercedes Way, Edgewood, New York 11717. We will promptly deliver the proxy materials to you upon receipt of your request. If you hold your shares in street name, please contact your bank, broker, or other record holder to request information about householding.
STOCKHOLDER PROPOSALS FOR
20
20
ANNUAL MEETING
We must receive stockholder proposals intended to be presented at our 20
20
Annual Meeting of Stockholders that are requested to be included in the proxy statement for that meeting at our principal executive office no later than
December 24
, 20
19
. Such proposals must also meet all the relevant requirements of our bylaws in order to be included in our proxy statement.
Any other stockholder proposals intended to be presented, and any nominations of persons for election as directors, at the 20
20
Annual Meeting of Stockholders must meet all of the relevant requirements of our bylaws and be received by us at our principal executive office no later than
February 23
, 20
20
. If, however, the date of our 20
20
Annual Meeting of Stockholders is before
April 23
, 20
20
or after
July 22
, 20
20
, then notice for such proposals or nominations by a stockholder will be timely only if received not less than 90 days before the date of our 20
20
Annual Meeting or, if later, within 10 days after the first public announcement of the date of our 20
20
Annual Meeting.
OTHER MATTERS
The board of directors does not know of any other matter that will be presented at the annual meeting other than the proposals discussed in this proxy statement. Under our bylaws, generally no business besides the proposals in this proxy statement may be transacted at the meeting. However, if any other matter properly comes before the meeting, your proxies will act on such matter in their discretion.
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By Order of the Board of Directors
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Bahram Akradi
Chairman of the Board of Directors
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NORTHERN OIL AND GAS, INC.
601 Carlson Parkway, Suite 990
Minnetonka, MN 55305
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VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
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ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
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VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
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VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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For
All
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Withhold
All
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For All
Except
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To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.
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The Board of Directors recommends you vote FOR all of the following:
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o
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o
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1.
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Election of Directors
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Nominees
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01 Bahram Akradi
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02 Lisa Bromiley
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03 Roy Easley
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04 Michael Frantz
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05 Robert Grabb
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06 Jack King
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07 Joseph Lenz
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08 Michael Popejoy
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The Board of Directors recommends you vote FOR proposals 2 and 3.
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For
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Against
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Abstain
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2.
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To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019.
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3.
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To approve, on an advisory basis, the compensation paid to our named executive officers.
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NOTE:
Such other business as may properly come before the meeting or any adjournment thereof.
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Annual Report on Form 10-K, Notice & Proxy Statement is/are available at
www.proxyvote.com
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NORTHERN OIL AND GAS, INC.
Annual Meeting of Stockholders
May 23, 2019 8:30 AM
This proxy is solicited by the Board of Directors
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The stockholder(s) hereby revokes all prior proxies and appoint(s) Brandon Elliott and Nicholas O’Grady, or either of them, as proxies, with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of Northern Oil and Gas, Inc. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 8:30 AM, CDT on May 23, 2019 at the JW Marriott Minneapolis, 2141 Lindau Lane, Minneapolis, Minnesota 55425, and any adjournment or postponement thereof.
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This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations.
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Continued and to be signed on reverse side
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