def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant þ
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o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
Concho Resources 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):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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CONCHO
RESOURCES INC.
550 West Texas Avenue
Suite 100
Midland, Texas
NOTICE OF 2009 ANNUAL MEETING
OF STOCKHOLDERS
To the Stockholders of Concho Resources Inc.:
Notice is hereby given that the 2009 Annual Meeting of
Stockholders of Concho Resources Inc. will be held in the
Wildcatter Room, Petroleum Club of Midland, 501 West Wall
Avenue, Midland, Texas, on Tuesday, June 2, 2009, at
3:00 p.m. Central Time (the Annual
Meeting). The Annual Meeting is being held for the
following purposes:
1. to elect two Class II directors, each for a term of
three years;
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to ratify the Audit Committee of the Board of Directors
selection of Grant Thornton LLP as the independent registered
public accounting firm of the Company for the fiscal year ending
December 31, 2009; and
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to transact such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof.
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These proposals are described in the accompanying proxy
materials. You will be able to vote at the Annual Meeting only
if you were a stockholder of record at the close of business on
April 17, 2009, the record date for the meeting.
By Order of the Board of Directors
David W. Copeland
Vice President, General Counsel and Secretary
Midland, Texas
April 24, 2009
Important Notice Regarding the Availability of Proxy
Materials for the Annual Meeting of Stockholders to Be Held on
June 2, 2009:
This Notice and Proxy Statement, along with the Companys
Annual Report on
Form 10-K
for the year ended December 31, 2008 and the Companys
2008 Annual Report to Stockholders, are available free of charge
at
http:/www.conchoresources.com/proxy.
YOUR VOTE IS IMPORTANT
Please date, sign and return the enclosed proxy card promptly
so that your shares may be voted in accordance with your wishes
and so that there is a quorum at the Annual Meeting.
TABLE OF
CONTENTS
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CONCHO
RESOURCES INC.
550 West Texas Avenue
Suite 100
Midland, Texas
PROXY
STATEMENT
2009
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is being furnished to you in connection
with the solicitation of proxies by the Board of Directors of
Concho Resources Inc. (the Company) for use at the
2009 Annual Meeting of Stockholders (the Annual
Meeting). The Board of Directors of the Company requests
your proxy for the Annual Meeting that will be held Tuesday,
June 2, 2009, at 3:00 p.m. Central Time, in the
Wildcatter Room, Petroleum Club of Midland, 501 West Wall
Avenue, Midland, Texas. By granting a proxy, you authorize the
persons named in the proxy to represent you and vote your shares
at the Annual Meeting. Those persons will also be authorized to
vote your shares to adjourn the Annual Meeting from time to time
and to vote your shares at any adjournments or postponements of
the Annual Meeting.
If you attend the Annual Meeting, you may vote in person. If you
are not present at the Annual Meeting, your shares may be voted
only by a person to whom you have given a proper proxy.
You may revoke your proxy in writing at any time before it is
exercised at the Annual Meeting by (i) delivering to the
Secretary of the Company a written notice of the revocation;
(ii) signing, dating and delivering to the Secretary of the
Company a proxy with a later date; or (iii) attending the
Annual Meeting and voting your shares in person. Your attendance
at the Annual Meeting will not revoke your proxy unless you give
written notice of revocation to the Secretary of the Company
before your proxy is exercised or unless you vote your shares in
person at the Annual Meeting before your proxy is exercised.
DELIVERY
OF PROXY MATERIALS
The approximate date on which this Proxy Statement, accompanying
Notice of 2009 Annual Meeting of Stockholders and proxy card,
and the Companys 2008 Annual Report to Stockholders
are first being sent or given to stockholders is April 24,
2009.
This Notice and Proxy Statement, along with the Companys
Annual Report on
Form 10-K
for the year ended December 31, 2008 and the Companys
2008 Annual Report to Stockholders, are available free of charge
at
http://www.conchoresources.com/proxy.
QUORUM
AND VOTING
Voting Stock. The Companys common stock,
par value $.001 per share, is the only class of securities that
entitles holders to vote generally at meetings of the
Companys stockholders. Each share of common stock
outstanding on the record date is entitled to one vote.
Record Date. The record date for stockholders
entitled to notice of and to vote at the Annual Meeting is the
close of business on April 17, 2009. As of the record date,
85,220,687 shares of common stock were outstanding and
entitled to be voted at the Annual Meeting.
Quorum and Adjournments. A quorum of
stockholders is necessary to have a valid meeting of
stockholders. The presence, in person or by proxy, of the
holders of a majority of the votes eligible to be cast at the
Annual Meeting is necessary to constitute a quorum at the Annual
Meeting. If a quorum is not present, the chairman has the power
to adjourn the Annual Meeting from time to time, without notice
other than an announcement at the Annual Meeting, until a quorum
is present. At any annual meeting reconvened following an
adjournment at which a quorum is present, any business may be
transacted that might have been transacted at the annual meeting
as originally noticed.
1
Vote Required. Only stockholders of record at
the close of business on April 17, 2009 have the right to
vote at the Annual Meeting. Directors will be elected by a
plurality of all votes cast. Ratification of the selection of
the Companys independent registered public accounting firm
will require the affirmative vote of the holders of a majority
of the votes of the Companys common stock cast at the
Annual Meeting with respect to the proposal. An automated system
that the Companys transfer agent administers will tabulate
the votes. Brokers who hold shares in street name for customers
are required to vote shares in accordance with instructions
received from the beneficial owners. Brokers are permitted to
vote on discretionary items if they have not received
instructions from the beneficial owners, but they are not
permitted to vote (a broker non-vote) on
non-discretionary items absent instructions from the beneficial
owner. Abstentions and broker non-votes will count in
determining whether a quorum is present at the Annual Meeting.
Neither abstentions nor broker non-votes will have any effect on
the outcome of voting on director elections nor on the
ratification of the selection of the independent registered
public accounting firm of the Company.
Default Voting. A proxy that is properly
completed and returned will be voted at the Annual Meeting in
accordance with the instructions on the proxy. If you properly
complete and return a proxy, but do not indicate any contrary
voting instructions, your shares will be voted as follows:
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FOR the election of the two persons named in this Proxy
Statement as the Board of Directors nominees for election
as Class II directors; and
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FOR the ratification of the selection of Grant Thornton LLP as
the independent registered public accounting firm of the Company
for the fiscal year ending December 31, 2009.
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If any other business properly comes before the stockholders for
a vote at the Annual Meeting, your shares will be voted in
accordance with the discretion of the holders of the proxy. The
Board of Directors knows of no matters, other than those
previously stated herein, to be presented for consideration at
the Annual Meeting.
ITEM ONE: ELECTION
OF DIRECTORS
The Company has classified its Board of Directors into three
classes. Directors in each class are elected to serve for
three-year terms and until either they are re-elected or their
successors are elected and qualified or until their earlier
resignation or removal. Each year, the directors of one class
stand for re-election as their terms of office expire. Based on
recommendations from its Nominating & Governance
Committee, the Board of Directors has nominated the following
individuals for election as Class II directors of the
Company with their terms to expire in 2012, when they are to be
re-elected or their successors are elected and qualified or
until their earlier resignation or removal:
Steven L. Beal
Tucker S. Bridwell
Messrs. Beal and Bridwell are currently serving as
Class II directors of the Company. Their biographical
information is contained in Directors and Executive
Officers below.
The Board of Directors has no reason to believe that any of its
nominees will be unable or unwilling to serve if elected.
Mr. Beal announced his intention to retire from the offices
of President and Chief Operating Officer effective June 30,
2009; however, Mr. Beal advised the Board of Directors
that, if re-elected to the Board of Directors, he will continue
to serve in such capacity. If a nominee becomes unable or
unwilling to accept nomination or election, either the number of
the Companys directors will be reduced or the persons
acting under your proxy will vote for the election of a
substitute nominee that the Board of Directors nominates.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE ELECTION OF EACH OF THE
DIRECTOR NOMINEES.
2
DIRECTORS
AND EXECUTIVE OFFICERS
The table below sets forth certain information, as of the date
of this Proxy Statement, regarding the Companys directors
and executive officers:
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Position
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Timothy A. Leach
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Chairman of the Board of Directors, Chief Executive Officer and
Class I Director
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Steven L. Beal
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President, Chief Operating Officer and Class II Director
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David W. Copeland
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Vice President, General Counsel and Secretary
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Jack F. Harper
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Vice President Business Development and Capital
Markets
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Darin G. Holderness
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Vice President, Chief Financial Officer and Treasurer
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Matthew G. Hyde
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Vice President Exploration and Land
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E. Joseph Wright
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Vice President Engineering and Operations
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Tucker S. Bridwell
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Class II Director
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William H. Easter III
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Class I Director
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W. Howard Keenan, Jr.
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Class I Director
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Ray M. Poage
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Class III Director
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A. Wellford Tabor
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Class III Director
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Set forth below is biographical information about each of the
Companys executive officers and directors. Executive
officers serve at the discretion of the Board of Directors.
Concho Equity Holdings Corp. was formed in April 2004 by certain
members of the Companys management and private equity
investors, and became a wholly-owned subsidiary of the Company
in 2006.
Timothy A. Leach has been a director and the Chairman of
the Board of Directors and Chief Executive Officer of the
Company since its formation in February 2006. Mr. Leach was
the Chairman of the Board of Directors and Chief Executive
Officer of Concho Equity Holdings Corp. from its formation in
April 2004 until it was merged into another subsidiary of the
Company at December 31, 2008. Mr. Leach was Chairman
of the Board and Chief Executive Officer of Concho
Oil & Gas Corp. from its formation in January 2001
until its sale in January 2004. From January 2004 to April 2004,
Mr. Leach was involved in private investments.
Mr. Leach was Chairman of the Board and Chief Executive
Officer of Concho Resources Inc. (which was a different company
than the Company) from its formation in August 1997 until its
sale in June 2001. From September 1989 until May 1997,
Mr. Leach was employed by Parker & Parsley
Petroleum Company (now Pioneer Natural Resources Company) in a
variety of capacities, including serving as Executive Vice
President and as a member of Parker & Parsley
Petroleum Companys Executive Committee. He is a graduate
of Texas A&M University with a Bachelor of Science degree
in Petroleum Engineering.
Steven L. Beal has been a director and the President and
Chief Operating Officer of the Company since its formation in
February 2006. Mr. Beal was a director and the President
and Chief Operating Officer of Concho Equity Holdings Corp. from
its formation in April 2004 until it was merged into another
subsidiary of the Company at December 31, 2008.
Mr. Beal was a director and the Executive Vice President
and Chief Financial Officer of Concho Oil & Gas Corp.
from its formation in January 2001 until he became its President
and Chief Operating Officer in August 2002, a position he held
until its sale in January 2004. From January 2004 to April 2004,
Mr. Beal was involved in private investments. Mr. Beal
was a director and the Vice President and Chief Financial
Officer of Concho Resources Inc. (which was a different company
than the Company) from its formation in August 1997 until its
sale in June 2001. From October 1988 until May 1997,
Mr. Beal was employed by Parker & Parsley
Petroleum Company (now Pioneer Natural Resources Company) in a
variety of capacities, including serving as its Senior Vice
President and Chief Financial Officer and as a member of
Parker & Parsley Petroleum Companys Executive
Committee. From 1981 until February 1988, Mr. Beal was
employed by the accounting firm of Price Waterhouse (now Price
Waterhouse Cooper). He is a graduate of the University of Texas
with a Bachelor of Business Administration degree in Accounting.
David W. Copeland has been the Vice President, General
Counsel and corporate Secretary of the Company since its
formation in February 2006. Mr. Copeland was the Vice
President, General Counsel and corporate
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Secretary of Concho Equity Holdings Corp. from its formation in
April 2004 until it was merged into another subsidiary of the
Company at December 31, 2008. Mr. Copeland was a
director and the Executive Vice President, General Counsel and
corporate Secretary of Concho Oil & Gas Corp. from its
formation in January 2001 until its sale in January 2004. From
January 2004 to April 2004, Mr. Copeland was involved in
private investments. Mr. Copeland was a director and the
Vice President, General Counsel and corporate Secretary of
Concho Resources Inc. (which was a different company than the
Company) from its formation in August 1997 until its sale in
June 2001. From 1991 until June 1997, Mr. Copeland was
employed in the Legal Department of Parker & Parsley
Petroleum Company (now Pioneer Natural Resources Company), and
served as its Vice President, Associate General Counsel from
1994 until June 1997. Prior to joining Parker &
Parsley Petroleum Company, Mr. Copeland was a partner with
the Midland, Texas law firm of Stubbeman, McRae, Sealy,
Laughlin & Browder, where his practice was
concentrated in corporate, banking and other commercial matters.
He is a graduate of Midwestern State University with a Bachelor
of Business Administration degree in Accounting and a graduate
of Texas Tech University School of Law with a Doctor of
Jurisprudence degree.
Jack F. Harper has been the Vice President
Business Development and Capital Markets of the Company since
May 2007. Mr. Harper was the Director of Investor Relations
and Business Development of the Company from July 2006 until May
2007. From October 2005 until July 2006, Mr. Harper was
involved in private investments. From October 2002 until October
2005, Mr. Harper was employed by Unocal Corporation where
he served as Manager of Planning and Evaluation and Manager of
Business Development for Unocal Corporations wholly owned
subsidiary, Pure Resources, Inc. From May 2000 until October
2002, Mr. Harper was employed by Pure Resources, Inc. in a
variety of capacities, including in his last position as Vice
President, Finance and Investor Relations. From December 1996
until May 2000, Mr. Harper was employed by Tom Brown, Inc.,
where his last position was Vice President, Investor Relations,
Corporate Development and Treasurer. He is a graduate of Baylor
University with a Bachelor of Business Administration degree in
Finance.
Darin G. Holderness has been the Vice President, Chief
Financial Officer and Treasurer of the Company since August
2008. From May 2008 until August 2008, Mr. Holderness was
employed by Eagle Rock Energy Partners, L.P. as Senior Vice
President and Chief Financial Officer. From November 2004 until
May 2008, Mr. Holderness served as Vice President and Chief
Accounting Officer of Pioneer Natural Resources Company. From
April 2004 until November 2004, he served as Vice President and
Chief Financial Officer of Basic Energy Services, Inc. From May
2000 until April 2004, he was an officer, including serving as
Vice President and Controller, of Pure Resources, Inc.
Mr. Holderness holds a Bachelor of Business Administration
degree in Accounting from Boise State University and is a
certified public accountant.
Matthew G. Hyde joined the Company as its Vice
President Exploration in May 2008, and was appointed
the Vice President Exploration and Land of the
Company in November 2008. From January 2008 to May 2008,
Mr. Hyde was involved in private investments. From March
2001 to December 2007, Mr. Hyde was an Asset Manager of Oxy
Permian, a business unit of Occidental Petroleum Corporation.
From April 1998 to February 2001, Mr. Hyde served as
President and General Manager of Occidental Petroleum
Corporations international business unit in Oman. Prior to
that role, Mr. Hyde served in a variety of domestic and
international exploration positions for Occidental Petroleum
Corporation, including Regional Exploration Manager responsible
for Latin American exploration activities. He is a graduate of
the University of Vermont and the University of Massachusetts
where he obtained Bachelor of Arts and Master of Science
degrees, respectively, in Geology. Mr. Hyde also holds a
Master of Business Administration degree from the University of
California Los Angeles.
E. Joseph Wright has been the Vice
President Engineering and Operations of the Company
since its formation in February 2006. Mr. Wright was the
Vice President Operations & Engineering of
Concho Equity Holdings Corp. from its formation in April 2004
until it was merged into another subsidiary of the Company at
December 31, 2008. Mr. Wright was Vice
President Operations/Engineering of Concho
Oil & Gas Corp. from its formation in January 2001
until its sale in January 2004. From January 2004 to April 2004,
Mr. Wright was involved in private investments.
Mr. Wright served in various engineering and operations
positions for Concho Resources Inc. (which was a different
company than the Company), including serving as its Vice
President Operations, from 1998 until its sale in
June 2001. From 1982 until February 1998, Mr. Wright was
employed by Mewbourne Oil Company in several operations,
engineering and capital markets positions. He is a graduate of
Texas A&M University with a Bachelor of Science degree in
Petroleum Engineering.
4
Tucker S. Bridwell has been a director of the Company
since its formation in February 2006. Mr. Bridwell was a
director of Concho Equity Holdings Corp. from its formation in
April 2004 until February 2006. Mr. Bridwell has been the
President of each of Mansefeldt Investment Corporation and the
Dian Graves Owen Foundation since September 1997 and manages
investments for both entities, each of which is a stockholder of
the Company. He has over twenty-five years experience in the
areas of finance and energy. Mr. Bridwell served as
Chairman of the Board of Directors of First Permian, LLC from
2000 until its sale to Energen Corporation in April 2002.
Mr. Bridwell is a director of Petrohawk Energy Corporation
and First Financial Bankshares, Inc. He is a graduate of
Southern Methodist University with a Bachelor of Business
Administration degree in Accounting and a Master of Business
Administration degree, and is a certified public accountant.
William H. Easter III has been a director of the
Company since February 2008. Mr. Easters career spans
over thirty years in the areas of natural gas supply,
processing, marketing and transportation, as well as crude oil
and petroleum refining, marketing and transportation.
Mr. Easter is the past Chairman of the Board of Directors,
President and Chief Executive Officer of DCP Midstream, LLC
(formerly Duke Energy Field Services, LLC), having retired from
such company in January 2008. He joined DCP Midstream, LLC in
January 2004 as Chairman, President and Chief Executive Officer.
He also served as director of TEPPCO GP, LLC, the general
partner of TEPPCO Partners, L.P., from January 2004 until
February 2005, and as a director of DCP Midstream GP, LLC, the
general partner of DCP Midstream Partners, LP, from November
2005 to January 2008. From August 2002 through January 2004,
Mr. Easter served as Vice President of State Government
Affairs for ConocoPhillips. From 1998 to 2002, Mr. Easter
served as General Manager of the Gulf Coast Refining, Marketing
and Transportation Business Unit of Conoco Inc. Since his
retirement from DCP Midstream, LLC in January 2008,
Mr. Easter has been involved in private investments. He
also served as a member of the Board of Directors for Junior
Achievement Rocky Mountain Inc. and the University of Colorado
at Denver Business School Advisory Board. Mr. Easter earned
his Bachelor of Business Administration degree in Finance from
the University of Houston and his Master of Science in
Management degree from The Graduate School of Business at
Stanford University.
W. Howard Keenan, Jr. has been a director of
the Company since its formation in February 2006.
Mr. Keenan previously was a director of Concho Equity
Holdings Corp from its formation in April 2004 until February
2006. Mr. Keenan has over thirty years of experience in the
areas of finance and energy. Since 1997, he has been a Member of
Yorktown Partners LLC, a private equity investment manager
focused on the energy industry. Two limited partnerships managed
by Yorktown Partners LLC are stockholders of the Company.
Mr. Keenan is also a director of GeoMet, Inc. From 1975 to
1997, he was in the Corporate Finance Department of Dillon,
Read & Co. Inc. and active in the private equity and
energy areas, including the founding of the first Yorktown
Partners fund in 1991. He is serving or has served as a director
of multiple Yorktown Partners portfolio companies.
Mr. Keenan holds a Bachelor of Arts degree in English from
Harvard College and a Master of Business Administration degree
from Harvard University.
Ray M. Poage has been a director of the Company since
August 2007. Mr. Poage was a partner in KPMG LLP from 1980
to June 2002 when he retired. Mr. Poages
responsibilities included supervising and managing both audit
and tax professionals and providing accounting services,
primarily in the area of taxation, to private and publicly held
companies engaged in the oil and natural gas industry. Since
June 2002, Mr. Poage has been involved in private
investments. Mr. Poage is a director of Parallel Petroleum
Corporation. Mr. Poage received a Bachelor of Business
Administration degree in Accounting from Texas Tech University,
and is a certified public accountant.
A. Wellford Tabor has been a director of the Company
since its formation in February 2006. Mr. Tabor was a
director of Concho Equity Holdings Corp. from its formation in
April 2004 until February 2006. Mr. Tabor served as a
director of Concho Oil & Gas Corp. from March 2003
until its sale in January 2004. Mr. Tabor is a Partner with
Wachovia Capital Partners, which is a stockholder of the
Company. Prior to joining Wachovia Capital Partners in 2000,
Mr. Tabor was a director at The Beacon Group from 1995 to
2000. From 1991 to 1993, he worked in the Investment Banking
Division at Morgan Stanley & Co. Mr. Tabor is
also a director of several privately held energy and financial
services companies in which Wachovia Capital Partners is an
investor. Mr. Tabor received an undergraduate degree in
History from the University of Virginia and a Master of Business
Administration degree from The Graduate School of Business at
Stanford University.
5
CORPORATE
GOVERNANCE
Corporate
Governance Guidelines
The Board of Directors believes that sound governance practices
and policies provide an important framework to assist it in
fulfilling its duty to stockholders. The Companys
Corporate Governance Guidelines include provisions concerning
the following:
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role and functions of the Board of Directors and the Lead
Director;
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qualifications, independence, responsibilities, tenure and
compensation of directors;
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size of the Board of Directors;
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director resignation process;
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committee functions and independence of committee members;
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meetings of non-management directors;
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|
|
performance review of the Board of Directors; and
|
|
|
|
director orientation and continuing education.
|
The Companys Corporate Governance Guidelines are reviewed
periodically and as necessary by the Companys
Nominating & Governance Committee, and any proposed
additions to or amendments of the Corporate Governance
Guidelines will be presented to the Board of Directors for its
approval.
Director
Independence
Rather than adopting categorical standards, the Board of
Directors assesses director independence on a
case-by-case
basis, in each case consistent with applicable legal
requirements and the listing standards of the New York Stock
Exchange (NYSE). After reviewing all relationships
each director has with the Company, including any significant
charitable contributions the Company makes to organizations
where its directors serve as board members or executive
officers, the Board of Directors has affirmatively determined
that the following directors have no material relationships with
the Company and are independent as defined by the current
listing standards of the NYSE: Messrs. Bridwell, Easter,
Keenan, Poage and Tabor. Mr. Leach, the Companys
Chief Executive Officer, and Mr. Beal, the Companys
President and Chief Operating Officer, are not considered by the
Board of Directors to be independent directors because of their
employment with the Company.
Executive
Sessions; Election of Lead Director
To facilitate candid discussion among the Companys
directors, its non-management directors (all of whom are
independent) meet in executive session in conjunction with each
regular board meeting and as otherwise determined by the Lead
Director of the Board of Directors.
The Board of Directors elected Mr. Bridwell, an independent
director, to serve as the Lead Director of the Board of
Directors. In this capacity Mr. Bridwell provides, in
conjunction with the Chairman of the Board of Directors,
leadership and guidance to the Board of Directors. As the Lead
Director, Mr. Bridwell also (i) serves as chairman of
executive sessions of the non-management directors; and
(ii) in consultation with the Chairman of the Board of
Directors, establishes the agenda for each meeting of the Board
of Directors, taking into account the suggestions of other
directors. Interested parties who wish to communicate with the
Board of Directors, its committees or the Chairman of the Board
of Directors, the Lead Director or any other individual director
should follow the procedures described below under
Interested Party Communications.
Attendance
at Annual Meetings
The Board of Directors encourages all directors to attend the
annual meetings of stockholders, if practicable. Five of the
Companys directors, including three non-employee
directors, attended last years annual meeting.
6
Interested
Party Communications
The Companys stockholders and other interested persons may
communicate with the Board of Directors, any committee of the
Board of Directors or the Chairman of the Board of Directors,
the Lead Director or any other individual director by sending
communications to: Concho Resources Inc., 550 West Texas
Avenue, Suite 100, Midland, Texas 79701, Attention: General
Counsel and Secretary.
The envelope containing each communication should be marked
Communication with Directors and clearly identify
the intended recipient(s) of the communication. The
Companys General Counsel will review each communication
received from stockholders and other interested parties and will
forward the communication, as expeditiously as reasonably
practicable, to the addressees if the communication
(i) complies with the requirements of any applicable policy
adopted by the Board of Directors relating to the subject matter
of the communication; and (ii) falls within the scope of
matters generally considered by the Board of Directors. To the
extent the subject matter of a communication relates to matters
that have been delegated by the Board of Directors to a
committee or to an executive officer of the Company, the
Companys General Counsel may forward the communication to
the chairperson of the committee or executive officer to which
the matter has been delegated. The acceptance and forwarding of
communication to the members of the Board of Directors or an
executive officer does not imply or create any fiduciary duty of
any member of the Board of Directors or executive officer to the
person submitting the communication.
Information may be submitted confidentially and anonymously,
although the Company may be obligated by law to disclose the
information or identity of the person providing the information
in connection with government or private legal actions and in
other circumstances. The Companys policy is not to take
any adverse action, and not to tolerate any retaliation, against
any person for asking questions or making good faith reports of
possible violations of law, the Companys policies or its
Code of Business Conduct and Ethics.
Available
Governance Materials
The following materials are available on the Companys
website at www.conchoresources.com:
|
|
|
|
|
Amended and Restated Charter of the Audit Committee of the Board
of Directors
|
|
|
|
Charter of the Compensation Committee of the Board of Directors
|
|
|
|
Charter of the Nominating & Governance Committee of
the Board of Directors
|
|
|
|
Code of Business Conduct and Ethics
|
|
|
|
Financial Code of Ethics
|
|
|
|
Corporate Governance Guidelines
|
|
|
|
Policies and Procedures Relating to Disclosures Required by
Item 407 of
Regulation S-K
|
Stockholders may obtain a copy, free of charge, of each of these
documents by sending a written request to Concho Resources Inc.,
550 West Texas Avenue, Suite 100, Midland, Texas
79701, Attention: General Counsel and Secretary.
MEETINGS
AND COMMITTEES OF DIRECTORS
General
The Board of Directors held fifteen meetings, and its
non-management directors met in executive session five times,
during 2008. No director attended fewer than 75% of the meetings
of the Board of Directors and of the committees of the Board of
Directors on which that director served.
The Board of Directors has three standing committees: the Audit
Committee, the Compensation Committee and the
Nominating & Governance Committee.
7
Audit
Committee
The members of the Audit Committee are Messrs. Poage
(Chairman), Bridwell, Easter and Tabor. The Board of Directors
has determined that each of the members of the Audit Committee
satisfies the standards of independence established under
Securities and Exchange Commission (SEC) rules and
regulations and the listing standards of the NYSE. The Board of
Directors has further determined that each of the members of the
Audit Committee is financially literate and that Mr. Poage
is an audit committee financial expert as defined by
the rules and regulations of the SEC. The Audit Committee held
nine meetings during 2008.
The Audit Committee has the authority to retain, compensate,
evaluate and terminate the Companys independent registered
public accounting firm. The functions of the Audit Committee,
which are discussed in detail in its charter, include the duty
to assist the Board of Directors in fulfilling its oversight
responsibilities regarding general oversight of the integrity of
the Companys financial statements, the Companys
compliance with legal and regulatory requirements, and the
independent registered public accounting firms
qualifications, independence and performance. Among other
things, the Audit Committee is responsible for overseeing the
Companys accounting and financial reporting processes;
preparing the Audit Committee Report for inclusion in the
Companys proxy statement; selecting and evaluating the
Companys independent registered public accounting firm;
reviewing and approving, as appropriate, any related person
transactions; and overseeing any investigations into complaints
concerning financial matters.
Compensation
Committee
The members of the Compensation Committee are Messrs. Tabor
(Chairman), Easter and Keenan, with Mr. Bridwell having
resigned from the Compensation Committee on February 26,
2009, after having served on the committee during all of 2008.
The Board of Directors has determined that each of the members
of the Compensation Committee satisfies the standards of
independence established under the listing standards of the
NYSE. The Compensation Committee held six meetings during 2008.
The functions of the Compensation Committee, which are discussed
in detail in its charter, include the duty to administer the
Companys agreements, plans, policies and programs
regarding compensation of the Companys executive officers
and directors. The Compensation Committee is also responsible
for preparing the Compensation Committee Report for inclusion in
the Companys proxy statement and for assisting the
Companys management in preparing the Compensation
Discussion and Analysis for inclusion in the Companys
proxy statement.
The Compensation Committee is delegated all authority of the
Board of Directors as may be required or advisable to fulfill
the purposes of the Compensation Committee. The Compensation
Committee may form and delegate some or all of its authority to
subcommittees when it deems appropriate.
Meetings may, at the discretion of the Compensation Committee,
include members of the Companys management, independent
consultants or advisors, and such other persons as the
Compensation Committee or its chairperson may determine. The
Compensation Committee Chairman makes decisions regarding the
agenda for regularly scheduled meetings and develops the agenda
for special meetings based on information supplied by the person
requesting the special meeting. The Companys Chief
Executive Officer and President make recommendations to the
Compensation Committee regarding the compensation of other
executive officers and provide information to the Compensation
Committee regarding the other executive officers
performance; however, the Compensation Committee makes all final
decisions regarding all executive officers compensation.
The Compensation Committee has the sole authority to retain,
amend the engagement with, and terminate any compensation
consultant to be used to assist in the evaluation of director
and executive officer compensation. The Compensation Committee
has engaged the services of Longnecker & Associates
since 2007 to apprise the Compensation Committee of
compensation-related trends, developments in the marketplace and
industry best practices; inform the Compensation Committee of
compensation-related regulatory developments; provide peer group
survey data to establish compensation ranges for the various
elements of compensation; provide an evaluation of the
competitiveness of the Companys non-employee director and
executive compensation and benefits programs; assess the
relationship between executive pay and performance; and advise
on the design of the Companys incentive compensation
programs, including metric selection and the design of the
Companys equity incentive award program.
8
Nominating &
Governance Committee
The members of the Nominating & Governance Committee
are Messrs. Bridwell (Chairman), Keenan and Tabor, with
Mr. Bridwell having been appointed Chairman by the Board of
Directors on February 26, 2009, upon the resignation of
Mr. Keenan as Chairman. The Board of Directors has
determined that each of the members of the
Nominating & Governance Committee satisfies the
standards of independence established under the listing
standards of the NYSE. The Nominating & Governance
Committee held six meetings during 2008.
The functions of the Nominating & Governance
Committee, which are discussed in detail in its charter, include
the duty to assist the Board of Directors by evaluating
potential new members of the Board of Directors, recommending
committee members and structure and advising the Board of
Directors about appropriate corporate governance practices. The
Companys Policies and Procedures Relating to Disclosures
Required by Item 407 of
Regulation S-K
provide that in identifying, evaluating and recommending to the
Board of Directors director nominees the Nominating &
Governance Committee shall identify persons who (i) are
selected on the basis of their business and professional
experience and qualifications, including service on the boards
of directors of other companies; (ii) have demonstrated
leadership in other companies or government, finance or
accounting, higher education or other fields or who are able to
provide the Company with relevant expertise, industry knowledge
or marketing acumen; (iii) possess the highest personal and
professional ethics, integrity and values and are committed to
the Companys core values; (iv) are willing to commit
the required time to serve as a member of the Board of Directors
and its committees; and (v) will represent all stockholders
rather than special interest groups or any group of stockholders.
In determining whether to recommend a director for re-election
to the Board of Directors, in accordance with such policies and
procedures the Nominating & Governance Committee shall
consider the directors:
|
|
|
|
|
past Board of Directors and committee meeting attendance
and performance;
|
|
|
|
length of Board of Directors service;
|
|
|
|
personal and professional integrity, including commitment to the
Companys core values;
|
|
|
|
experience, skills and contributions to the Board of
Directors; and
|
|
|
|
independence under applicable standards.
|
ITEM TWO: RATIFICATION
OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC
ACCOUNTING FIRM
The Audit Committee of the Board of Directors has selected Grant
Thornton LLP as the independent registered public accounting
firm of the Company for the year ending December 31, 2009.
Grant Thornton LLP has audited the Companys and its
predecessors financial statements since 2004. The audit of
the Companys annual consolidated financial statements for
the year ended December 31, 2008 was completed by Grant
Thornton LLP on February 27, 2009.
The Board of Directors is submitting the selection of Grant
Thornton LLP for ratification at the Annual Meeting. The
submission of this matter for ratification by stockholders is
not legally required, but the Board of Directors and the Audit
Committee believe the submission provides an opportunity for
stockholders through their vote to communicate with the Board of
Directors and the Audit Committee about an important aspect of
corporate governance. If the stockholders do not ratify the
selection of Grant Thornton LLP, the Audit Committee will
reconsider the selection of that firm as the Companys
independent registered public accounting firm. Representatives
of Grant Thornton LLP are expected to be present at the Annual
Meeting and will have the opportunity to make a statement if
they desire to do so. Such representatives are also expected to
be available to respond to appropriate questions.
The Audit Committee has the authority and responsibility to
retain, evaluate and replace the Companys independent
registered public accounting firm. The stockholders
ratification of the appointment of Grant Thornton LLP does not
limit the authority of the Audit Committee to change the
Companys independent registered public accounting firm at
any time.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE SELECTION
OF GRANT THORNTON LLP AS THE INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM OF THE COMPANY FOR THE YEAR ENDED DECEMBER 31,
2009.
9
AUDIT
MATTERS
Audit
Committee Report
Pursuant to its charter, the Audit Committees principal
functions include the duty to (i) annually review and
reassess its performance and the adequacy of its charter;
(ii) pre-approve audit or non-audit services proposed to be
rendered by the Companys independent registered public
accounting firm; (iii) annually review the qualifications
and independence of the independent registered public accounting
firms senior personnel that are providing services to the
Company; (iv) review with management and the independent
registered public accounting firm the Companys annual and
quarterly financial statements, earnings press releases and
financial information and earnings guidance provided to analysts
and ratings agencies; (v) review with management the
Companys major financial risk exposures; (vi) review
changes to the Companys significant auditing and
accounting principles and practices; (vii) review the
independent registered public accounting firms internal
quality-control procedures and the procedures for the
Companys financial reporting processes; and
(viii) assist the Board of Directors in monitoring
compliance with legal and regulatory requirements. While the
Audit Committee has the responsibilities and powers set forth in
its charter and the Companys management and the
independent registered public accounting firm are accountable to
the Audit Committee, it is not the duty of the Audit Committee
to plan or conduct audits or to determine that the
Companys financial statements and disclosures are complete
and accurate and are in accordance with generally accepted
accounting principles and applicable laws, rules and regulations.
On February 25, 2009, the Audit Committee reviewed and
assessed its performance during 2008 and the adequacy of its
charter, and subsequently (i) reported to the Board of
Directors the results of such assessment and review; and
(ii) recommended to the Board of Directors that it adopt
and approve an Amended and Restated Charter of the Audit
Committee of the Board of Directors, which was done by the Board
of Directors.
In performing its oversight role, the Audit Committee has
reviewed and discussed the Companys audited financial
statements with the Companys management and independent
registered public accounting firm. The Audit Committee has also
discussed with the independent registered public accounting firm
the matters required to be discussed by Statement on Auditing
Standards No. 61, Communication with Audit
Committees. The Audit Committee has received the written
disclosures and the written statement from the independent
registered public accounting firm required by applicable
requirements of the Public Company Accounting Oversight Board
regarding the independent accountants communications with
the Audit Committee concerning independence. The Audit Committee
has also considered whether the provision of non-audit services
by the independent registered public accounting firm to the
Company is compatible with maintaining the independent
registered public accounting firms independence and has
discussed with the independent registered public accounting firm
its independence.
Based on the reviews and discussions described in this Audit
Committee Report, and subject to the limitations on the roles
and responsibilities of the Audit Committee referred to herein
and in its charter, the Audit Committee recommended to the Board
of Directors that the Companys audited financial
statements for the year ended December 31, 2008 be included
in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2008, to be filed with the
SEC. The Audit Committee also selected Grant Thornton LLP as the
Companys independent registered public accounting firm for
2009.
Members of the Audit Committee rely, without independent
verification, on the information provided to them and on the
representations made by the Companys management and
independent registered public accounting firm. Accordingly, the
Audit Committees oversight does not provide an independent
basis to determine that management has maintained appropriate
accounting and financial reporting principles or appropriate
internal controls and procedures designed to assure compliance
with accounting standards and applicable laws and regulations.
Furthermore, the Audit Committees considerations and
discussions referred to above do not assure that (i) the
audit of the Companys financial statements has been
carried out in accordance with generally accepted auditing
standards, (ii) the Companys financial statements are
presented in accordance with generally accepted accounting
principles, or (iii) Grant Thornton LLP is in fact
independent.
Members of the Audit Committee:
Ray M. Poage (Chairman)
Tucker S. Bridwell
William H. Easter III
A. Wellford Tabor
10
Audit and
Other Fees
The table below sets forth the aggregate fees billed by Grant
Thornton LLP, the Companys independent registered public
accounting firm, for the last two fiscal years:
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|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Audit
Fees(1):
|
|
|
|
|
|
|
|
|
Audit
|
|
$
|
465,039
|
|
|
$
|
211,632
|
|
Quarterly Reviews
|
|
|
140,376
|
|
|
|
176,847
|
|
SEC Filings
|
|
|
17,567
|
|
|
|
271,698
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
622,982
|
|
|
|
660,177
|
|
Audit Related
Fees(2)
|
|
|
|
|
|
|
260,438
|
|
Tax
Fees(3)
|
|
|
329,753
|
|
|
|
187,175
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
952,735
|
|
|
$
|
1,107,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes audit of the
Companys annual consolidated financial statements included
in its Annual Report on Form
10-K, review
of the Companys quarterly financial statements included in
its Quarterly Reports on
Form 10-Q
and review of the Companys other filings with the SEC,
including comfort letters, consents and other research work
necessary to comply with generally accepted auditing standards
for the years ended December 31, 2007 and 2008.
|
|
(2) |
|
Audits of acquired oil and natural
gas and related properties in 2007.
|
|
(3) |
|
Tax return preparation and
consultation on tax matters.
|
The charter of the Audit Committee and its pre-approval policy
require that the Audit Committee review and pre-approve the
Companys independent registered public accounting
firms fees for audit, audit-related, tax and other
services. The Chairman of the Audit Committee has the authority
to grant pre-approvals, provided such approvals are within the
pre-approval policy and are presented to the Audit Committee at
a subsequent meeting. For the year ended December 31, 2008,
the Audit Committee approved 100% of the services described
above under the captions Audit Fees,
Audit-Related Fees and Tax Fees.
EQUITY
COMPENSATION PLAN INFORMATION
The table below provides certain information about the
Companys equity compensation plans as of December 31,
2008:
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|
|
|
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|
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
|
|
|
|
|
|
Future Issuance Under
|
|
|
|
Number of Securities to
|
|
|
Weighted-Exercise
|
|
|
Equity Compensation
|
|
|
|
be Issued Upon Exercise
|
|
|
Price of
|
|
|
Plans (Excluding
|
|
|
|
of Outstanding Options,
|
|
|
Outstanding
|
|
|
Securities Reflected in
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Options
|
|
|
Column (a)
|
|
|
Equity compensation plan approved by security
holders(1)
|
|
|
2,731,324
|
(2)
|
|
$
|
12.46
|
|
|
|
1,993,507
|
|
Equity compensation plan not approved by security
holders(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,731,324
|
|
|
|
|
|
|
|
1,993,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In August 2006, the stockholders of
the Company approved the Concho Resources Inc. 2006 Stock
Incentive Plan, the Companys only equity compensation
plan, which provides for the issuance of up to 5.85 million
shares of the Companys common stock.There are no
outstanding warrants or equity rights awarded under the
Companys equity compensation plan.
|
|
(2) |
|
These securities do not include
shares of restricted stock awarded under the Concho Resources
Inc. 2006 Stock Incentive Plan.
|
|
(3) |
|
None.
|
11
DIRECTOR
COMPENSATION
The table below summarizes compensation paid by the Company to
non-employee directors during 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
Stock
|
|
|
|
|
|
|
or Paid in
|
|
|
Awards
|
|
|
|
|
Name(1)
|
|
Cash(2)
|
|
|
(3)(4)(5)(6)
|
|
|
Total
|
|
|
Tucker S. Bridwell
|
|
$
|
60,500
|
|
|
$
|
45,490
|
|
|
$
|
105,990
|
|
William H. Easter, III
|
|
|
56,500
|
|
|
|
90,979
|
|
|
|
147,479
|
|
W. Howard Keenan,
Jr.(7)
|
|
|
55,000
|
|
|
|
45,490
|
|
|
|
100,490
|
|
Ray M. Poage
|
|
|
54,500
|
|
|
|
68,193
|
|
|
|
122,693
|
|
A. Wellford
Tabor(8)
|
|
|
59,000
|
|
|
|
45,490
|
|
|
|
104,490
|
|
|
|
|
(1) |
|
The Companys employee
directors are not included because they receive no compensation
for serving on the Board of Directors.
|
|
(2) |
|
Fees earned during the fourth
quarter of each year are paid during the first quarter of the
next year.
|
|
(3) |
|
Stock awards represent the dollar
amount of compensation expense recognized by the Company for
financial statement reporting purposes for the year ended
December 31, 2008, determined in accordance with the
provisions of Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 123(R), Share-Based
Payments (SFAS 123(R)). The Company values its
restricted stock awards based on the average of the high and low
market-quoted sales prices of the Companys common stock on
the grant date of the award. Additional detail regarding the
Companys share-based awards is included in Note G to
Consolidated Financial Statements included in Item 8.
Financial Statements and Supplementary Data in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2008.
|
|
(4) |
|
The grant-date fair value of stock
awards granted to directors during 2008 were, respectively:
(i) for Messrs. Bridwell, Keenan and Tabor, $54,588;
(ii) for Mr. Poage, $77,175; and (iii) for
Mr. Easter, $109,175.
|
|
(5) |
|
Aggregate director stock awards for
which restrictions had not lapsed as of December 31, 2008,
totaled 2,500 shares each for Messrs. Bridwell,
Keenan, Poage and Tabor, and 5,000 shares for
Mr. Easter; restrictions on these shares lapse
February 27, 2009, except as to Mr. Poages
shares, as to which restrictions lapse on August 7, 2009.
|
|
(6) |
|
There were no options to purchase
the Companys common stock granted to directors as of
December 31, 2008.
|
|
(7) |
|
Mr. Keenan directed that all
cash fees due him as director compensation be paid to Yorktown
Energy Partners V, L.P., and Yorktown Energy Partners VI,
L.P., and he holds all securities received as director
compensation for the benefit of those entities. Mr. Keenan
waived all securities to be awarded during 2009 as director
compensation. Mr. Keenan disclaims beneficial ownership of
all securities awarded as director compensation, as well as
those held by those entities, except to the extent of his
pecuniary interest therein.
|
|
(8) |
|
Mr. Tabor directed that cash
fees due him as director compensation prior to January 1,
2009 be paid to Wachovia Capital Partners (WCP), and
he holds these securities received as director compensation for
the benefit of WCP. Mr. Tabor disclaims beneficial
ownership of all securities held for, as well as those held by,
WCP and its affiliates, except to the extent of his pecuniary
interest therein.
|
The Board of Directors believes that providing a compensation
package at the market median is necessary to attract and retain
qualified non-employee directors. The Board of Directors
believes that the compensation package should require a
significant portion of the total compensation package to be
equity-based to align the interests of the Companys
directors and stockholders.
The elements of compensation for the Companys non-employee
directors during the year ended December 31, 2008 were:
|
|
|
|
|
each non-employee director received an annual retainer fee of
$35,000, plus $1,000 for each Board of Directors meeting
attended and $500 for each committee meeting attended;
|
|
|
|
each non-employee director received an initial equity award of
5,000 shares of restricted stock upon appointment or
election to the Board of Directors; and
|
|
|
|
each non-employee director received an annual equity award of
2,500 shares of restricted stock following his initial
service year.
|
12
After review with Longnecker & Associates of
non-employee director compensation paid by the Companys
peer group, the Compensation Committee approved the following
compensation plan for non-employee directors, effective
January 1, 2009:
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an annual retainer fee of $40,000;
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annual retainer fees of $15,000, $10,000 and $7,500,
respectively, to the chairpersons of the Audit Committee,
Compensation Committee and Nominating & Governance
Committee;
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attendance fees of $1,500 and $1,000, respectively, for Board of
Directors and committee meetings; and
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annual equity awards of shares of restricted stock to each
non-employee director having a value of $125,000.
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The price used to determine the value of restricted shares
granted for non-employee directors equity awards is the
average of the high and low market-quoted sales prices of the
Companys common stock on the grant date of the award. Time
of service related forfeiture restrictions on the Companys
restricted stock issued to non-employee directors generally
lapse twelve months following the grant date of the award. All
cash fees are paid quarterly to non-employee directors.
Additionally, each director is reimbursed for (i) travel
and miscellaneous expenses to attend meetings and activities of
the Board of Directors or its committees; (ii) travel and
miscellaneous expenses related to such directors
participation in the Companys general education and
orientation program for directors; and (iii) travel and
miscellaneous expenses for each directors spouse who
accompanies a director to attend meetings and activities of the
Board of Directors or its committees. Neither the Companys
Chief Executive Officer nor its President and Chief Operating
Officer receives compensation for serving on the Board of
Directors.
In February 2008, the Compensation Committee established stock
ownership guidelines for the Companys non-employee
directors under which each non-employee director is expected to
own shares of the Companys common stock with a market
value equal to at least three times the annual cash retainer
paid to such non-employee director. When evaluating compliance
with these guidelines, shares of the Companys common stock
owned by affiliates of each non-employee director will be
included in the calculation. Each non-employee director is
expected to meet this guideline within three years of becoming a
director.
COMPENSATION
DISCUSSION AND ANALYSIS
The following compensation discussion and analysis contains
statements regarding future Company performance goals and
measures. These goals and measures are disclosed in the limited
context of the Companys compensation and benefits programs
and should not be understood to be statements of
managements expectations or estimates of results or other
guidance. The Company specifically cautions investors not to
apply these statements to other contexts.
Introduction
and Overview
General. This Compensation Discussion and
Analysis (i) explains the Companys compensation
philosophy, objectives, policies and practices with respect to
its executive officers, and (ii) analyzes the elements of
13
compensation for each of the individuals identified below, whom
the Company refers to in this Compensation Discussion and
Analysis as the Companys named executive
officers.
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Name
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Principal Position
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Timothy A. Leach
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Chairman and Chief Executive Officer
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Steven L. Beal
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President and Chief Operating Officer
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Jack F. Harper
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Vice President Business Development and Capital
Markets
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Darin G. Holderness
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Vice President Chief Financial Officer and Treasurer
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E. Joseph Wright
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Vice President Engineering and Operations
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Curt F.
Kamradt(1)
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Vice President Chief Financial Officer and Treasurer
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(1) |
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Mr. Kamradt resigned his
employment with the Company effective June 23, 2008.
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Compensation Philosophy and Objectives. The
success of the Company and its ability to maximize stockholder
value is dependent on its ability to attract, retain and
motivate the best available talent in the energy industry. As
such, the Compensation Committee views the Companys most
important asset, its people, as an investment rather than an
expense. Consequently, the Compensation Committee has developed
overarching objectives for its executive compensation program,
which are as follows:
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attract, retain and motivate the best available talent in the
energy industry;
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align the interests of the Companys executive officers
with those of its stockholders; and
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pay for performance, whereby an executive officers total
compensation opportunity will be heavily influenced by the
Companys performance, as well as the executive
officers individual performance.
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To accomplish these objectives, the Company provides what it
believes is a competitive total compensation package to the
Companys executive officers through a combination of base
salary, performance-based annual cash incentive awards,
long-term equity incentive compensation and broad-based benefit
programs.
Total Compensation. In determining total
compensation for the Companys executive officers, the
Compensation Committee intends to align management incentives
with long-term value creation for the Companys
stockholders. To that end, the Compensation Committee targets
total compensation to be such that base salaries are at or below
the market median and that annual cash incentives and long-term
incentives provide the opportunity to realize total compensation
at or above the 50th percentile of the Companys peer
group based on individual and Company performance.
Setting
Executive Officer Compensation
Role of the Compensation Committee. The
Compensation Committee approves all compensation decisions
relating to the Companys executive officers, oversees the
Companys compensation benefit plans and administers the
Companys stock incentive plan (including reviewing and
approving all equity grants to the Companys executive
officers). The Compensation Committee is empowered by the Board
of Directors and by the Compensation Committees charter to
make all decisions regarding compensation for the Companys
executive officers. In his role as chairman of the Compensation
Committee, Mr. Tabor sets the Compensation Committees
meeting agendas, meeting times and calendar. In addition, the
Compensation Committee members speak frequently with each other
concerning compensation matters outside of regularly scheduled
Compensation Committee meetings. Mr. Tabor regularly
reports to the entire Board of Directors regarding compensation
matters and calls upon the counsel and expertise of other
members of the Board of Directors as he and the other members of
the Compensation Committee deem advisable.
Role of Executive Officers. The Compensation
Committee meets outside the presence of all of the
Companys executive officers to consider appropriate
compensation for the Companys Chief Executive Officer and
its President. When determining compensation for other executive
officers, the Compensation Committee meets with the Chief
Executive Officer and President. The Companys Chief
Executive Officer and President together review other executive
officers performance with the Compensation Committee and
make recommendations with respect to appropriate base salaries,
awards under the Companys annual cash incentive plan and
grants
14
of long-term equity incentive awards for the other executive
officers. Based in part on these recommendations from the
Companys Chief Executive Officer and President and other
considerations discussed below, the Compensation Committee
establishes and approves the compensation package for each of
the Companys other executive officers.
Use of Peer Group Comparisons. The
Compensation Committee has selected a group of companies that it
considers a peer group for executive compensation
analysis purposes. Longnecker & Associates, the
Compensation Committees independent compensation
consultant, compiles compensation data for the peer group from a
variety of sources, including proxy statements and other
publicly filed documents. The Compensation Committee uses the
compensation data to compare the compensation of the
Companys executive officers to comparably titled persons
at companies within its peer group, targeting base salaries for
the Companys executive officers which are at or below the
market median of its peer group, and targeting annual cash and
long-term incentives so that the Companys executive
officers will have the opportunity to realize total compensation
at or above the 50th percentile of the Companys peer
group based on Company and individual performance.
Each year, the Compensation Committee reviews and re-determines
the composition of the Companys peer group so that the
peer group consists of oil and gas exploration and production
companies (i) with annual revenue and market capitalization
similar to the Company, and (ii) who potentially compete
with the Company for executive talent.
For 2008, the Companys peer group consisted of :
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Atlas Energy Resources, LLC
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EXCO Resources, Inc.
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Bill Barrett Corporation
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Goodrich Petroleum Corporation
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Bois dArc Energy, Inc.
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Parallel Petroleum Corporation
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Carrizo Oil & Gas, Inc.
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PetroQuest Energy, Inc.
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Clayton Williams Energy, Inc.
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Rosetta Resources Inc.
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Comstock Resources, Inc.
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Swift Energy Company
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Encore Acquisition Company
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Whiting Petroleum Corporation
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As a result of the Companys growth in size and scale
relative to certain of the companies in the peer group, and
changes to certain of such companies, the Compensation Committee
modified the peer group for 2009 by (i) adding Arena
Resources, Inc., Cabot Oil & Gas Corporation,
Continental Resources, Inc., Denbury Resources Inc., Petrohawk
Energy Corporation, Quicksilver Resources Inc., Range Resources
Corporation and St. Mary Land & Exploration
Company; and (ii) removing Bois dArc Energy, Inc.,
Carrizo Oil & Gas, Inc., Clayton Williams Energy Inc.,
Goodrich Petroleum Corporation, Parallel Petroleum Corporation
and PetroQuest Energy, Inc.
Role of Compensation Consultant. The
Compensation Committee has retained Longnecker &
Associates since 2007 as an independent compensation consultant
to assist the Compensation Committee in developing the
Companys non-employee director and executive compensation
program. In this capacity, Longnecker & Associates
reports only to the Compensation Committee and does no other
work for the Company. Representatives from
Longnecker & Associates attend many of the
Compensation Committee meetings and advise the Compensation
Committee on an ongoing basis with regard to general trends in
director and executive compensation matters, including
(i) competitive benchmarking; (ii) incentive plan
design; (iii) peer group selection and (iv) other
matters requested from time to time by the Compensation
Committee. The Compensation Committee has the sole authority to
hire and terminate its compensation consultant.
Elements
of the Companys Executive Officer Compensation
Program
Overview. The Companys executive officer
compensation program is comprised of the following four
components: base salaries, performance-based annual cash
incentive awards, long-term equity incentive grants and a
broad-based benefits program. The Compensation Committee
determined the appropriate level for each compensation component
for compensation during 2008 based on the Companys
recruiting and retention goals, its view of internal parity and
consistency, peer group data and overall Company performance. In
consideration of internal parity and consistency, the
Compensation Committee has always provided identical
compensation packages to Mr. Leach, the Companys
Chairman and Chief Executive Officer and Mr. Beal, its
President and Chief Operating Officer. When reviewing peer group
compensation information for Messrs. Leach and Beal, the
Compensation Committee considers an average of the market data
for those two positions at the Companys peer group
companies.
15
Base Salaries. The Company pays base salaries
to provide a minimum, fixed level of cash compensation for its
executive officers. The Compensation Committee believes that
paying base salaries near the market median is necessary to
achieve the Companys compensation objectives of attracting
and retaining executives with the appropriate abilities and
experience required to lead the Company. On an annual basis, the
Compensation Committee reviews salary ranges and individual
salaries for each of the Companys executive officers as
compared to the salaries of comparably titled officers in the
Companys peer group companies. The Compensation Committee
established 2008 base salary levels for each named executive
officer after consideration of market median pay levels, the
individuals responsibilities, skills and experience, and
the base salaries of others on the executive team. Based on that
review, the Compensation Committee increased the 2008 annual
base salaries of Messrs. Leach and Beal to $450,000 and
left the base salaries of the other named executive officers
unchanged.
For 2009, the Compensation Committee process for setting
executive officer base salaries was similar to the process for
2008, and the Compensation Committee established 2009 base
salary levels for the Companys named executive officers,
as follows:
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Name
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2009 Base Salary
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Salary Increase
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Timothy A. Leach
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$
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475,000
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5.6
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%
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Steven L. Beal
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475,000
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5.6
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%
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Jack F. Harper
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265,000
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17.8
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%
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Darin G. Holderness
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285,000
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14.0
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%
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E. Joseph Wright
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300,000
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20.0
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%
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Performance-based Annual Cash Incentive
Awards. The Compensation Committee utilizes
performance-based annual cash incentive awards to reward
achievement of certain performance goals with a time horizon of
one year or less. Each year, the Compensation Committee
establishes an annual cash incentive program, because the
Compensation Committee believes that the payment of annual cash
incentive awards upon the achievement of certain performance
goals is necessary to achieve its compensation objectives of
motivating and rewarding the Companys executive officers
as well as aligning the interests of the Companys
executive officers and stockholders with the performance of the
Company on a short-term basis.
For 2008, the Compensation Committee established the 2008 annual
cash incentive compensation plan (the 2008 Incentive
Compensation Plan) to reward the Companys executive
officers for performance relative to certain performance
metrics, which include:
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production growth;
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EBITDAX per share;
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proved reserves growth;
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organic finding and development costs per Boe; and
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net asset value per share growth.
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These performance metrics were selected because the Compensation
Committee and Longnecker & Associates believe that
these performance metrics were relevant, objective measures of
performance for the Company and management. They are also used
by the management of the Company to evaluate the performance of
the Company. In addition, the Compensation Committee retained
the ability to apply discretion to awards under the 2008
Incentive Compensation Plan based on extenuating market
circumstances or individual performance. The Compensation
Committee sets target annual cash incentive award amounts such
that a payout at the target level will result in each executive
officer receiving a cash incentive award at or near the
50th percentile of comparably titled officers in the
Companys peer group. Pursuant to the 2008 Incentive
Compensation Plan, the Compensation Committee set the target
annual cash incentive award amount for 2008 to be 100% of 2008
base salary for each of Messrs. Leach and Beal, although
awards to these officers may range from 0% to 200% of 2008 base
salary depending on performance relative to performance metrics
and subject to the discretion of the Compensation Committee. The
annual cash incentive award for the other executive officers is
allocated by the Compensation Committee from a bonus pool. The
target amount of the annual cash incentive award pool for those
officers is 68% of the aggregate of the 2008 base
16
salaries of all officers other than the Chief Executive Officer
and President, although the pool may range from 0% to 200% of
the aggregate target bonus amounts (0% to 136% of the aggregate
2008 base salaries) depending on performance relative to
performance metrics and subject to the discretion of the
Compensation Committee. Once the annual cash incentive award
pool amount is established, the Compensation Committee approves
the allocation of annual cash incentive awarded to those
officers after recommendations from and discussions with the
Companys Chief Executive Officer and President. Under the
terms of the 2008 Incentive Compensation Plan, no officer
participating in the pool can receive an annual cash incentive
award in excess 200% of his base salary.
The payout of annual cash incentive awards, if any, is based
upon the Companys level of achievement with respect to the
performance metrics, which are derived each year from the
Companys annual capital budgeting process and are based
upon certain assumptions made by the Companys management.
If the Company achieves expected performance, the short term
incentive program should pay out at target levels. In order to
create additional incentive for exceptional Company performance,
awards can be up to 200% of the base salary for each named
executive officer, but it is not expected that payment at this
level would be triggered in most years. In evaluating the
Companys achievement relative to various performance
metrics, the Compensation Committee does not employ a formula or
weighting of performance metrics, but rather subjectively
evaluates performance in light of oil and gas industry
fundamentals and assesses how effectively management adapts to
changing industry conditions and opportunities during the year.
The five performance metrics selected with respect to the 2008
Annual Incentive Compensation Plan are shown in the table below,
together with the goals and actual levels of achievement.
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2008
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2008
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Performance Metric
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Goal
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Actual(1)
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Production growth
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20%
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41%
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EBITDAX per
share(2)
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$3.79
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$5.06
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Proved reserves growth
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10%-15%
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51%
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Organic finding and development costs per
Boe(3)
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$11-$13
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$10.19
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Net asset value per share
growth(4)
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15%
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47%
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(1) |
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Includes effect of acquisitions.
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(2) |
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The Company defines EBITDAX as net
income, plus (i) exploration and abandonment expense;
(ii) depreciation, depletion and amortization expense;
(iii) accretion expense; (iv) impairments of
long-lived assets; (v) non-cash stock based compensation
expense; (vi) the ineffective portion of cash flow hedges
and unrealized (gain) loss on derivatives not designated as
hedges; (vii) interest expense; (viii) bad debt
expense; and (ix) federal and state income taxes, less
other ancillary income, including interest income, gathering
income and rental income.
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(3) |
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Organic finding and development
costs per Boe are calculated by dividing exploration and
development costs incurred for 2008 of approximately
$339.0 million by extensions and discoveries, including
performance revisions and excluding price revisions in 2008, of
approximately 33.3 MMBoe.
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(4) |
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Net asset value per share is
computed by replacing the historical net basis of proved oil and
gas properties in the December 31, 2008 consolidated
balance sheet with the
PV-10 of the
Companys proved oil and gas properties, utilizing
predetermined commodity prices (that are the same for both the
beginning and end of period calculation of net asset value), and
by dividing the resulting value by the Companys fully
diluted shares outstanding.
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In February 2009, the Compensation Committee reviewed the
Companys 2008 results relative to these performance
metrics and determined that the Companys performance far
exceeded the goals for production growth, EBITDAX per share,
proved reserves growth and net asset value per share growth.
Additionally, the Compensation Committee noted that the Company
was able to produce these results while achieving organic
finding and development costs of $10.19 per Boe. Based on its
review, the Compensation Committee approved an annual cash
incentive award for each of Messrs. Leach and Beal equal to
175% of their target annual cash incentive award and established
a bonus pool for the Companys other executive officers
equal to 175% of those officers aggregate target annual
cash incentive awards. Allocations from the bonus pool to each
executive officer were approved by the Compensation Committee
after recommendations from and discussion with the
Companys Chief Executive Officer and President.
For 2009, the Compensation Committee has established the 2009
annual cash incentive compensation plan (the 2009
Incentive Compensation Plan). The 2009 Incentive
Compensation Plan is substantially similar to the
17
2008 Incentive Compensation Plan and will reward the
Companys executive officers for achievement relative to
certain performance metrics, which include:
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production growth;
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EBITDAX per share;
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proved reserves growth;
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organic finding and development costs per Boe;
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net asset value per share growth; and
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any other performance metric considered by the Compensation
Committee, in its discretion.
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The Compensation Committee retains the ability to apply
discretion to awards based on extenuating market circumstances
or on Company or individual performance. Pursuant to the 2009
Incentive Compensation Plan, the Compensation Committee has set
the target annual cash incentive award amount for 2009 to be
100% of the 2009 base salary for Mr. Leach, although the
award to Mr. Leach may range from 0% to 200% of 2009 base
salary depending on achievement relative to performance metrics
and subject to the discretion of the Compensation Committee. The
annual cash incentive award for other executive officers will be
allocated from a bonus pool. The bonus pool for those officers
is expected to be equal to 75% of the aggregate of their 2009
base salaries, although the bonus pool may range from 0% to 150%
of the aggregate of their 2009 base salaries depending on
achievement relative to performance metrics and subject to the
discretion of the Compensation Committee. Mr. Beal has
announced his intention to retire as an executive officer of the
Company effective June 30, 2009, and upon his retirement
will no longer be eligible to participate in the 2009 Incentive
Compensation Plan.
Long-term Equity Incentive Compensation. The
annualized value of the long-term equity incentive compensation
is intended to be the largest component of each named executive
officers overall compensation package, because the
Compensation Committee believes significant emphasis on
stock-based compensation effectively aligns the interests of the
Companys named executive officers with those of its
stockholders, providing incentive to the Companys named
executive officers to focus on the long-term success of the
Company. In addition, the Company utilizes multi-year vesting
periods, typically four years, when granting long-term equity
incentive compensation to facilitate the compensation objective
of retaining the Companys named executive officers.
The value of each named executive officers annual
long-term incentive award is set in the first quarter each year
and is based significantly on the Compensation Committees
review of peer group data provided by Longnecker &
Associates that reflects the value of equity grants as a
percentage of base salary for similarly titled positions at the
Companys peer group companies. Awards are targeted at the
median of the Companys peer group, which is consistent
with the Compensation Committees overall compensation
philosophy. In addition to peer group data, the Compensation
Committee considers and reviews individual performance to
determine the value of the long-term equity incentive award. The
Compensation Committee considers the unvested portion of prior
equity awards when determining future award levels. Awards are
determined based on a dollar value, which, with respect to stock
options, is converted to a number of stock options by reference
to the estimated Black-Scholes value of the stock options on the
date of grant.
Based on the foregoing considerations, the Company granted stock
options in February 2008 to its named executive officers, as
follows:
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|
|
|
|
|
Shares Subject to
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|
Name
|
|
2008 Stock Options
|
|
|
Timothy A. Leach
|
|
|
150,000
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|
Steven L. Beal
|
|
|
150,000
|
|
Jack F. Harper
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|
|
35,000
|
|
E. Joseph Wright
|
|
|
40,000
|
|
Curt F.
Kamradt(1)
|
|
|
35,000
|
|
|
|
|
(1) |
|
Mr. Kamradt resigned as the
Companys Vice President, Chief Financial Officer and
Treasurer on June 23, 2008 and has forfeited 100% of these
options.
|
18
In addition to annual grants to existing executive officers, the
Compensation Committee has the discretion to approve long-term
incentive awards in connection with hiring new executive
officers. When hiring Mr. Holderness as the Companys
Vice President, Chief Financial Officer and Treasurer in August
2008, the Company awarded him 14,993 shares of restricted
stock and stock options covering 35,000 shares, all of
which vest in three equal annual installments beginning one year
from the date of grant.
Stock Ownership Guidelines. The Compensation
Committee established stock ownership guidelines under which
each of the Companys Chief Executive Officer and President
is expected to own shares of the Companys common stock
having a market value of at least five times their respective
base salaries and each of the Companys other executive
officers is expected to own shares of the Companys common
stock having a market value of at least three times their
respective base salaries. All executive officers are expected to
meet these guidelines within five years of becoming an executive
officer. The Companys stock ownership guidelines are
designed to increase an executives equity stake in the
Company and to align an executives interests more closely
with those of the Companys stockholders.
Potential Payments Upon a Termination or Change of
Control. The Company maintains an employment
agreement with each of the named executive officers that
provides potential severance payments upon the termination of
their employment in certain situations. On December 19,
2008, the Company entered into new employment agreements with
all of its executive officers, which became effective on
January 1, 2009. These new employment agreements were
entered into in anticipation of the expiration of the initial
three year term of the employment agreements for most of the
Companys executive officers. The employment agreements for
all of the Companys executive officers were designed so
that all of the officers would have employment agreements with
the same term and similar severance and change of control
provisions. The Compensation Committee was advised by
Longnecker & Associates regarding market competitive
levels for the compensation related terms and conditions in the
new employment agreements. The new employment agreements contain
substantially similar terms and conditions to those contained in
the executives previous respective employment agreements,
with the most significant changes being (i) the addition of
a severance payment following the executives termination
by reason of death or disability; (ii) the increase in the
number of months severance to be paid following an
involuntary termination that is not within a two year period
following a change of control; and (iii) the addition of
the executives average annual bonus into the severance
payment calculation for an involuntary termination within a two
year period following a change of control.
In the event that the employment of the executives is terminated
by the Company other than for cause (and not by
reason of death or disability) or if they terminate their
employment following a change in duties, the
executives will receive severance equal to twenty-four months of
base salary (eighteen months of base salary in the case of
executives other than Messrs. Leach and Beal), as well as
up to twelve months continued medical benefits. If the same
termination events fall within the two year period immediately
following a change of control, each of the Companys named
executive officers is entitled to an increased severance payment
equal to two years of base salary and average annual bonus,
accelerated vesting of any unvested equity compensation awards,
and up to eighteen months continued medical benefits.
The Company believes that these severance and change of control
arrangements mitigate some of the risk that exists for
executives working in a publicly owned company. These
arrangements are intended to attract and retain qualified
executives that could have job alternatives that may appear to
them to be less risky absent these arrangements. Because of
recent significant volatility in the oil and gas industry, the
transactional nature of the industry historically, and the
quality of the Companys workforce and asset base there is
a possibility that the Company could be acquired in the future.
Accordingly, the Company believes that the larger severance
packages resulting from terminations related to change of
control transactions provide an incentive for executives to
continue to help successfully execute such a transaction from
its early stages until consummation. The Compensation Committee
believes that these severance and change of control arrangements
provide important protection to the Companys executive
officers, are consistent with the practices of peer companies
and are appropriate for the attraction and retention of
executive talent. More information on these severance and change
of control agreements can be found below under Potential
Payments Upon a Termination or Change of Control.
19
Other Benefits. The Companys executive
officers are eligible to participate in all of the
Companys employee benefit plans, such as medical, dental,
vision, group life, disability, and accidental death and
dismemberment insurance and 401(k) plan, in each case on the
same basis as other employees, subject to applicable law. The
Company also provides vacation and other paid leave to all
employees, including the Companys executive officers,
which are comparable to those provided within the oil and gas
industry.
During 2008, the Company owned and operated an airplane and
purchased hours in an additional aircraft program to facilitate
the travel of executives in as safe a manner as possible and
with the best use of their time. Under their employment
agreements, Messrs. Leach and Beal are entitled to utilize
the Companys aircraft for business travel and reasonable
personal travel in North America. The immediate family members
of Messrs. Leach and Beal are also permitted to utilize the
Companys aircraft for reasonable personal use in North
America. Messrs. Leach and Beal are not obligated to
reimburse the Company for the use of such aircraft except when
their immediate family members use such aircraft without one of
Messrs. Leach or Beal accompanying them on the flight, in
which case they are obligated to reimburse the Company for the
variable costs of such use. The amount of personal and family
use of the Companys aircraft is subject to review and
adjustment by the Compensation Committee.
The value of personal aircraft usage described above is based on
the Companys direct operating cost. This methodology
calculates the Companys incremental cost based on the
average weighted cost of fuel, on-board catering, aircraft
maintenance, landing fees, trip-related hangar and parking
costs, and other variable costs. Since the Companys
aircraft is used primarily for business travel, the methodology
excludes fixed costs which do not change based on usage, such as
pilot and other employee charges, purchase costs of the aircraft
and non-trip-related hangar expenses. On occasions when the
spouse or other family member of Messrs. Leach or Beal
accompanies the executive on a flight, no additional direct
operating cost is incurred under the foregoing methodology.
Tax and Accounting
Policies. Section 162(m) of the Internal
Revenue Code of 1986, as amended (the Code), places
a limit of $1,000,000 on the amount of compensation that the
Company may deduct in any one year with respect to each of the
Companys Chief Executive Officer and other three most
highly paid executive officers (other than its Chief Financial
Officer). There is an exception to the $1,000,000 limitation for
performance-based compensation meeting certain requirements. The
Companys annual cash incentive plan does not meet the
definition of performance-based compensation for purposes of
Section 162(m) of the Code primarily because it is not
formula driven, the performance goals applicable under the plan
have not been approved by the Companys stockholders and
the Compensation Committee retains the right to make subjective
evaluations of performance, including an assessment of how
effectively management adapts to changing industry conditions
and opportunities during the year. Pursuant to a transition rule
that applies to the Company, compensation attributable to the
exercise of a stock option or the vesting of a restricted stock
award granted under the Companys 2006 Stock Incentive Plan
will not be subject to the deduction limitation under
Section 162(m) of the Code if the grant of the stock option
or restricted stock award occurs on or before the earliest of
(i) the material modification of such plan; (ii) the
issuance of all shares of the Companys common stock
available for issuance under such plan; or (iii) the first
meeting of the Companys stockholders at which directors
are to be elected that occurs after December 31, 2010. To
maintain flexibility in compensating the Companys
executive officers in a manner designed to promote varying
corporate goals, the Compensation Committee has not adopted a
policy requiring all compensation to be deductible.
The Company accounts for equity compensation to its employees
under SFAS 123(R), which requires the Company to estimate
and record an expense over the service period of the award.
However, for tax purposes, subject to any limitations under
Section 162(m) of the Code, income recognized by employees
from nonqualified stock options granted at fair market value
should be deductible by the Company, but, to the extent that a
stock option constitutes an incentive stock option, the Company
will not be allowed a compensation deduction if there is no
disqualifying disposition by the optionee. In addition, subject
to any limitations under Section 162(m) of the Code, if the
Company grants shares of restricted stock, the related
compensation expense should be fully deductible by the Company
at the time the award is otherwise taxable to the grantee.
The Company structures annual cash incentive compensation so
that it is taxable to its executives at the time it becomes
available to them. For tax purposes, cash compensation is
recorded as an expense at the time the obligation is accrued.
20
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The compensation paid to the Companys executive officers
generally consists of base salaries, annual cash incentive
payments, awards under the Concho Resources Inc. 2006 Stock
Incentive Plan, contributions to the Companys defined
contribution 401(k) retirement plan and miscellaneous
perquisites. The table below sets forth information regarding
fiscal 2008 compensation awarded to, earned by or paid to the
Companys Chief Executive Officer, Chief Financial Officer
and three most highly compensated executive officers other than
its Chief Executive Officer and Chief Financial Officer, plus
Mr. Kamradt, the Companys former Vice President,
Chief Financial Officer and Treasurer (the Companys
named executive officers). The table also sets forth
information regarding the fiscal years 2007 and 2006
compensation for Messrs. Leach, Beal, Wright and Kamradt,
because they were also named executive officers in 2007 and 2006.
|
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|
|
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|
|
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|
|
|
|
|
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|
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|
Non-equity
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|
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Stock
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Option
|
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|
Incentive Plan
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All Other
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Awards(1)
|
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|
Awards(1)
|
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|
Compensation(2)
|
|
|
Compensation(3)
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|
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Total
|
|
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Timothy A. Leach
|
|
|
2008
|
|
|
$
|
433,333
|
|
|
$
|
|
|
|
$
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914,632
|
|
|
$
|
787,500
|
|
|
$
|
52,701
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|
|
$
|
2,188,166
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|
Chairman and Chief
|
|
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2007
|
|
|
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350,000
|
|
|
|
|
|
|
|
390,661
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|
|
|
663,000
|
|
|
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32,895
|
|
|
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1,436,556
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|
Executive Officer
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2006
|
|
|
|
333,333
|
|
|
|
|
|
|
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1,382,953
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|
|
|
|
|
|
|
34,124
|
|
|
|
1,750,410
|
|
Steven L. Beal
|
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2008
|
|
|
|
433,333
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|
|
|
|
|
|
|
914,632
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|
|
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787,500
|
|
|
|
76,610
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|
|
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2,212,075
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|
President and Chief
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2007
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|
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350,000
|
|
|
|
|
|
|
|
390,661
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|
|
663,000
|
|
|
|
24,302
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|
|
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1,427,963
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|
Operating Officer
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2006
|
|
|
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333,333
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|
|
|
|
|
|
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1,382,953
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|
|
|
|
|
|
|
18,395
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|
|
|
1,734,681
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Jack F. Harper
|
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2008
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|
|
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225,000
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|
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24,660
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|
|
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633,698
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|
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275,000
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|
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13,538
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|
|
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1,171,896
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|
Vice President Business Development and Capital
Markets
|
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Darin G. Holderness
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2008
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88,294
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(4)
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101,849
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|
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124,679
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153,000
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|
|
|
3,763
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|
|
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383,291
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|
Vice President Chief Financial Officer and
Treasurer
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|
|
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E. Joseph Wright
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2008
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|
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250,000
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|
|
|
|
|
|
|
411,563
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|
|
306,000
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|
|
|
15,038
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|
|
|
982,601
|
|
Vice President
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2007
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250,000
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|
|
|
|
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343,240
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|
|
|
357,000
|
|
|
|
15,055
|
|
|
|
965,295
|
|
Engineering and Operations
|
|
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2006
|
|
|
|
233,333
|
|
|
|
|
|
|
|
722,177
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|
|
|
|
|
|
|
14,055
|
|
|
|
969,565
|
|
Curt F.
Kamradt(5)
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2008
|
|
|
|
125,000
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|
|
|
|
|
|
|
|
|
|
|
|
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|
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7,519
|
|
|
|
132,519
|
|
Former Vice President,
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2007
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250,000
|
|
|
|
|
|
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343,240
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|
|
|
347,000
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|
|
|
15,055
|
|
|
|
955,295
|
|
Chief Financial Officer and Treasurer
|
|
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2006
|
|
|
|
233,333
|
|
|
|
|
|
|
|
722,177
|
|
|
|
|
|
|
|
13,883
|
|
|
|
969,393
|
|
|
|
|
(1) |
|
Stock awards represent the dollar
amount of compensation expense recognized by the Company for
financial statement reporting purposes for the year ended
December 31, 2008, determined in accordance with
SFAS 123(R). The Company valued its restricted stock awards
based on the median of the high and low market-quoted sales
prices of the Companys common stock on the grant date of
the award. Stock option awards are valued as of the grant dates
using the Black-Scholes option pricing model. Additional detail
regarding the Companys share-based awards is included in
Note G of Notes to Consolidated Financial Statements
included in Item 8. Financial Statements and
Supplementary Data in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2008.
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(2) |
|
Represents cash awards earned in
2008 and 2007 under the Companys performance-based cash
incentive plans.
|
21
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(3) |
|
All Other Compensation
includes the Company contributions to the named executive
officers 401(k) retirement accounts, life insurance
premiums and other perquisites, as shown in the following table:
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Company
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Contributions to
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Life Insurance
|
|
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Use of
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Total All Other
|
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Name
|
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Year
|
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401(k) Plan
|
|
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Premiums
|
|
|
Aircraft
|
|
|
Compensation
|
|
|
Timothy A. Leach
|
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2008
|
|
|
$
|
15,475
|
|
|
$
|
38
|
|
|
$
|
37,188
|
|
|
$
|
52,701
|
|
|
|
|
2007
|
|
|
|
15,225
|
|
|
|
55
|
|
|
|
17,615
|
|
|
|
32,895
|
|
|
|
|
2006
|
|
|
|
14,987
|
|
|
|
55
|
|
|
|
19,082
|
|
|
|
34,124
|
|
Steven L. Beal
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|
|
2008
|
|
|
|
15,475
|
|
|
|
38
|
|
|
|
61,097
|
|
|
|
76,610
|
|
|
|
|
2007
|
|
|
|
15,225
|
|
|
|
55
|
|
|
|
9,022
|
|
|
|
24,302
|
|
|
|
|
2006
|
|
|
|
14,998
|
|
|
|
55
|
|
|
|
3,342
|
|
|
|
18,395
|
|
Jack F. Harper
|
|
|
2008
|
|
|
|
13,500
|
|
|
|
38
|
|
|
|
|
|
|
|
13,538
|
|
Darin G. Holderness
|
|
|
2008
|
|
|
|
3,750
|
|
|
|
13
|
|
|
|
|
|
|
|
3,763
|
(a)
|
E. Joseph Wright
|
|
|
2008
|
|
|
|
15,000
|
|
|
|
38
|
|
|
|
|
|
|
|
15,038
|
|
|
|
|
2007
|
|
|
|
15,000
|
|
|
|
55
|
|
|
|
|
|
|
|
15,055
|
|
|
|
|
2006
|
|
|
|
14,000
|
|
|
|
55
|
|
|
|
|
|
|
|
14,055
|
|
Curt F.
Kamradt(b)
|
|
|
2008
|
|
|
|
7,500
|
|
|
|
19
|
|
|
|
|
|
|
|
7,519
|
|
|
|
|
2007
|
|
|
|
15,000
|
|
|
|
55
|
|
|
|
|
|
|
|
15,055
|
|
|
|
|
2006
|
|
|
|
13,828
|
|
|
|
55
|
|
|
|
|
|
|
|
13,883
|
|
|
|
|
(a) |
|
Mr. Holderness is entitled to
reimbursement of his relocation costs in excess of those paid
under the Companys standard relocation policy of up to
$150,000, plus a
gross-up for
applicable taxes. No amount of this obligation was paid during
2008.
|
(b) |
|
Mr. Kamradt resigned as the
Companys Vice President, Chief Financial Officer and
Treasurer on June 23, 2008.
|
|
|
|
(4) |
|
Mr. Holderness became the
Companys Vice President, Chief Financial Officer and
Treasurer on August 25, 2008, and this amount represents a
proportionate share of his 2008 base salary of $250,000.
|
|
(5) |
|
Mr. Kamradt resigned from the
Company effective June 23, 2008.
|
Grants of
Plan-Based Awards
The table below sets forth the range of potential annual cash
incentive awards for 2008 performance as a dollar amount for
each of the named executive officers under the Companys
2008 Annual Incentive Compensation Plan. The table also sets
forth the number of shares of restricted stock and the number of
stock options awarded during 2008 to the Companys named
executive officers under the Concho Resources Inc. 2006 Stock
Incentive Plan.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Option
|
|
|
Exercise or
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
Number of
|
|
|
Awards:
|
|
|
Base Price
|
|
|
Closing
|
|
|
Fair Value
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
|
Shares of
|
|
|
Number of
|
|
|
of Option
|
|
|
Market
|
|
|
of Stock
|
|
|
|
|
|
Plan
Awards(1)
|
|
|
Stock or
|
|
|
Underlying
|
|
|
Awards
|
|
|
Price on
|
|
|
and Option
|
|
Name
|
|
Grant Date
|
|
Threshold
|
|
|
Target
|
|
|
Maximum(2)
|
|
|
Units(3)(4)
|
|
|
Options(3)(4)
|
|
|
($/Sh)(5)
|
|
|
Grant Date
|
|
|
Awards(6)
|
|
|
Timothy A. Leach
|
|
February 27, 2008
|
|
$
|
|
|
|
$
|
450,000
|
|
|
$
|
900,000
|
|
|
|
|
|
|
|
150,000
|
|
|
$
|
21.84
|
|
|
$
|
22.82
|
|
|
$
|
1,371,000
|
|
Steven L. Beal
|
|
February 27, 2008
|
|
|
|
|
|
|
450,000
|
|
|
|
900,000
|
|
|
|
|
|
|
|
150,000
|
|
|
|
21.84
|
|
|
|
22.82
|
|
|
|
1,371,000
|
|
Jack F. Harper
|
|
February 27, 2008
|
|
|
|
|
|
|
153,000
|
|
|
|
450,000
|
|
|
|
|
|
|
|
35,000
|
|
|
|
21.84
|
|
|
|
22.82
|
|
|
|
319,900
|
|
Darin G. Holderness
|
|
August 25, 2008
|
|
|
|
|
|
|
60,040
|
|
|
|
176,588
|
|
|
|
14,993
|
|
|
|
35,000
|
|
|
|
33.35
|
|
|
|
32.99
|
|
|
|
1,085,142
|
|
E. Joseph Wright
|
|
February 27, 2008
|
|
|
|
|
|
|
170,000
|
|
|
|
500,000
|
|
|
|
|
|
|
|
40,000
|
|
|
|
21.84
|
|
|
|
22.82
|
|
|
|
365,600
|
|
Curt F.
Kamradt(7)
|
|
February 27, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
21.84
|
|
|
|
22.82
|
|
|
|
319,900
|
|
|
|
|
(1) |
|
These columns show the range of
potential values for the payout of the annual cash incentive
awards for 2008 performance for each named executive officer.
The potential payout is performance-based and driven by Company
and individual performance. The actual amount of the annual cash
incentive award paid for 2008 performance is shown in the
Summary Compensation Table under the Non-Equity Incentive
Plan Compensation column. For a detailed description of
the performance metrics associated with the Companys
annual cash incentive awards, please see
Compensation Discussion and
Analysis Elements of the Companys Executive
Officer Compensation Program Performance-based
Annual Cash Incentive Awards.
|
|
(2) |
|
The values in this column show the
maximum amount of an annual cash incentive award under the
Companys 2008 Annual Incentive Compensation Plan, capped
at 200% of the officers base salary for the year.
|
22
|
|
|
(3) |
|
Additional detail regarding the
Companys share-based awards is included in Note G to
Consolidated Financial Statements included in Item 8.
Financial Statements and Supplementary Data in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2008.
|
|
(4) |
|
These shares of restricted stock
and stock options vest in four equal annual installments
beginning one year from the date of grant, except as to
Mr. Holderness, whose shares of restricted stock and stock
options vest in one-third increments beginning one year from the
date of grant.
|
|
(5) |
|
The exercise price for stock
options is the average of the high and low market-quoted sales
prices of the Companys common stock on the grant date of
award.
|
|
(6) |
|
This column shows the grant date
fair value of restricted stock computed in accordance with
SFAS 123(R) and the grant date fair value of stock options
computed in accordance with SFAS 123(R) granted to the
named executive officers during 2008. Generally, the grant date
fair value is expensed in the Companys financial
statements over the vesting schedule of the restricted stock and
stock options.
|
|
(7) |
|
Mr. Kamradt resigned as the
Companys Vice President, Chief Financial Officer and
Treasurer on June 23, 2008, and has forfeited 100% of these
stock options.
|
Outstanding
Equity Awards at Fiscal Year-End
The table below sets forth, for each named executive officer,
information about equity awards outstanding as of
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
Number of
|
|
|
Payout Value of
|
|
|
|
Number of
|
|
|
Securities
|
|
|
|
|
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
Securities Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
Shares,
|
|
|
Shares,
|
|
|
|
Unexercised Options
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
Units, or Other
|
|
|
Units, or Other
|
|
|
|
Vested
|
|
|
Vested
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Expiration
|
|
Rights That Have
|
|
|
Rights That Have
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable(1)
|
|
|
Options
|
|
|
Price
|
|
|
Date
|
|
Not Vested
|
|
|
Not
Vested(5)
|
|
|
Timothy A. Leach
|
|
|
|
|
|
|
81,583
|
|
|
|
30,666
|
(1)(2)
|
|
$
|
8.00
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,583
|
|
|
|
30,666
|
(1)(2)
|
|
|
8.00
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,581
|
|
|
|
30,709
|
(1)(2)
|
|
|
8.00
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
69,630
|
|
|
|
|
|
|
|
19,639
|
(2)
|
|
|
8.00
|
|
|
August 13, 2014
|
|
|
|
|
|
|
|
|
|
|
|
31,250
|
|
|
|
|
|
|
|
31,250
|
(3)
|
|
|
15.40
|
|
|
June 12, 2016
|
|
|
5,780
|
(4)
|
|
$
|
131,900
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
(6)
|
|
|
21.84
|
|
|
February 27, 2018
|
|
|
|
|
|
|
|
|
Steven L. Beal
|
|
|
|
|
|
|
81,583
|
|
|
|
30,666
|
(1)(2)
|
|
|
8.00
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,583
|
|
|
|
30,666
|
(1)(2)
|
|
|
8.00
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,581
|
|
|
|
30,709
|
(1)(2)
|
|
|
8.00
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
69,630
|
|
|
|
|
|
|
|
19,639
|
(2)
|
|
|
8.00
|
|
|
August 13, 2014
|
|
|
|
|
|
|
|
|
|
|
|
31,250
|
|
|
|
|
|
|
|
31,250
|
(3)
|
|
|
15.40
|
|
|
June 12, 2016
|
|
|
5,780
|
(4)
|
|
|
131,900
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
(6)
|
|
|
21.84
|
|
|
February 27, 2018
|
|
|
|
|
|
|
|
|
Jack F. Harper
|
|
|
50,000
|
|
|
|
|
|
|
|
150,000
|
(7)
|
|
|
12.85
|
|
|
August 15, 2017
|
|
|
4,736
|
(8)
|
|
|
108,076
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
(6)
|
|
|
21.84
|
|
|
February 27, 2018
|
|
|
|
|
|
|
|
|
Darin G. Holderness
|
|
|
|
|
|
|
|
|
|
|
35,000
|
(9)
|
|
|
33.35
|
|
|
August 25, 2018
|
|
|
14,993
|
(10)
|
|
|
342,140
|
|
E. Joseph Wright
|
|
|
|
|
|
|
36,260
|
|
|
|
13,629
|
(1)(2)
|
|
|
8.00
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,260
|
|
|
|
13,629
|
(1)(2)
|
|
|
8.00
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,254
|
|
|
|
13,649
|
(1)(2)
|
|
|
8.00
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
30,947
|
|
|
|
|
|
|
|
8,728
|
(2)
|
|
|
8.00
|
|
|
August 13, 2014
|
|
|
|
|
|
|
|
|
|
|
|
37,500
|
|
|
|
|
|
|
|
37,500
|
(3)
|
|
|
15.40
|
|
|
June 12, 2016
|
|
|
6,936
|
(4)
|
|
|
158,280
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
(6)
|
|
|
21.84
|
|
|
February 27, 2018
|
|
|
|
|
|
|
|
|
Curt F. Kamradt
|
|
|
78,774
|
(11)
|
|
|
|
|
|
|
|
|
|
|
8.00
|
|
|
March 15, 2009
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
On November 16, 2007, the
Company and each subject named executive officer entered into
amendments to these stock option awards in order to cause these
stock option awards to constitute deferred compensation that is
compliant with Section 409A of the Code
(Section 409A). In order to comply with
Section 409A, it was necessary to amend these stock options
to provide that they could only be exercised within certain
pre-established time periods or upon the occurrence of certain
specifically enumerated events (such as the executives
death, disability, separation from service or the occurrence of
a change of control).
|
23
|
|
|
|
|
The vested unexercisable stock
options expiring on (i) December 31, 2009 are
generally exercisable from January 1, 2009 through
December 31, 2009, (ii) December 31, 2010 are
generally exercisable from January 1, 2010 through
December 31, 2010, and (iii) December 31, 2011
are generally exercisable from January 1, 2011 through
December 31, 2011.
|
|
|
|
The unearned stock options expiring
on (i) December 31, 2009 are generally exercisable
from February 27, 2009 through December 31, 2009,
(ii) December 31, 2010 are generally exercisable from
January 1, 2010 through December 31, 2010, and
(iii) December 31, 2011 are generally exercisable from
January 1, 2011 through December 31, 2011.
|
|
|
|
Notwithstanding the foregoing, to
the extent vested, these stock options may become exercisable on
a date that is different than the date described in the
preceding two paragraphs in the event of the named executive
officers death, disability or separation from service or
upon the occurrence of a change of control (as defined in
Section 409A) of the Company.
|
|
(2) |
|
These stock options vest on
February 27, 2009.
|
|
(3) |
|
These stock options vest in 50%
increments on June 12, 2009 and 2010. However, vesting is
accelerated upon the occurrence of certain events following a
change of control of the Company as discussed below in
Potential Payments Upon a Termination or Change of
Control.
|
|
(4) |
|
These shares of restricted stock
vest in 50% increments on June 12, 2009 and 2010. However,
vesting is accelerated upon the occurrence of a change of
control of the Company as discussed below in Potential
Payments Upon a Termination or Change of Control.
|
|
(5) |
|
Based on the closing price of the
Companys common stock of $22.82 on December 31, 2008.
|
|
(6) |
|
These stock options vest in 25%
increments on February 27, 2009, 2010, 2011 and 2012.
However, vesting is accelerated upon the occurrence of certain
events following a change of control of the Company as discussed
below in Potential Payments Upon a Termination or Change
of Control.
|
|
(7) |
|
These stock options vest in
one-third increments on August 15, 2009, 2010 and 2011.
However, vesting is accelerated upon the occurrence of certain
events following a change of control of the Company as discussed
below in Potential Payments Upon a Termination or Change
of Control.
|
|
(8) |
|
These shares of restricted stock
vest on August 1, 2009. However, vesting is accelerated
upon the occurrence of a change of control of the Company as
discussed below in Potential Payments Upon a Termination
or Change of Control.
|
|
(9) |
|
These stock options vest in
one-third increments on August 25, 2009, 2010 and 2011.
However, vesting is accelerated upon the occurrence of certain
events following a change of control of the Company as discussed
below in Potential Payments Upon a Termination or Change
of Control.
|
|
(10) |
|
These shares of restricted stock
vest in one-third increments on August 25, 2009, 2010 and
2011. However, vesting is accelerated upon the occurrence of a
change of control of the Company as discussed below in
Potential Payments Upon a Termination or Change of
Control.
|
|
(11) |
|
Mr. Kamradt resigned as the
Companys Vice President, Chief Financial Officer and
Treasurer on June 23, 2008. These vested exercisable stock
options were exercised prior to their scheduled expiration on
March 15, 2009.
|
Option
Exercises and Stock Vested
The table below sets forth, for each named executive officer,
information about option exercises and lapses of restrictions on
restricted stock awards during 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Value
|
|
|
|
Acquired on
|
|
|
Realized on
|
|
|
Acquired on
|
|
|
Realized on
|
|
Name
|
|
Exercise
|
|
|
Exercise(1)
|
|
|
Vesting
|
|
|
Vesting(2)
|
|
|
Timothy A. Leach
|
|
|
81,583
|
|
|
$
|
1,189,886
|
|
|
|
5,781
|
|
|
$
|
168,031
|
|
Steven L. Beal
|
|
|
81,583
|
|
|
|
1,546,707
|
|
|
|
5,781
|
|
|
|
168,031
|
|
Jack F. Harper
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Darin G. Holderness
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E. Joseph Wright
|
|
|
36,260
|
|
|
|
557,240
|
|
|
|
6,938
|
|
|
|
201,670
|
|
Curt F.
Kamradt(3)
|
|
|
134,707
|
|
|
|
2,864,491
|
|
|
|
6,938
|
|
|
|
201,670
|
|
|
|
|
(1) |
|
The value realized upon the
exercise of stock options represents the number of stock options
multiplied by the difference between the exercise price of the
stock option and the closing market price of the Companys
common stock on the date of exercise.
|
24
|
|
|
(2) |
|
The value realized on vesting
represents the number of shares multiplied by the average of the
high and low market-quoted sales prices of the Companys
common stock on the vesting date.
|
|
(3) |
|
Mr. Kamradt resigned as the
Companys Vice President, Chief Financial Officer and
Treasurer on June 23, 2008.
|
Potential
Payments Upon a Termination or Change of Control
The Company maintains employment agreements with each of its
named executive officers that provide for potential severance
payments upon a termination of the executives employment
under various circumstances, and the timing and form of the
potential payment of benefits under the employment agreements
may vary depending on whether the termination occurs in
connection with a change of control. The named executive
officers employment agreements are all substantially
similar, so the following discussion will apply to each of the
named executive officers unless specifically noted otherwise.
The Company and its named executive officers (other than
Mr. Kamradt) entered into the current executive employment
agreements on December 19, 2008, although the effective
date for each agreement was January 1, 2009. As noted
previously in Compensation Discussion and Analysis,
the new employment agreements contain substantially similar
terms and conditions to those contained in the executives
previous employment agreements, with the most significant
changes being: (i) the addition of a severance payment
following the executives termination by reason of death or
disability; (ii) the increase in the number of months
severance to be paid following an involuntary termination that
is not within a two year period following a change of control;
and (iii) the addition of the executives average
annual bonus in the severance payment calculation for an
involuntary termination within a two year period following a
change of control. A calculation of potential severance and
benefit payments under the previous employment agreements in
effect at December 31, 2008 would not provide an accurate
reflection of the Companys potential liabilities to its
executives upon a termination of employment, so the description
that follows is based on the new employment agreements that were
effective January 1, 2009.
Mr. Kamradt is not included in the following discussion as
he resigned his employment with the Company effective
June 23, 2008. Mr. Kamradt voluntarily resigned from
his employment and officer positions and the Company elected not
to exercise the non-compete provisions of his employment
agreement, so he did not receive any additional payments
pursuant to his employment agreement in connection with his
resignation. Mr. Kamradt also did not receive any
acceleration of his unvested equity compensation awards at the
time of his resignation, as a voluntary resignation is not
considered a termination event that requires accelerated vesting
or payment of the then-unvested equity compensation awards.
Employment Agreement Terms. An
involuntary termination is defined in the employment
agreements as a termination of an executives employment
that is not a voluntary resignation by the executive, unless
such resignation occurs on or before a date that is sixty days
following the date the executive receives a notice that a change
in duties has occurred; an involuntary termination also does not
include a termination for cause or any termination
that results from the executives death or disability. A
change in duties has two alternative definitions
depending on whether or not the event happens within the two
year period beginning on the date a change of control has
occurred (the change of control period). A change of
duties within a change of control period means (i) a
material reduction in the nature or scope of an executives
authorities or duties; (ii) a reduction in an
executives base salary; (iii) a diminution in an
executives eligibility to participate in bonus, stock
option, incentive award and other compensation plans;
(iv) a material diminution in an executives employee
benefits and perquisites, or (v) a change in the location
of an executives principal place of employment by more
than ten miles. A change of duties prior to or following a
change of control period will consist of a reduction in the rank
of an executives title as an officer of the Company, a
reduction in an executives base salary, or a material
diminution in an executives employee benefits and
perquisites from those substantially similar to those provided
to similarly situated executives.
A termination for cause generally means that an
executive (i) has engaged in gross negligence, gross
incompetence or willful misconduct in the performance of his
duties; (ii) has materially breached any material provision
of his employment agreement, corporate policy or code of conduct
established by the Company; (iii) has willfully engaged in
conduct that is materially injurious to the Company;
(iv) has committed an act of fraud, embezzlement or willful
breach of a fiduciary duty to the Company; (v) has been
convicted of a crime involving
25
fraud, dishonesty or moral turpitude or any felony;
(vi) has refused, without proper reason, to perform his
duties; or (vii) has used Company securities owned or
controlled by the executive as collateral for a securities
margin account.
An executive will have incurred a disability if, as
a result of an executives incapacity due to physical or
mental illness, the executive has not been able to perform his
full-time duties for a period of six consecutive months, and is
unable to return to full-time employment within thirty days of
receiving a notice of a termination.
A change of control is generally defined as:
(i) a merger, consolidation, or the sale of all or
substantially all of the Companys assets if, (a) the
holders of the Companys securities prior to the
transaction no longer own 50% or more of the securities of the
resulting company immediately following the transaction in
essentially the same proportion that existed immediately prior
to the transaction, or (b) the members of the
Companys Board of Directors immediately prior to the
transaction do not also constitute a majority of the board of
directors of the resulting entity immediately after the
transaction; (ii) the dissolution or complete liquidation
of the Company; (iii) the date any person or entity
acquires ownership or control of 50% or more of the combined
voting power of the Companys outstanding securities; or
(iv) the members of the Companys Board of Directors
cease to constitute a majority of the board as a result of or in
connection with a contested election of directors.
Potential Severance Benefits. In the event
that an executives employment is terminated due to his
death or disability, the executive will receive a payment equal
to his annual base salary, to be paid out in twenty-four equal
monthly installments (or eighteen equal monthly installments in
the case of Messrs. Harper, Holderness and Wright), as well
as a lump sum payment within thirty days of the termination that
equals the pro-rated annual target bonus for the year in which
the termination occurs.
If an involuntary termination occurs outside of a change of
control period, the executive will continue to receive his base
salary for twenty-four months (or eighteen months in the case of
Messrs. Harper, Holderness and Wright) and the Company will
reimburse him for up to twelve months for the amount by which
the cost of his continued coverage under the Companys
group health plans exceeds the employee contribution amount that
the Company charges its active senior executives for similar
coverage. An involuntary termination within the change of
control period, however, will trigger a severance payment equal
to two times the sum of his annual base salary and average
(using the prior two years) annual bonus (which amount will
either be paid in a single payment on or before the fifth day
following the executives termination of employment
[subject to any delay required under Section 409A of the
Code] or divided into twenty-four monthly installments [or
eighteen monthly installments in the case of
Messrs. Harper, Holderness and Wright], depending on the
nature of the change of control), all of his stock options and
restricted stock awards will vest in full, and the Company will
reimburse him for up to eighteen months for the amount by which
the cost of his continued coverage under the Companys
group health plans exceeds the employee contribution amount that
the Company charges the Companys active senior executives
for similar coverage. If any of the severance payments described
in this paragraph are not made when due, the Company shall also
pay interest on the amount payable from the date it should have
been made until such time as the payment is actually made,
interest to be the prime or base rate of interest announced by
JPMorgan Chase Bank (or any successor thereto) at its principal
New York office.
The employment agreements do not provide for tax
gross-up
payments. If the total amount of payments to be provided by the
Company in connection with a change of control would cause any
of the named executive officers to incur golden
parachute excise tax liability, then the payments provided
under the employment agreement will be reduced to the extent
necessary to eliminate the application of the excise tax if that
will leave him in a better after-tax position than if no such
reduction had occurred; this generally means that the full
payment would be reduced to $1.00 less than three times the
executives base amount (as defined in Section 280G of
the Code).
Restrictions and Conditions to Receiving Severance Benefits
under the Employment Agreements. Each executive
must execute and not revoke a general release agreement before
receiving any severance or benefits pursuant to his employment
agreement. The release shall discharge the Company and its
affiliates, as well as officers, directors and employees of the
Company and its affiliates, from any claims or judicial actions
arising out of the executives employment or termination of
employment. The release must be executed and irrevocable within
55 days of the executives termination of employment.
26
Section 409A of the Code can subject an executive to a 20%
tax, in addition to normal income taxes, in the event that
payments are not structured to be compliant with
Section 409A of the Code and its regulations. If the
executives are specified employees according to
Section 409A of the Code at the time of their termination
of employment, the payment of severance benefits may be delayed
for a period of six months in order to remain in compliance with
this Code section, despite the timing otherwise provided for in
the employment agreements. This six month delay period will not
be considered a late payment, however, for purposes
of crediting late payments with interest as described above.
The named executive officers are also subject to non-compete and
related restrictions. During the term of his employment
agreement and for a period of one year following a termination
of employment for any reason (the non-compete
period), the executive may not hire, contract or solicit
the Companys employees for his own benefit or for the
benefit of any other person or entity, nor may he encourage any
Company employee to leave the Companys employ for any
reason. Within the geographical area or market where the Company
is conducting (or within the twelve months prior to the
executives termination of employment, has conducted)
business, the executive may not participate in the ownership,
management, operation of or have any financial interest in a
business that is similar to the Company or that is a competitor
of the Company, attempt to solicit or divert the Companys
customers or vendors, or call upon a prospective acquisition
candidate on his own behalf or on behalf of another entity if
the Company is also negotiating for that potential acquisition.
However, in the event the executive resigns under circumstances
that would not be considered an involuntary termination or
either party provides written notice to the other that the term
of the employment agreement will not automatically renew, then
the post-employment restriction relating to the participation in
the ownership, management, operation or financial interest in a
competitive operation will only apply for a number of months
(not in excess of twelve) selected by the Company and the
Company must continue to pay the executive his base salary for
the number of months, if any, selected by the Company.
Long-Term Incentive Plan. In addition to the
accelerated vesting of equity compensation awards as noted
within the executive employment agreements, certain stock option
and restricted awards granted under the Companys 2006
Stock Incentive Plan (the 2006 Plan) also provide
for the accelerated vesting of such awards in various
termination of employment and change of control scenarios. While
the named executive officers are generally granted restricted
stock awards under the 2006 Plan that have a vesting period of
four years, (a) for restricted stock awards made on or
before December 31, 2008, the restricted shares will vest
in full upon the occurrence of a change of control, and
(b) for restricted stock awards made after
December 31, 2008, the occurrence of a termination of
employment by reason of death or disability or the occurrence of
an involuntary termination within the two year-period after a
change of control will result in the full vesting of the
restricted shares. The definitions for change of control and
involuntary termination in the 2006 Plan restricted stock award
agreements are identical to the same terms as found in the
employment agreements. The Company does not currently provide
for accelerated vesting of stock options upon a termination of
an executives employment pursuant to the 2006 Plan or an
individual award agreement, but as noted above, the executive
employment agreements will govern the accelerated vesting of
stock options following an involuntary termination within the
change of control period. However, certain stock options that
were granted on or before February 23, 2006 (the
Pre-Combination Options) include special provisions
that affect the vesting
and/or the
time of exercise of such options in the event of a termination
of employment or a change of control of the Company. The
Pre-Combination Options (which became fully vested pursuant to
their terms on February 27, 2009) are the stock
options with an $8.00 option exercise price as shown in the
table above under Outstanding Equity Awards at Fiscal
Year-End. As shown in such table, a portion of the
Pre-Combination Options were not earned (vested) as of
December 31, 2008, and a portion of the Pre-Combination
Options were earned (vested) but were unexercisable by the named
executive officer as of such date. The unvested portion of the
Pre-Combination Options would have fully vested upon an
involuntary termination of employment or a change of control of
the Company (based on definitions of such terms that were
different than the definitions of such terms included in the
employment agreements). Accordingly, the unvested portion of the
Pre-Combination Options is included where appropriate in the
table below that summarizes potential payments to the named
executive officers upon certain events that are assumed to occur
on December 31, 2008. The vested but unexercisable portion
of the Pre-Combination Options has not been included in the
table below because the named executive officers had a
nonforfeitable interest in such options as of December 31,
2008 (other than in connection with a termination for cause),
and the effect of a termination of employment or a change of
control of the Company
27
on such portion of such options would have merely changed the
time period during which the executive was allowed to exercise
such portion of such options.
The table below summarizes potential payments to each named
executive officer assuming that one of the events described in
the table below occurs. The table assumes that the event
occurred on December 31, 2008, when the closing price of
the Companys common stock was $22.82. The values below are
the Companys best estimate of the severance payments and
benefits the executives would receive upon a termination of
employment or a change of control as of December 31, 2008,
as a true value could not be determined with absolute certainty
until an actual termination or change of control of the Company
occurs. The Company has also assumed for purposes of these
calculations that all payments were made in a timely manner and
that no interest accrued on the original payment amount.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Termination
|
|
|
Upon a Change
|
|
|
|
|
|
|
|
|
|
Outside of
|
|
|
Within a
|
|
|
of Control
|
|
|
|
|
|
|
|
|
|
a Change
|
|
|
Change of
|
|
|
(Without a
|
|
|
Termination
|
|
|
|
Voluntary
|
|
|
of Control
|
|
|
Control
|
|
|
Termination of
|
|
|
Due to Death or
|
|
Name
|
|
Termination(1)
|
|
|
Period(2)
|
|
|
Period(3)
|
|
|
Employment)(4)
|
|
|
Disability(5)
|
|
|
Timothy A. Leach
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
$
|
450,000
|
|
|
$
|
900,000
|
|
|
$
|
900,000
|
|
|
$
|
|
|
|
$
|
450,000
|
|
Bonus
|
|
|
|
|
|
|
|
|
|
|
663,000
|
|
|
|
|
|
|
|
450,000
|
|
Accelerated
Equity(6)
|
|
|
|
|
|
|
1,655,098
|
|
|
|
2,165,872
|
|
|
|
1,786,997
|
|
|
|
|
|
Continued Medical
|
|
|
|
|
|
|
17,508
|
|
|
|
26,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(7)
|
|
$
|
450,000
|
|
|
$
|
2,572,606
|
|
|
$
|
3,755,134
|
|
|
$
|
1,786,997
|
|
|
$
|
900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven L. Beal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
$
|
450,000
|
|
|
$
|
900,000
|
|
|
$
|
900,000
|
|
|
$
|
|
|
|
$
|
450,000
|
|
Bonus
|
|
|
|
|
|
|
|
|
|
|
663,000
|
|
|
|
|
|
|
|
450,000
|
|
Accelerated
Equity(6)
|
|
|
|
|
|
|
1,655,098
|
|
|
|
2,165,872
|
|
|
|
1,786,997
|
|
|
|
|
|
Continued Medical
|
|
|
|
|
|
|
17,508
|
|
|
|
26,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(7)
|
|
$
|
450,000
|
|
|
$
|
2,572,606
|
|
|
$
|
3,755,134
|
|
|
$
|
1,786,997
|
|
|
$
|
900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack F. Harper
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
$
|
225,000
|
|
|
$
|
337,500
|
|
|
$
|
450,000
|
|
|
$
|
|
|
|
$
|
225,000
|
|
Bonus
|
|
|
|
|
|
|
|
|
|
|
188,012
|
|
|
|
|
|
|
|
153,000
|
|
Accelerated Equity
|
|
|
|
|
|
|
|
|
|
|
1,637,876
|
|
|
|
108,076
|
|
|
|
|
|
Continued Medical
|
|
|
|
|
|
|
17,508
|
|
|
|
26,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(7)
|
|
$
|
225,000
|
|
|
$
|
355,008
|
|
|
$
|
2,302,150
|
|
|
$
|
108,076
|
|
|
$
|
378,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Darin G. Holderness
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
$
|
250,000
|
|
|
$
|
375,000
|
|
|
$
|
500,000
|
|
|
$
|
|
|
|
$
|
250,000
|
|
Bonus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170,000
|
|
Accelerated Equity
|
|
|
|
|
|
|
|
|
|
|
342,140
|
|
|
|
342,140
|
|
|
|
|
|
Continued Medical
|
|
|
|
|
|
|
17,508
|
|
|
|
26,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(7)
|
|
$
|
250,000
|
|
|
$
|
392,508
|
|
|
$
|
868,402
|
|
|
$
|
342,140
|
|
|
$
|
420,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E. Joseph Wright
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
$
|
250,000
|
|
|
$
|
375,000
|
|
|
$
|
500,000
|
|
|
$
|
|
|
|
$
|
250,000
|
|
Bonus
|
|
|
|
|
|
|
|
|
|
|
357,000
|
|
|
|
|
|
|
|
170,000
|
|
Accelerated
Equity(6)
|
|
|
|
|
|
|
735,591
|
|
|
|
1,211,320
|
|
|
|
893,870
|
|
|
|
|
|
Continued Medical
|
|
|
|
|
|
|
17,508
|
|
|
|
26,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(7)
|
|
$
|
250,000
|
|
|
$
|
1,128,099
|
|
|
$
|
2,094,582
|
|
|
$
|
893,870
|
|
|
$
|
420,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This column represents the amounts
payable to the executive if he resigns under circumstances that
would not be considered an involuntary termination or if either
party to the employment agreement provides written notice to the
other that the term
|
28
|
|
|
|
|
of the employment agreement will
not automatically renew. Under such circumstances, the
employment agreements provide the Company with the option to
choose the number of months in which to enforce certain
post-employment non-compete provisions. The values disclosed in
this column assume that the Company has chosen to enforce the
non-compete provisions for the maximum allowable time period of
twelve months, although these amounts would be lower in the
event that the Company chooses a shorter period of time.
|
|
(2) |
|
The values in this column for
Salary reflect the aggregate amount of continued
monthly salary (as in effect on December 31, 2008) for
Messrs. Leach and Beal for a period of 24 months, and
for Messrs. Harper, Holderness and Wright, a period of
eighteen months. The values in this column for Continued
Medical include twelve months of continued coverage for
each executive and his dependents. The values in this column for
Accelerated Equity include the accelerated value of
the unvested portion of the Pre-Combination Options.
|
|
(3) |
|
The values in this column for
Salary reflect two times the executives annual
base salary as in effect on December 31, 2008. The values
in this column for Bonus were calculated by
multiplying two times the executives average annual bonus
as defined in the employment agreements. The values in this
column for Accelerated Equity include the
accelerated value of both unvested stock option and restricted
stock awards held by each executive as of December 31,
2008. The amounts in this column for Continued
Medical include eighteen months of continued coverage for
each executive and his dependents.
|
|
(4) |
|
This column represents what each
executive would receive upon a change of control without a
termination of employment. The values in this column for
Accelerated Equity include the accelerated value of
(a) the unvested potion of the Pre-Combination Options
granted to the executive and (b) restricted stock awards
held by each executive as of December 31, 2008.
|
|
(5) |
|
The values in this column for
Salary represent the executives annual salary
(as in effect on December 31, 2008). The values in this
column for Bonus include the executives full
target bonus for the 2008 year, as a proration was
unnecessary for a termination on December 31, 2008.
|
|
(6) |
|
As discussed above, the values for
Accelerated Equity do not include the portion of the
Pre-Combination Options that vested prior to December 31,
2008.
|
|
(7) |
|
The total represents the maximum
value of the payments and benefits that the executive would
receive upon the occurrence of a change of control or the
referenced termination of employment. However, if the total
amount of payments and benefits to be provided to the executive
would cause the executive to incur golden parachute
excise tax liability, then any payments and benefits provided
under the executives employment agreement may be reduced
to the extent necessary to eliminate the application of the
excise tax if that will leave the executive in a better
after-tax position than if no such reduction had occurred.
Accordingly, the total value of the payments and benefits that
the executive would receive under such circumstances may be less
than the total reflected in the table.
|
COMPENSATION
COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
During 2008, no member of the Compensation Committee served as
an executive officer of the Company, and, except as described in
Related Persons Transactions below, no such person
had any relationship with the Company requiring disclosure
herein. During 2008, there were no Compensation Committee
interlocks with other companies.
COMPENSATION
COMMITTEE REPORT
The Compensation Committee reviewed and discussed the
Compensation Discussion and Analysis required by Item 402
of
Regulation S-K
promulgated by the SEC with management of the Company, and,
based on such review and discussions, the Compensation Committee
recommended to the Board of Directors that such Compensation
Discussion and Analysis be included in this Proxy Statement and
incorporated by reference into the Companys Annual Report
on
Form 10-K
for the fiscal year ended December 31, 2008.
Members of the Compensation Committee:
A. Wellford Tabor (Chairman)
William H. Easter III
W. Howard Keenan, Jr.
29
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth certain information regarding the
beneficial ownership of common stock as of April 15, 2009,
by (i) each person who is known by the Company to own
beneficially more than 5% of the outstanding shares of common
stock, (ii) each named executive officer of the Company,
(iii) each director of the Company and (iv) all
directors and executive officers as a group. Unless otherwise
noted, the mailing address of each person or entity named below
is 550 West Texas Avenue, Suite 100, Midland, Texas
79701, Attention: General Counsel and Secretary.
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Percentage
|
|
Name of Beneficial Owner or Identity of Group
|
|
Shares
|
|
|
of
Class(1)
|
|
|
FMR LLC(2)
|
|
|
12,704,266
|
|
|
|
14.9
|
%
|
Chase Oil
Corporation(3)
|
|
|
6,516,268
|
|
|
|
7.6
|
%
|
Mack C.
Chase(4)
|
|
|
6,516,268
|
|
|
|
7.6
|
%
|
Capital World
Investors(5)
|
|
|
5,076,880
|
|
|
|
6.0
|
%
|
Yorktown Energy Partners VI,
L.P.(6)
|
|
|
4,506,379
|
|
|
|
5.3
|
%
|
Yorktown Energy Partners V,
L.P.(6)
|
|
|
1,928,465
|
|
|
|
2.3
|
%
|
|
|
|
|
|
|
|
|
|
Timothy A.
Leach(7)(8)
|
|
|
1,159,078
|
|
|
|
1.4
|
%
|
Steven L.
Beal(7)(8)(9)
|
|
|
1,127,104
|
|
|
|
1.3
|
%
|
Jack F.
Harper(7)(8)
|
|
|
70,839
|
|
|
|
*
|
|
Darin G.
Holderness(7)(8)
|
|
|
22,346
|
|
|
|
*
|
|
E. Joseph
Wright(7)(8)
|
|
|
417,820
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Tucker S.
Bridwell(8)(10)
|
|
|
334,648
|
|
|
|
*
|
|
William H. Easter
III(8)
|
|
|
21,628
|
|
|
|
*
|
|
W. Howard Keenan,
Jr.(6)(8)(11)
|
|
|
6,496,305
|
|
|
|
7.6
|
%
|
Ray M.
Poage(8)
|
|
|
13,628
|
|
|
|
*
|
|
A. Wellford
Tabor(8)(12)
|
|
|
16,128
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Curt F.
Kamradt(13)
|
|
|
283,639
|
|
|
|
*
|
|
All directors and executive officers as a group
(12 persons)(6)(8)(10)(11)(12)(14)
|
|
|
10,233,950
|
|
|
|
12.0
|
%
|
|
|
|
* |
|
Less than 1%.
|
|
(1) |
|
Based upon an aggregate of
85,220,187 shares outstanding as of April 15, 2009.
|
|
(2) |
|
According to Amendment No. 1
to a Schedule 13G, dated February 13, 2009, filed with
the SEC by FMR LLC, it has sole voting power over 350,210 of
these shares, no voting power over the remainder and the sole
dispositive power over all of these shares. The address of FMR
LLC is 82 Devonshire Street, Boston, MA 02109.
|
|
(3) |
|
The address of Chase Oil
Corporation is P.O. Box 1767, Artesia, NM
88211-1767.
The directors of Chase Oil Corporation are Mack C. Chase, Robert
C. Chase and Richard C. Chase.
|
|
(4) |
|
Mr. Chase owns a majority of
the voting stock of Chase Oil Corporation and therefore may be
deemed to have voting and investment power with respect to the
shares owned by Chase Oil Corporation. Mr. Chase disclaims
beneficial ownership in the shares owned by Chase Oil
Corporation, except to the extent of his pecuniary interest in
Chase Oil Corporation. The address of Mr. Chase is
P.O. Box 693, Artesia, NM
88211-0693.
|
|
(5) |
|
According to a Schedule 13G,
dated February 9, 2009, filed with the SEC by Capital World
Investors, it has sole voting power and sole dispositive power
over all of these shares. The address for Capital World
Investors is 333 South Hope Street, Los Angeles, CA 90071.
|
|
(6) |
|
The address of Mr. Keenan,
Yorktown Energy Partners V, L.P. and Yorktown Energy
Partners VI, L.P. is 410 Park Avenue, 19th Floor, New York, NY
10022. Includes 2,968 shares and 7,032 shares
attributed to Yorktown Energy Partners V, L.P. and Yorktown
Energy Partners VI, L.P., respectively, but issued to
Mr. Keenan as director compensation as the nominee of those
entities.
|
30
|
|
|
(7) |
|
The number of shares beneficially
owned includes the following shares that are subject to stock
options that were exercisable as of or will become exercisable
within sixty days of April 15, 2009:
|
|
|
|
|
|
Holder
|
|
Shares
|
|
Timothy A. Leach
|
|
|
173,644
|
|
Steven L. Beal
|
|
|
229,769
|
|
Jack F. Harper
|
|
|
58,750
|
|
Darin G. Holderness
|
|
|
|
|
E. Joseph Wright
|
|
|
139,934
|
|
|
|
|
(8) |
|
Executive officer or director of
the Company.
|
|
(9) |
|
Includes 886,388 shares that
are pledged to secure a bank loan.
|
|
(10) |
|
Includes 43,312 shares owned
by Mansefeldt Investment Corporation and 243,220 shares
owned by the Dian Graves Owen Foundation.
|
|
(11) |
|
Includes
(i) 6,434,844 shares of common stock owned by Yorktown
Energy Partners V, L.P. and Yorktown Energy Partners VI,
L.P. Mr. Keenan is a member and a manager of the general
partners of Yorktown Energy Partners V, L.P. and Yorktown
Energy Partners VI, L.P. and holds all securities received as
director compensation for the benefit of those entities;
Mr. Keenan disclaims beneficial ownership of all such
securities, as well as those held by Yorktown Energy
Partners V, L.P. and Yorktown Energy Partners VI, L.P.,
except to the extent of his pecuniary interest therein; and
(ii) 61,461 shares beneficially owned and received as
prorata distributions from Yorktown Energy Partners V, L.P.
and Yorktown Energy Partners VI, L.P.
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Mr. Tabor is a member of
Wachovia Capital Partners (WCP) and holds all
securities received as director compensation prior to
January 1, 2009 for the benefit of WCP. Mr. Tabor
disclaims beneficial ownership of all securities held for, as
well as those held by, WCP and its affiliates, except to the
extent of his pecuniary interest therein.
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Mr. Kamradt resigned as the
Companys Vice President, Chief Financial Officer and
Treasurer on June 23, 2008. The number of shares indicated
is based on the last report on Form 4 filed by
Mr. Kamradt on June 16, 2008.
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The number of shares beneficially
owned includes 755,803 shares that are subject to stock
options that were exercisable or will become exercisable within
sixty days of April 15, 2009.
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SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The executive officers and directors of the Company and persons
who own more than 10% of the Companys common stock are
required to file reports with the SEC, disclosing the amount and
nature of their beneficial ownership in common stock, as well as
changes in that ownership. Based solely on its review of reports
and written representations that the Company has received, the
Company is aware that Ray M. Poage, Director, did not timely
file one report on Form 4 covering a grant of restricted
shares to him on or about August 7, 2008. The Company
believes that all other required reports were timely filed
during 2008.
RELATED
PERSON TRANSACTIONS
General
The Board of Directors has determined that the Audit Committee
will periodically review all related person transactions that
the rules of the SEC require be disclosed in the Companys
proxy statement, and make a determination regarding the initial
authorization or ratification of any such transaction.
The Audit Committee is charged with reviewing the material facts
of all related person transactions and either approving or
disapproving of the Companys participation in such
transactions under the Companys Related Persons
Transaction Policy adopted by the Board of Directors (RPT
Policy) on November 8, 2007, which pre-approves
certain related person transactions, including:
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any employment of an executive officer if his or her
compensation is required to be reported in the Companys
proxy statement under Item 402;
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director compensation which is required to be reported in the
Companys proxy statement under Item 402;
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any transaction with an entity at which the related
persons only relationship is as a director or manager
(other than sole director or manager) or beneficial owner of
less than 10% of the entitys equity, if the aggregate
amount involved does not exceed the greater of $1,000,000 or 2%
of the entitys annual revenues; and
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transactions with Chase Oil Corporation (Chase Oil)
and its affiliates, pursuant to which the Company acquires
equipment, services or supplies in the ordinary course of its
oil and gas business.
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The Audit Committee Chairman may approve any related person
transaction in which the aggregate amount involved is expected
to be less than $120,000. A summary of such approved
transactions and each new related person transaction deemed
pre-approved under the RPT Policy is provided to the Audit
Committee for its review. The Audit Committee has the authority
to modify the RPT Policy regarding pre-approved transactions or
to impose conditions upon the ability of the Company to
participate in any related person transaction.
There were no related persons transactions during 2008 which
were required to be reported in Related Persons
Transactions, where the procedures described above did not
require review, approval or ratification or where these
procedures were not followed.
Prior to the adoption of the RPT Policy, the Company entered
into the following transactions and contractual arrangements
involving its officers, directors or principal stockholders.
None of these transactions were reviewed by the Audit Committee.
The Company believes that the terms of these arrangements and
agreements were at least as favorable as they would have been
had it contracted with unrelated third parties under the same or
similar circumstances.
Transactions
Involving Directors
The Company leased certain mineral interests in Andrews County,
Texas from a partnership in which Mr. Bridwell, one of the
Companys directors, is the general partner and in which he
holds a 3.5% interest. The Company paid royalties of
approximately $332,000 during the year ended December 31,
2008 attributable to such mineral interests. The Company owed
this partnership royalty payments of approximately $13,000 at
December 31, 2008.
Mr. Tabor, one of the Companys directors, is a member
of Wachovia Capital Partners, a merchant banking arm of Wells
Fargo & Company. An affiliate of Wachovia Capital
Partners and Wells Fargo & Company is one of the
Companys stockholders. In addition, both Wachovia Bank,
National Association and Wells Fargo Bank, N.A. are affiliates
of Wells Fargo & Company and are lenders under the
Companys revolving credit facility and counterparties
under certain of the Companys hedging instruments.
Transactions
Involving Executive Officers
Overriding Royalty Interests. Prior to the
formation of Concho Equity Holdings Corp., Messrs. Leach,
Beal, Copeland, Kamradt and Wright acquired working interests in
120 undeveloped acres located in Lea County, New Mexico. In
connection with the formation of Concho Equity Holdings Corp.,
these working interests were sold to that company in November
2004 for $120,000 in the aggregate, and Messrs. Leach,
Beal, Copeland, Kamradt and Wright each retained a 0.25%
overriding royalty interest in any production attributable to
this acreage. The Company has not drilled any wells that are
subject to these overriding royalty interests and, therefore, no
payments have been made in connection with these interests.
In April 2005, the Company acquired certain working interests in
properties located in Culberson County, Texas for approximately
$2.5 million from an entity partially owned by David M.
Thomas III, an executive officer of the Company until
March 31, 2008. In connection with this acquisition, such
entity retained a 2% overriding royalty interest in the acquired
properties, which overriding royalty interest was later conveyed
in equal shares by such entity to Mr. Thomas and a
non-executive employee of the Company.
Transactions
Involving Chase Oil Corporation and its Affiliates
Silver Oak Drilling Contracts. Silver Oak
Drilling, LLC, an affiliate of Chase Oil, owns and operates
drilling rigs, four of which the Company uses for a substantial
portion of its operations in Southeast New Mexico. During the
year ended December 31, 2008, the Company paid Silver Oak
Drilling approximately $18.3 million for drilling
32
services in Southeast New Mexico. The Companys contracts
with Silver Oak Drilling will terminate on August 1, 2009.
Saltwater Disposal Services Agreement. Among
the assets the Company acquired from Chase Oil in February 2006
is an undivided interest in a saltwater gathering and disposal
system in Southeast New Mexico, which is owned and maintained
under a written agreement among the Company and Chase Oil and
certain of its affiliates, and under which the Company as
operator gathers and disposes of produced water . The system is
owned jointly by the Company and Chase Oil and its affiliates in
undivided ownership percentages, which are annually redetermined
as of January 1 on the basis of each partys percentage
contribution of the total volume of produced water disposed of
through the system during the prior calendar year. As of
January 1, 2009, the Company owned 95.4% of the system and
Chase Oil and its affiliates owned 4.6%.
Software License Agreement. As of
March 1, 2006, the Company entered into a Software License
Agreement with Enertia Software Systems, which is an affiliate
of Chase Oil, with an initial term of 99 years. The Company
is using the subject software in the following software
functional areas: accounting and financial reporting, well
production and field data gathering, land and contracts, and
payroll processing. The Software License Agreement provides for
up to fifty-five concurrent users with the ability for the
Company to upgrade in five concurrent user increments for a
one-time license fee of $50,000 for each concurrent user
increment. The license can be terminated by either party by
providing notice to the other party at least six months prior to
the date on which the termination will be effective. During the
year ended December 31, 2008, the Company paid Enertia
approximately $258,000 for consulting and programming services,
$233,000 for additional licensing fees and $22,000 for annual
maintenance fees, a total of $513,000.
Overriding Royalty Interests. Certain persons
affiliated with Chase Oil own overriding royalty interests in
some of the properties which the Company operates. The aggregate
amount of royalty payments made in connection with these
overriding royalty interests was approximately $3.1 million
during the year ended December 31, 2008.
Other Transactions. The Company also conducts
business from time to time with other companies that are
affiliated with Chase Oil, with respect to oilfield services or
supplies and other services that the Company uses in the
ordinary course of its operations. The Company is not required
to purchase products or services from these companies, and the
Company is able to purchase these products and services from
other vendors who are not affiliated with Chase Oil. During the
year ended December 31, 2008, the Company paid the
approximate amounts indicated to the following such affiliates
of Chase Oil:
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Name of Vendor
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Expenditures
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Production Specialty Services, Inc.
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$
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2,020,000
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Catalyst Oilfield Services LLC
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1,927,000
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Deer Horn Aviation Ltd. Co.
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383,000
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Total
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$
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4,330,000
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Registration
Rights Agreement
Demand Registration Rights. The Company is a
party to a registration rights agreement with certain of its
stockholders, including Chase Oil, certain of the Companys
executive officers and the former stockholders of Concho Equity
Holdings Corp., which was later merged into a wholly owned
subsidiary of the Company. According to the registration rights
agreement, holders of either 20% of the aggregate shares held by
Chase Oil or 20% of the aggregate shares held by the former
stockholders of Concho Equity Holdings Corp. may request in
writing that the Company register their shares by filing a
registration statement under the Securities Act of 1933 (the
Securities Act), so long as the anticipated
aggregate offering price, net of underwriting discounts and
commissions, exceeds $50 million.
Piggy-back Registration Rights. If the Company
proposes to file a registration statement under the Securities
Act relating to an offering of the Companys common stock
(other than on a
Form S-4
or a
Form S-8),
upon the written request of holders of registrable securities,
the Company will use its commercially reasonable efforts to
include in such registration, and any related underwriting, all
of the registrable securities requested to be included,
33
subject to customary cutback provisions. There is no limit to
the number of these piggy-back registrations in
which these holders may request their shares be included.
Registration Procedures and Expenses. The
Company generally will bear the registration expenses incurred
in connection with any registration, including all registration,
filing and qualification fees, printing and accounting fees, but
excluding underwriting discounts and commissions. The Company
has agreed to indemnify the subject stockholders against certain
liabilities, including liabilities under the Securities Act, in
connection with any registration effected under the registration
rights agreement. The Company is not obligated to effect any
registration more than one time in any six-month period and
these registration rights terminate on August 7, 2017.
ADDITIONAL
INFORMATION
Stockholder
Proposals; Director Nominations
Any stockholder desiring to present a stockholder proposal at
the Companys 2010 Annual Meeting of Stockholders and to
have the proposal included in the Companys related proxy
statement must send it to the Companys General Counsel and
Secretary at 550 West Texas Avenue, Suite 100,
Midland, Texas 79701, so that it is received no later than
February 2, 2010. All such proposals should be in
compliance with SEC rules and regulations. The Company will only
include in its proxy materials those stockholder proposals that
it receives before the deadline and that are proper for
stockholder action.
In addition, in accordance with the Companys bylaws, any
stockholder entitled to vote at the Companys 2010 Annual
Meeting of Stockholders may propose business (other than
proposals to be included in the Companys proxy statement
and proxy as discussed in the preceding paragraph) to be
included on the agenda of, and properly presented for action at,
the 2010 Annual Meeting of Stockholders only if written notice
of such stockholders intent is given in accordance with
the requirements of the Companys bylaws and SEC rules and
regulations. Such proposal must be submitted in writing and
addressed to the attention of the Companys General Counsel
and Secretary at the address shown above, so that it is received
between February 8, 2010 and March 10, 2010.
Solicitation
of Proxies
The solicitation of proxies by the Board of Directors will be
conducted primarily by mail. In addition, officers, directors
and employees of the Company may solicit proxies personally or
by telephone, facsimile or electronic means. These officers,
directors and employees will not receive any extra compensation
for these services, but may be reimbursed for their reasonable
expenses in forwarding solicitation material. The Companys
transfer agent, American Stock Transfer &
Trust Company, and Broadridge Financial Solutions will
assist the Company in the distribution of proxy materials and
will provide voting and tabulation services for the Annual
Meeting. For these services, the Company estimates that it will
pay approximately $50,000 in the aggregate for fees and
expenses. In addition, the Company will reimburse brokers,
custodians, nominees and fiduciaries for reasonable expenses
incurred by them in forwarding proxy materials to stockholders
of the Company. The costs of the solicitation, including the
cost of the preparation, assembly, printing and mailing of this
Proxy Statement, the proxy card and any additional information
furnished to stockholders, will be borne by the Company.
Stockholder
List
In accordance with the Delaware General Corporation Law, the
Company will maintain at its corporate offices in Midland, Texas
a list of the stockholders entitled to vote at the Annual
Meeting. The list will be open to the examination of any
stockholder, for purposes germane to the Annual Meeting, during
ordinary business hours for ten days before the Annual Meeting.
34
Proxy
Materials, Annual Report and Other Information
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON JUNE 2, 2009:
A COPY OF THE PROXY STATEMENT, THE FORM OF PROXY, THE
COMPANYS ANNUAL REPORT ON
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2008 AND THE 2008 ANNUAL REPORT
TO STOCKHOLDERS ARE AVAILABLE FREE OF CHARGE AT
http://www.conchoresources.com/proxy.
The Companys Annual Report to Stockholders for the year
ended December 31, 2008, is being mailed to stockholders
concurrently with this Proxy Statement and does not form part of
the proxy solicitation material.
A copy of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2008, as filed with the
SEC, will be sent to any stockholder without charge upon written
request addressed to Concho Resources Inc., 550 West Texas
Avenue, Suite 100, Midland, Texas 79701, Attention: General
Counsel and Secretary. A copy of this Proxy Statement and the
Companys Annual Report to Stockholders will also be sent
upon written or oral request to any stockholder of a shared
address to which a single copy of this Proxy Statement or the
Companys Annual Report to Stockholders was delivered.
Requests may be made by writing to Concho Resources Inc.,
550 West Texas Avenue, Suite 100, Midland, Texas
79701, Attention: General Counsel and Secretary or by calling
432-683-7443.
* * * * * *
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
VOTE BY COMPLETING, SIGNING AND RETURNING YOUR PROXY CARD IN THE
ENCLOSED POSTAGE-PAID, ADDRESSED ENVELOPE.
35
o n
CONCHO RESOURCES INC.
2009 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 2, 2009
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David W. Copeland, Jack F. Harper,
Darin G. Holderness and Matthew G. Hyde as proxies, each with full
power of substitution, to represent and vote, as designated on the
reverse side, all of the shares of Common Stock of Concho Resources
Inc. held of record by the undersigned on April 17, 2009, at the 2009
Annual Meeting of Stockholders to be held at 3:00 p.m. in the Wildcatter
Room, Petroleum Club of Midland, 501 West Wall, Midland, Texas, on
June 2, 2009, or any adjournment or postponement thereof.
(Continued and to be signed on the reverse side)
2009 ANNUAL MEETING OF STOCKHOLDERS OF
CONCHO RESOURCES INC.
June 2, 2009
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS:
The Annual Report, Notice of Meeting and Proxy Statement
are available at http://www.conchoresources.com/proxy.
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
â Please detach along perforated line and mail in the envelope provided. â
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n 20230000000000000000 0
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060209 |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL DIRECTOR NOMINEES AND FOR PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
1. Election of Directors:
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FOR ALL NOMINEES
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NOMINEES:
¡ Steven L. Beal
¡ Tucker S. Bridwell |
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WITHHOLD AUTHORITY
FOR ALL NOMINEES
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FOR ALL EXCEPT
(See instructions below)
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INSTRUCTIONS: To withhold authority to vote for any individual
nominee(s), mark FOR ALL EXCEPT and fill in the circle next to
each nominee you wish to withhold, as shown here: l
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To change the address on your account, please check the box at right and indicate
your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via
this method.
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FOR
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AGAINST
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ABSTAIN
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2. To ratify the selection of Grant Thornton LLP as independent
registered public accounting firm of the Company for its fiscal
year ending December 31, 2009.
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3. In their discretion, the proxies are authorized to vote upon such other business as
may properly come before the meeting.
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This proxy is solicited on behalf of the Board of Directors of the Company. This proxy,
when properly executed, will be voted in accordance with the instructions given
above. If no instructions are given, this proxy will be voted FOR election of the
director nominees and FOR proposal 2.
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Signature of Stockholder
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Date:
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Signature of Stockholder
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Date: |
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as
executor, administrator,
attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as
such. If signer is a partnership, please sign in partnership name by authorized person.
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