form10ka_04302010.htm
SECURITIES
AND EXCHANGE COMMISSION
WASHTINGTON,
DC 20549
FORM
10-K/A
(AMENDMENT
NO. 1)
|
(Mark
One)
|
|
| T
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
|
For
the fiscal year ended December 31, 2009
or
|
| £
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
|
For
the transition period from ________ to
________
|
Commission
File No. - 000-33999
__________________
NORTHERN
OIL AND GAS,
INC.
(Exact Name of Registrant as
Specified in Its Charter)
|
Nevada
|
95-3848122
|
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
(I.R.S.
Employer Identification No.)
|
|
|
|
315
Manitoba Avenue – Suite 200, Wayzata, Minnesota 55391
(Address of Principal Executive
Offices) (Zip
Code)
952-476-9800
(Registrant’s Telephone Number,
Including Area Code)
Securities
registered pursuant to Section 12(b) of the Act:
|
Title
of Each Class
|
|
Name
of Each Exchange On Which Registered
|
|
Common
Stock, $0.001 par value
|
|
NYSE
Amex Equities Market
|
|
|
|
|
Securities
registered pursuant to Section 12(g) of the Act:
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act Yes £ No T
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act. Yes £ No T
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.Yes T No £
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files. Yes £ No £
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405) is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. £
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
|
Large
Accelerated
Filer £
|
Accelerated
Filer T
|
|
Non-Accelerated
Filer £
(Do not
check if a smaller reporting company)
|
Smaller
Reporting
Company £
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes £ No T
State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter.
The
aggregate market value of the registrant’s voting and non-voting common equity
held by non-affiliates of the registrant on the last business day of the
registrant’s most recently completed second fiscal quarter (based on the closing
sale price as reported by the NYSE Amex Equities Market) was approximately
$192,730,733.
Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.
As of
March 1, 2010, the registrant had 43,911,044 shares of common stock issued and
outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
No
documents are incorporated herein by reference.
NORTHERN
OIL AND GAS, INC.
TABLE
OF CONTENTS
|
|
|
|
Page
|
|
| Explanatory
Note |
|
2 |
|
|
|
Part
III
|
|
|
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
|
|
2 |
|
|
Item 11.
|
Executive
Compensation
|
|
|
5 |
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
|
|
13 |
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
|
|
14 |
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
Part
IV
|
|
|
|
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
|
|
15 |
|
|
|
|
|
|
|
|
|
Signatures
|
|
|
16 |
|
EXPLANATORY
NOTE
Northern
Oil and Gas, Inc. is filing this Form 10-K/A to its Annual Report on Form 10-K
for the year ended December 31, 2009 to include the information required
pursuant to Part III of Form 10-K. We previously disclosed that portions of the
proxy statement related to the registrant’s 2010 Annual Meeting of Stockholders
were incorporated by reference into Part III of the original Annual Report on
Form 10-K (the “Original Filing”) filed with the Securities and Exchange
Commission (the “SEC”) on March 8, 2010. Part III of the Original Filing is
hereby replaced in its entirety with the information provided
below.
Except
where specifically indicated, this Form 10-K/A does not reflect events occurring
after the filing of the Form 10-K or modify or update those disclosures affected
by subsequent events. Consequently, all other information is unchanged and
reflects the disclosures made at the time of the filing of the Form 10-K. Except
as expressly set forth in this Form 10-K/A, our Annual Report on Form 10-K for
the year ended December 31, 2009 has not been amended, updated or otherwise
modified.
PART
III
Item 10. Directors, Executive Officers and
Corporate Governance
Our
directors are elected each year at the annual meeting by our stockholders. We do
not have a classified board of directors. There are no familial relationships
between any of our directors and executive officers. Our management and
directors are identified below.
|
Name
|
|
Age
|
|
Position(s)
|
|
Michael
L. Reger
|
|
|
34 |
|
Director,
Chairman of the Board and Chief Executive Officer
|
|
Ryan
R. Gilbertson
|
|
|
34 |
|
Director
and President
|
|
Robert
Grabb
|
|
|
58 |
|
Director
|
|
Jack
E. King
|
|
|
58 |
|
Director
|
|
Lisa
Meier
|
|
|
37 |
|
Director
|
|
Loren
J. O’Toole
|
|
|
79 |
|
Director
|
|
Carter
Stewart
|
|
|
52 |
|
Director
|
Mr. Reger has served as
Chairman of the Board and Chief Executive Officer of our company since
March 2007 and has been primarily involved in the acquisition of oil and
gas mineral rights for his entire career. Mr. Reger began working the oil and
gas leasing business for his family’s company, Reger Oil, in 1992 and worked as
an oil and gas landman for Reger Oil from 1992 until co-founding our
predecessor, Northern Oil and Gas, Inc. (“Northern”), in 2006. Mr. Reger holds a
BA in Finance and an MBA in Finance/Management from the University of St. Thomas
in St. Paul, Minnesota. The Reger family has a history of acreage acquisition in
the Williston Basin dating to 1952.
Mr. Gilbertson has served as
President our company since March 2010 and has served as a director since
March 2007. Mr. Gilbertson served as Chief Financial Officer of our company
from March 2007 to March 2010. Prior to co-founding Northern in 2006,
Mr. Gilbertson served as a portfolio manager at Piper Jaffray in
Minneapolis, Minnesota from 2004 to 2006 and at Telluride Asset Management in
Wayzata, Minnesota from 2002 to 2005. He brings extensive experience in
financial structuring and capital markets. Mr. Gilbertson holds a BA from
Gustavus Adolphus College in Management/Finance.
Mr. Grabb is a Registered
Petroleum geologist and has served as a director since May 2007.
Mr. Grabb has worked as Senior District Geologist for Samson Investment
Company, a large privately held exploration and production company headquartered
in Tulsa, Oklahoma, since March 2007 and previously served as a geologist for
Newfield Exploration from April 2003 to March 2007. He was an integral member of
the Newfield Exploration Geologic Team that conceptualized and commercialized
the resource plays that have driven Newfield’s growth. Mr. Grabb holds B.S. and
M.S.
Degrees in geology from Montana State University. Mr. Grabb is also a member of
the American Association of Petroleum Geologists and the Society of Petroleum
Engineers.
Mr. King has served as a
director since May 2007 and has been employed since 1983 as a landman with
Hancock Resources, a prominent independent oil and gas exploration and
development corporation based in Billings, Montana. Mr. King’s 30 years in the
industry began in petroleum land management in the Northern Rockies. Throughout
his career, Mr. King has managed several independent oil and gas companies.
Currently Mr. King serves on the Finance Committee of the Montana Community
Foundation and sits on the boards of The Montana Petroleum Association and The
Montana Board of Oil and Gas Conservation Commission, which is Montana’s oil and
gas regulatory Board appointed by the Governor. Mr. King holds a degree in
Economics from the University of Montana.
Mrs. Meier has served as a
director since September 2007 and was appointed Chief Financial Officer and
Treasurer of Platinum Energy Resources, Inc. in August 2008, a public
independent oil and gas exploration and production company. She served as Chief
Financial Officer of Flotek Industries, Inc., a public oilfield service company,
from April 2004 to August 2008. During that time, Mrs. Meier led the turn-around
of Flotek by successfully completing ten acquisitions, raising capital through
public debt and equity offerings and negotiating multiple credit facilities and
listing the company on the American Stock Exchange and later the New York Stock
Exchange. Mrs. Meier was awarded Best CFO of the Year 2007 by the Houston
Business Journal. Prior to joining Flotek, Mrs. Meier worked in the energy audit
practice of PricewaterhouseCoopers, LLP and worked for three Fortune 500
companies. Mrs. Meier served in various accounting, finance, SEC reporting and
risk management positions. Mrs. Meier is a Certified Public Accountant. Mrs.
Meier is a member of the American Institute of Certified Public Accountants,
Financial Executives International and National Association of Corporate
Directors. Mrs. Meier holds B.B.A. and Masters of Accountancy degrees from the
University of Texas.
Mr. O’Toole has served as a
director since May 2007. Mr. O’Toole founded the law firm of O’Toole and
O’Toole, based in Plentywood, Montana, over 25 years ago and actively practices
law in the oil and gas industry. Mr. O’Toole holds a BA from Gonzaga University
and received his juris doctor from Georgetown University Law School. The O’Toole
law firm is a leader in the legal profession specializing in oil and gas
throughout the Rocky Mountain Region. Mr. O’Toole has over 50 years of
experience in the oil and gas industry.
Mr. Stewart has served as a
director since May 2007 and is a Registered Petroleum Geologist who has been
generating prospects in the Williston Basin for 26 years. Mr. Stewart has served
as the principal of Stewart Geological since the late 1980’s and as a principal
in Gallatin Resources, LLC since August 2004. Stewart Geological, Inc. is
currently participating in wells in Montana, Wyoming, North Dakota, New York and
Alberta, Canada. Mr. Stewart has been directly involved in the drilling of over
500 wells during his career, in several different locations within the United
States and Canada. He holds a B.A. in Geology from the University of
Montana.
Each
nominee brings a unique set of skills to our board of directors. The board of
directors believes the nominees as a group have the experience and skills in
areas such as the oil and gas industry, finance, risk management, marketing and
corporate governance that are necessary to effectively oversee our company. Set
forth below are the conclusions reached by our board of directors as to why each
nominee is qualified for service as a director of our company.
|
·
|
Mr.
Reger has been our chairman, chief executive officer and secretary since
the company’s inception and has worked in the oil and gas industry for
more than 17 years. Mr. Reger provides unique industry knowledge related
to acquiring mineral leases and brings a deep relationship base with
various oil and gas companies in the Williston
Basin.
|
|
·
|
Mr.
Gilbertson was our chief financial officer from the company’s inception
until March 2010, when he became our President. Mr. Gilbertson provides
the company with expertise in financial structuring, capital markets and
risk management.
|
|
·
|
Mr.
Grabb is a Registered Petroleum geologist with years of experience in the
oil and gas industry. Mr. Grabb provides both geological and industry
expertise as it relates to the company’s exploration prospects and
drilling programs.
|
|
·
|
Mr.
King has over 30 years of experience in the oil and gas industry. Mr. King
provides expertise in the areas of evaluating, acquiring and managing
mineral leases as well as the company’s exploration
prospects.
|
|
·
|
Mrs.
Meier has extensive experience as a Chief Financial Officer and leader
within various companies across the oil and gas industry. Mrs. Meier
provides expertise in the areas of financial reporting, accounting,
capital markets, internal controls and corporate
governance.
|
|
·
|
Mr.
O’Toole has over 50 years of experience practicing law in the oil and gas
industry. Mr. O’Toole advises the company on various transactions and oil
and gas legal matters.
|
|
·
|
Mr.
Stewart is a Registered Petroleum Geologist who has been generating
prospects in the Williston Basin for 26 years. Mr. Stewart has been
directly involved in the drilling of over 500 wells during his career, in
several different locations within the United States and
Canada.
|
Directors
Our
directors are elected each year at the annual meeting by our stockholders. We do
not have a classified board of directors. Seven directors were elected at our
Annual Meeting of Stockholders held on June 18, 2009. Each director’s term will
last until the 2011 Annual Meeting of Stockholders and until he or she is
succeeded by another qualified director who has been elected.
Committees
The board
of directors has standing Audit, Compensation and Nominating Committees. As of
December 2009, all three Committees consist solely of independent directors. The
table below shows the current membership of the committees and identifies our
independent directors:
|
Name
|
|
Audit
Committee
|
|
Compensation
Committee
|
|
Nominating
Committee
|
|
Independent
Directors
|
|
Ryan
R. Gilbertson
|
|
|
|
|
|
|
|
|
|
Robert
Grabb
|
|
ü
|
|
ü
|
|
ü*
|
|
ü
|
|
Jack
King
|
|
|
|
|
|
ü
|
|
ü
|
|
Lisa
Meier
|
|
ü*
|
|
ü*
|
|
|
|
ü
|
|
Loren
J. O’Toole
|
|
ü
|
|
ü
|
|
ü
|
|
ü
|
|
Michael
L. Reger
|
|
|
|
|
|
|
|
|
|
Carter
Stewart
|
|
|
|
|
|
|
|
|
______________________________
* Denotes
committee chairman.
We have
adopted written charters for each of our committees. Current copies of all
committee charters appear on our website at http://www.northernoil.com/governance.php
and are available in print upon written request to Northern Oil and Gas, Inc.,
315 Manitoba Ave., Suite 200, Wayzata, Minnesota 55391, Attention: Corporate
Secretary.
Audit
Committee and Financial Expert
The Audit
Committee’s primary function is to assist our board of directors in its general
oversight of our company’s financial reporting, internal control and audit
functions. The Audit Committee’s main duties include recommending a firm of
independent certified public accountants to audit the annual financial
statements, reviewing the independent auditor’s independence, the financial
statements and their audit report and reviewing management’s administration of
the system of internal accounting controls. Ms. Meier is an “audit
committee financial expert” as defined in the applicable SEC rules and an
“independent director” as defined in Section 803.A(2) of the NYSE Amex Company
Guide.
Our Audit
Committee Charter also requires that the Audit Committee review and approve all
material transactions between our company and its directors, officers and 5% or
greater stockholders, as well as all material transactions between our company
and any relative or affiliate of any of the foregoing.
To assist
the Audit Committee in fulfilling its duties, our management provides the
Committee with information and reports as needed and requested. Our Audit
Committee also is provided access to our general counsel and the ability to
retain outside legal counsel or other experts at its sole discretion if it deems
such action to be necessary.
Code
of Business Conduct and Ethics
The board
of directors has adopted the Northern Oil and Gas, Inc. Code of Business Conduct
and Ethics that applies to our directors and employees. A current copy of our
Code of Business Conduct and Ethics appear on our website at http://www.northernoil.com/governance.php
and are available in print upon written request to Northern Oil and Gas, Inc.,
315 Manitoba Ave., Suite 200, Wayzata, Minnesota 55391, Attention: Corporate
Secretary.
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a)
of the Securities Exchange Act of 1934 requires our officers, directors and
persons who own more than 10% of a registered class of our equity securities to
file reports of ownership and changes in ownership with the SEC. Such officers,
directors and stockholders are required by the SEC to furnish us with copies of
all such reports. To our knowledge, based solely on a review of copies of
reports filed with the SEC during the last fiscal year, all applicable
Section 16(a) filing requirements were met.
Item 11. Executive
Compensation
The
following discussion of executive compensation addresses the material
compensation awarded to our four named executive officers, including the
following individuals:
| Michael L.
Reger |
Chief
Executive Officer, Chairman of the Board and Director |
| Ryan R.
Gilbertson |
President and
Director |
| Chad D.
Winter |
Chief
Financial Officer |
| James R.
Sankovitz |
Chief
Operations Officer, General Counsel and
Secretary |
Summary
Compensation Table
The table
below shows compensation for our named executive officers for services in all
capacities to our company during fiscal years 2007, 2008 and 2009. Information
provided for fiscal year 2007 reflects compensation paid by our
predecessor—Northern Oil and Gas, Inc. Compensation, as reflected in this table
and the tables which follow, is presented on the basis of rules of the SEC and
does not, in the case of certain stock-based awards or accruals, necessarily
represent the amount of compensation realized or which may be realized in the
future. For more information regarding our salary policies and executive
compensation plans, please review the information under the caption
“Compensation Committee Report.”
|
Name
and Principal Position(1)
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)(2)
|
|
|
Stock
Awards
($)(3)
|
|
|
Option
Awards
($)(4)
|
|
|
Non-Equity
Incentive Plan Compensation
($)(5)
|
|
|
All
Other Compensation
($)(6)(7)
|
|
|
Total
Compensation
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
L. Reger
|
2007
|
|
|
– |
|
|
|
120,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
1,367 |
|
|
|
121,367 |
|
|
Chief
Executive Officer and Chairman of the Board
|
2008
|
|
|
185,000 |
|
|
|
100,000 |
|
|
|
– |
|
|
|
– |
|
|
|
370,000 |
|
|
|
155,833 |
|
|
|
810,833 |
|
|
2009
|
|
|
285,000 |
|
|
|
570,000 |
|
|
|
1,455,000 |
(8) |
|
|
– |
|
|
|
– |
|
|
|
50,186 |
|
|
|
2,360,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ryan
R. Gilbertson
|
2007
|
|
|
– |
|
|
|
120,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
1,955 |
|
|
|
121,955 |
|
|
President
|
2008
|
|
|
185,000 |
|
|
|
100,000 |
|
|
|
– |
|
|
|
– |
|
|
|
370,000 |
|
|
|
156,964 |
|
|
|
811,964 |
|
|
2009
|
|
|
285,000 |
|
|
|
570,000 |
|
|
|
1,455,000 |
(9) |
|
|
– |
|
|
|
– |
|
|
|
58,782 |
|
|
|
2,368,782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chad
D. Winter
|
2007
|
|
|
– |
|
|
|
– |
|
|
|
388,500 |
(10) |
|
|
163,200 |
(11) |
|
|
– |
|
|
|
– |
|
|
|
551,700 |
|
|
Chief
Financial Officer
|
2008
|
|
|
105,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
677 |
|
|
|
105,677 |
|
|
2009
|
|
|
155,000 |
|
|
|
– |
|
|
|
441,750 |
(12) |
|
|
– |
|
|
|
– |
|
|
|
34,478 |
|
|
|
631,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
R. Sankovitz
|
2008
|
|
|
100,000 |
|
|
|
– |
|
|
|
140,500 |
(13) |
|
|
– |
|
|
|
– |
|
|
|
1,802 |
|
|
|
207,177 |
|
|
Chief
Operating Officer, General Counsel & Secretary
|
2009
|
|
|
155,000 |
|
|
|
– |
|
|
|
441,750 |
(14) |
|
|
– |
|
|
|
– |
|
|
|
39,613 |
|
|
|
636,363 |
|
(1)
Mr. Reger joined our
company as Chief Executive Officer, Chairman of the Board and Secretary and Mr.
Gilbertson joined us as Chief Financial Officer and a director on March 20,
2007. Mr. Winter joined our company in November 2007 and Mr. Sankovitz joined
our company in March 2008. Mr. Reger, Mr. Gilbertson and Mr. Winter were not
paid any salary during the fiscal year ended December 31,
2007.
(2)
The amounts reported for Messrs. Reger and Gilbertson represent $120,000
year-end cash bonuses in 2007, $100,000 signing bonuses upon execution of
employment agreements in 2008 and $570,000 year-end cash bonuses in
2009.
(3)
Valuation of awards based on the grant date fair value of those awards
computed in accordance with FASB ASC Topic 718 utilizing assumptions discussed
in note 8 to our consolidated financial statements for the fiscal year
ended December 31, 2009.
(4)
Valuation of awards based on the grant date fair value of those awards
computed in accordance with FASB ASC Topic 718 utilizing assumptions discussed
in note 8 to our consolidated financial statements for the fiscal year
ended December 31, 2009.
(5)
For 2008, the amounts reported for Messrs. Reger and Gilbertson include a
$370,000 year-end bonus based upon achievement of performance objectives and
approved by the Compensation Committee but paid through issuance of promissory
notes in lieu of cash bonus.
(6)
For 2008, the amounts reported for Messrs. Reger and Gilbertson include
$153,735 accrued by our company as an additional bonus to pay tax obligations
associated with year-end bonuses in consideration of their willingness to accept
such bonuses in the form of unsecured notes rather than cash.
(7)
The amounts reported consist of the following for 2009:
|
Form
of All Other Compensation
|
|
Michael
L.
Reger
|
|
|
Ryan
R.
Gilbertson
|
|
|
Chad
D.
Winter
|
|
|
James
R.
Sankovitz
|
|
|
Personal
use of company-leased vehicles ($)
|
|
|
7,202 |
|
|
|
7,032 |
|
|
|
9,113 |
|
|
|
11,977 |
|
|
401(k)
contributions by the Company ($)
|
|
|
16,500 |
|
|
|
16,500 |
|
|
|
16,500 |
|
|
|
16,500 |
|
|
Reimbursement
of meal, entertainment and personal expenses ($)
|
|
|
10,698 |
|
|
|
5,274 |
|
|
|
1,445 |
|
|
|
2,876 |
|
|
Tax
Gross-ups ($)
|
|
|
15,786 |
|
|
|
29,976 |
|
|
|
7,420 |
|
|
|
8,260 |
|
|
Total
($)
|
|
|
50,186 |
|
|
|
58,782 |
|
|
|
34,478 |
|
|
|
39,613 |
|
(8)
Reflects the grant date
fair value of 50,000 shares of common stock and 100,000 shares of restricted
common stock, granted to Mr. Reger on December 7,
2009.
(9)
Reflects the grant date fair value of 50,000 shares of common stock and
100,000 shares of restricted common stock, granted to Mr. Gilbertson on December
7, 2009.
(10)
Reflects the grant date fair value of 75,000 shares of common stock
granted to Mr. Winter upon the commencement of his employment in November
2007.
(11)
Reflects the grant date fair value of options to purchase 60,000 shares
of common stock granted to Mr. Winter upon the commencement of his employment in
November 2007.
(12)
Includes (i) $ 213,000, which is the grant date fair value of 45,000
shares of common stock and 30,000 shares of restricted common stock, granted to
Mr. Winter on February 23, 2009 and (ii) $228,750, which is the grant date fair
value of 25,000 shares of common stock granted to Mr. Winter on November 30,
2009
(13)
Reflects the grant date fair value of 20,000 shares of restricted common
stock granted to Mr. Sankovitz upon the commencement of his employment in March
2008.
(14)
Includes (i) $213,000, which is the grant date fair value of 45,000
shares of common stock and 30,000 shares of restricted common stock, granted to
Mr. Sankovitz on February 23, 2009 and (ii) $ 228,750, which is the grant date
fair value of 25,000 shares of common stock granted to Mr. Sankovitz on November
30, 2009.
Compensation
Discussion and Analysis
Our
Compensation Committee is responsible for establishing director and executive
officer compensation, policies and programs to insure that they are consistent
with our compensation philosophy and corporate governance guidelines. The
Compensation Committee is authorized to make plan awards to our employees to
recognize individual and company-wide achievements as the Committee deems
appropriate. Our Compensation Committee has annually reviewed and approved base
salary and incentive compensation levels, employment agreements and benefits of
executive officers and other key executives.
We have
implemented a compensation program that is designed to reward our management for
maximizing stockholder value and ensuring the long-term stability of our
company. Our compensation program is intended to reward individual
accomplishments, team success and corporate results. It also recognizes the
varying responsibilities and contributions of each employee and is intended to
foster an ownership mentality among our management team.
Stock-Based
Incentives
We have
traditionally utilized stock incentives as a means to align the interests of our
management with the interests of our stockholders and motivate our management to
enhance stockholder value. Stock issuances to-date have been designed to serve
as both short-term rewards and long-term incentives. As a result, each of our
named executive officers holds a significant number of shares of our outstanding
common stock.
Year-End
Compensation Decisions
Near the
end of the 2009, the Compensation Committee met on multiple occasions to
consider the performance of our named executive officers and make year-end
compensation decisions. In evaluating the performance of our named executive
officers, the Committee primarily focused on the accomplishments and overall
performance of the Company during 2009. Notable accomplishments in 2009 that the
Compensation Committee took into account were the closing of a $25 million
credit facility with CIT; the raising of over $70 million in equity capital at
accretive levels; the substantial increase in production and revenues from 2008
to 2009; the efficient expansion of the company’s acreage position throughout
2009; and the realization of almost a 400% stock appreciation from the lows of
March 2009.
The
Compensation Committee also examined the compensation policies and practices of
numerous exploration and production companies which it deemed to be similar to
our company. The companies examined included Kodiak Oil & Gas Corp., Double
Eagle Petroleum Co., Gasco Energy, Inc., Gastar Exploration Ltd., Union
Drilling, Inc., Bronco Drilling Company, Venoco Inc. and FX Energy, Inc. The
Compensation Committee used this information in determining 2009 bonus and 2010
base salary amounts for our management.
2009
Cash Bonuses
On
November 30, 2009, the Compensation Committee approved the payment of a $570,000
cash bonus to each of Mr. Reger and Mr. Gilbertson, in recognition of their
contributions to the Company and the significant accomplishments of the Company
during 2009, as described above under “Compensation Committee Evaluation
of Performance.”
2009
Equity Incentive Plan
In 2009, the
Board adopted and the stockholders approved the 2009 Equity Incentive Plan (the
“Plan”). The Plan is designed to enable our company to attract, retain and
motivate capable and loyal employees, non-employee directors, consultants and
advisors. The Plan is administered by our Compensation Committee.
The Plan
permits grants of both options to purchase common stock and restricted shares of
our common stock. Stock options granted under the Plan may be either incentive
stock options, which qualify for favorable tax treatment under Section 422 of
the Internal Revenue Code, or nonqualified stock options, which do not qualify
for favorable tax treatment. The Plan permits grants of options to any employee,
non-employee director, consultant or advisor of our company or its
subsidiaries.
A total of
3,000,000 shares of our common stock are reserved for issuance pursuant to
awards granted under the Plan. The maximum number of shares for which any person
may be granted awards under the Plan is 500,000 shares annually. The maximum
number of shares for which awards may be granted under the Plan to all persons
in any calendar year shall be limited to ten percent (10%) of the total
outstanding shares of our common stock. Upon a “change in control” of the
Company, all outstanding options granted under the Plan immediately vest and
become immediately exercisable in full and all grants of restricted stock issued
under the Plan become immediately fully-vested and free of all forfeiture and
transfer restrictions.
On February
23, 2009, the Compensation Committee approved (subject to shareholder approval
of the Plan, which was subsequently obtained) the issuance of 75,000 shares of
common stock to each of Mr. Winter and Mr. Sankovitz, of which 45,000
shares were fully vested upon issuance and the remaining 30,000 of which were
restricted shares that were to vest in two equal installments on January 1, 2010
and January 1, 2011. These grants were made in recognition of the contributions
of Mr. Winter and Mr. Sankovitz since they were each initially hired by the
Company and to further align their interests with those of our
stockholders.
On November
30, 2009, the Compensation Committee approved the issuance of 150,000 shares of
common stock to each of Mr. Reger and Mr. Gilbertson, of which 50,000 shares
were fully vested upon issuance and the remaining 100,000 of which are
restricted shares that vest in approximately equal installments on the first day
of each month from January 2010 through December 2011. In addition, on November
30, 2009, the Compensation Committee approved the issuance of 25,000 shares of
common stock to each of Mr. Winter and Mr. Sankovitz, all of which were fully
vested upon grant and approved the acceleration and immediate vesting of 15,000
shares of restricted stock previously granted to each of Mr. Winter and Mr.
Sankovitz, which were otherwise scheduled to vest on January 1, 2010. All such
actions taken by the Compensation Committee were made in recognition of the
named executive officers’ contributions to the Company during 2009 and the
company’s achievements during 2009 (as described above under “Compensation Committee Evaluation
of Performance”) and to further align their interests with those of our
stockholders.
On March 17,
2010, the Compensation Committee approved the issuance of 250,000 shares of
common stock to each of Mr. Reger, Mr. Gilbertson, Mr. Winter and Mr. Sankovitz.
Each such grant consisted of 12,500 shares that were fully vested upon issuance
and 237,500 restricted shares that will vest in quarterly installments from July
1, 2010 through January 1, 2014. The first three quarterly vesting installments
are for 12,500 shares each, the next eight quarterly vesting installments are
for 15,625 shares each and the final four quarterly vesting installments are for
18,750 shares each. Such grants were made in order to significantly increase
each executive officer’s personal stake in the Company, thereby further aligning
their interests with those of our stockholders. In addition, the four year
vesting period will provide our executive officers with a strong incentive to
remain with the Company for the long-term. The
Compensation Committee examined the compensation practices of various
publicly-traded oil and gas exploration and production peer companies, including
(in alphabetical order) Abraxas Petroleum Corp., Callon Petroleum Co., Carrizo
Oil & Gas, Inc., Double Eagle Petroleum Co., Energy XXI (Bermuda) Limited,
EV Energy Partners LP, GMX Resources Inc., Goodrich Petroleum Corp., Kodiak Oil
and Gas, PetroQuest Energy Inc., Rex Energy Corporation Stone Energy Corp. and
Swift Energy Co. The Compensation Committee also engaged BDO Seidman
as an independent consultant to prepare an analysis of peer company compensation
practices. BDO Seidman concluded that the award of equity, in
combination with prior year awards and a continuation of cash compensation at
levels suggested by our Compensation Committee, sets our executive officers’
compensation at market-competitive levels for the next four years, and the
vesting terms of the awards establish a meaningful incentive to remain with our
company.
Employment
Contracts, Termination of Employment and Change-in-Control
In January
2008, we entered into employment agreements with Mr. Reger and Mr. Gilbertson
covering their service as our Chief Executive Officer and Chief Financial
Officer, respectively. In November 2007 and March 2008, we entered into
employment agreements with Chad D. Winter and James R. Sankovitz, respectively,
as a condition to their employment with our company. On January 30, 2009, our
board of directors and Compensation Committee approved certain amendments to all
employment agreements, which were effectuated through adopting amended and
restated employment agreements. In March 2010, Mr. Winter and Mr. Sankovitz were
promoted to executive officer positions with the Company and in connection
therewith entered into new employment agreements.
General
Employment Agreement Provisions
The current
employment agreements entitle Messrs. Reger, Gilbertson, Winter and Sankovitz to
each receive an annual base salary as determined by our Compensation Committee,
but which shall increase each year a minimum of four percent (4.0%) over the
prior year’s annual salary. All officers are eligible to receive bonus
compensation at the discretion of our Compensation Committee or board of
directors based upon meeting or exceeding established performance objectives.
The employment agreements also contain provisions prohibiting our named
executive officers from competing with our company or soliciting any employees
of our company for a period of one year following termination of their
employment in the event either officer terminates his employment with our
company.
The current
employment agreements have a three-year term commencing January 30, 2009 for
Messrs. Reger and Gilbertson and March 25, 2010 for Messrs. Winter and
Sankovitz, which term automatically renews for an additional three-year term
each year unless otherwise terminated by either the Company or the employee.
Notwithstanding the specified term, each employee’s employment with our company
is entirely “at-will,” meaning that either the employee or our company may
terminate such employment relationship at any time for any reason or for no
reason at all, subject to the provisions of the then-applicable employment
agreements.
Change-in-Control
and Similar Provisions
The current
employment agreements of each named executive officer contain change-in-control
provisions entitling the employees to certain payments under specified
circumstances. A “change-in-control” is defined as any one or more of the
following:
|
·
|
The
consummation of a reorganization, merger, share exchange, consolidation or
similar transaction, or the sale or disposition of all or substantially
all of the assets of our company, unless, in any case, the persons
beneficially owning the voting securities of our company immediately
before that transaction beneficially own, directly or indirectly,
immediately after the transaction, at least seventy-five percent (75%) of
the voting securities of our company or any other corporation or other
entity resulting from or surviving the transaction in substantially the
same proportion as their respective ownership of the voting securities of
our company immediately prior to the
transaction;
|
|
·
|
Individuals
who constitute the incumbent board of directors cease for any reason to
constitute at least a majority of the board of directors;
or
|
|
·
|
Our
stockholders approve a complete liquidation or dissolution of our
company.
|
Upon a
change-in-control of our company, each employee’s employment agreement will
immediately cease and our employees will be entitled to certain specified
compensation.
In the event
of a change-in-control, upon the earlier to occur of their death or six (6)
months following the “change in control” we must pay each of our named executive
officers a lump sum payment equal to twice their then-applicable annual salary
in lieu of any and all other benefits and compensation to which they otherwise
would be entitled. Messrs. Reger, Gilbertson, Winter and Sankovitz also are
entitled to the pre-payment of the remaining lease term of their company vehicle
and use of such vehicle through the remaining lease term of such vehicle, along
with a lump sum payment of the estimated insurance premiums for such vehicle
through the remaining lease terms upon a change-in-control.
In addition
to the cash payments referenced above, upon any change-in-control our company or
its successor must pay and/or issue (as appropriate) to both Messrs. Winter and
Sankovitz that amount of cash and/or that number of shares of our common stock
or shares of capital stock or ownership interests of any other entity which they
would have been entitled to receive in connection with the change-in-control had
they owned an aggregate of 30,000 fully-paid and non-assessable shares of our
common stock prior to the change-in-control.
Assuming a
change-in-control had occurred as of December 31, 2009 and assuming
then-applicable base salaries, Messrs. Reger and Gilbertson each would have been
entitled to receive a lump sum cash payment of $570,000 and each of Messrs.
Winter and Sankovitz would have been entitled to receive a lump sum cash payment
of $310,000. In addition, Messrs. Reger and Gilbertson each would have been
entitled to payment of approximately $7,000 toward their vehicle lease and
related insurance and Messrs. Winter and Sankovitz each would have been entitled
to payment of approximately $11,000 toward their vehicle lease and related
insurance. At December 31, 2009, the value of stock or similar change-in-control
compensation to be awarded to both Messrs. Winter and Sankovitz would have
approximated $360,600.
Our
Compensation Committee carefully reviewed and considered the foregoing
change-in-control provisions before approving the current employment agreements
of each of our named executive officers. In addition, our Compensation Committee
Chairperson—Lisa Meier—was involved in reviewing and negotiating draft
employment agreements in advance of the full Committee review and
approval.
Grants
of Plan-Based Awards
The
following table sets forth grants of plan-based awards during the year ended
December 31, 2009, which consisted solely of grants of common stock and
restricted common stock. All grants were made pursuant to the 2009 Equity
Incentive Plan.
|
Name
|
Grant
Date
|
Compensation
Committee Approval Date
|
|
Number
of Shares of Common Stock
|
|
|
Grant
Date
Fair
Value of
Stock
Awards ($)
|
|
|
Michael
L. Reger
|
12/7/2009
|
11/30/2009
|
|
|
150,000 |
|
|
|
1,455,000 |
|
|
Ryan
R. Gilbertson
|
12/7/2009
|
11/30/2009
|
|
|
150,000 |
|
|
|
1,455,000 |
|
|
Chad
D. Winter
|
2/23/2009
|
2/23/2009
|
|
|
75,000 |
|
|
|
213,000 |
(a) |
|
|
11/30/2009
|
11/30/2009
|
|
|
25,000 |
|
|
|
228,750 |
|
|
James
R. Sankovitz
|
2/23/2009
|
2/23/2009
|
|
|
75,000 |
|
|
|
213,000 |
(b) |
|
|
11/30/2009
|
11/30/2009
|
|
|
25,000 |
|
|
|
228,750 |
|
30,
2009. There was no incremental fair value related to the November 30, 2009
modification of the award.
(b)
On November 30, 3009, the Compensation Committee approved a modification
of this award, such that 15,000 shares of restricted common stock that would
have otherwise vested on January 1, 2010 instead vested on November 30, 2009.
There was no incremental fair value related to the November 30, 2009
modification of the award.
Outstanding
Equity Awards
The
following table sets forth the outstanding equity awards to our named executive
officers as of December 31, 2009.
| |
|
Stock
Awards
|
|
|
Name
|
|
Number
of Shares That Had Not Vested
|
|
|
Market Value of Shares That Had
Not Vested(a)
|
|
|
Michael
L. Reger
|
|
|
100,000 |
(b) |
|
$ |
1,184,000 |
|
|
Ryan
R. Gilbertson
|
|
|
100,000 |
(c) |
|
$ |
1,184,000 |
|
|
Chad
D. Winter
|
|
|
15,000 |
(d) |
|
$ |
177,600 |
|
|
James
R. Sankovitz
|
|
|
15,000 |
(e)
|
|
$ |
177,600 |
|
(b)
Consists of restricted common stock granted to Mr. Reger on December 7,
2009. 4,167 shares will vest on the first day of each month from January 2010
through November 2011 and the final 4,159 shares will vest on December 1,
2011.
(c)
Consists of restricted common stock granted to Mr. Gilbertson on December
7, 2009. 4,167 shares will vest on the first day of each month from January 2010
through November 2011 and the final 4,159 shares will vest on December 1,
2011.
(d)
Consists of restricted common stock granted to Mr. Winter on February 23,
2009. All 15,000 shares will vest on January 1, 2011.
(e)
Consists of restricted common stock granted to Mr. Sankovitz on February
23, 2009. All 15,000 shares will vest on January 1,
2011
Option
Exercises and Stock Vested
Our named
executive officers did not hold or exercise any stock options during the year
ended December 31, 2009. The table below sets forth the number of shares of
common stock acquired on vesting by our named executive officers during the year
ended December 31, 2009.
|
|
|
Stock
Awards
|
|
|
Name
|
|
Number
of Shares Acquired on Vesting
|
|
|
Value
Realized on Vesting
|
|
|
Michael
L. Reger
|
|
|
50,000 |
|
|
$ |
485,000 |
(1) |
|
Ryan
R. Gilbertson
|
|
|
50,000 |
|
|
$ |
485,000 |
(2) |
|
Chad
D. Winter
|
|
|
85,000 |
|
|
$ |
493,800 |
(3) |
|
James
R. Sankovitz
|
|
|
105,000 |
|
|
$ |
547,000 |
(4) |
(2)
Mr. Gilbertson received a grant of 50,000 shares of fully vested common
stock on December 7, 2009. The closing price of our common stock on the NYSE
AMEX Equities Market on such date was $9.70.
(3)
Mr. Winter received a grant of 45,000 shares of fully vested common stock
on February 23, 2009. The closing price of our common stock on the NYSE AMEX
Equities Market on such date was $2.84. Mr. Winter received a grant of 25,000
shares of fully vested common stock and had an additional 15,000 shares of
restricted stock vest, on November 30, 2009. The closing price of our common
stock on such date was $9.15.
(4)
Mr. Sankovitz had 20,000
shares of restricted stock vest on January 2, 2009. The closing price
of our common stock on the
NYSE AMEX Equities Market on such date was $2.66. Mr. Sankovitz received a grant of 45,000 shares of
fully vested common stock
on February 23, 2009. The closing price of our common stock on
such date was $2.84. Mr.
Sankovitz received a grant
of 25,000 shares of fully vested common stock and had an additional 15,000 shares of
restricted stock vest, on November 30, 2009. The closing price of our common stock on
such date was $9.15.
Defined
Benefit Plans
We did
not maintain any defined benefit plans during the year ended December 31,
2009.
Non-Employee Director
Compensation
Our
directors receive no cash fees for their services. Directors are, however,
reimbursed for their actual out-of-pocket expenses associated with attending
meetings and carrying out their obligations as directors.
On
November 1, 2007, each of our non-employee directors received an option to
purchase 100,000 shares of common stock pursuant to our 2006 Incentive Stock
Option Plan. The options were fully vested at the time of grant and are
exercisable at $5.18 per share, which represents the fair market value of our
common stock on the date of grant, calculated based on the average close/last
trade price of our common stock reported for the five highest volume trading
days during the 30-day trading period ending on the last trading day preceding
the date of grant (rounded to the nearest penny).
On
December 7, 2009, each of our non-employee directors received a grant of 25,000
shares of common stock pursuant to our 2009 Equity Incentive Plan, of which
8,334 shares were fully vested upon issuance and the remaining 16,666 are
restricted shares that vest in approximately equal installments on the first day
of each month from January 2010 through December 2011.
The
following table contains compensation information for our non-employee directors
for the year ended December 31, 2009.
|
Name
|
|
Fees
Earned or Paid in Cash ($)
|
|
|
Stock
Awards
($)(1)(2)
|
|
|
Option
Awards
($)(3)
|
|
|
Total
($)
|
|
|
Robert
Grabb
|
|
|
– |
|
|
|
242,500 |
|
|
|
– |
|
|
|
242,500 |
|
|
Jack
E. King
|
|
|
– |
|
|
|
242,500 |
|
|
|
– |
|
|
|
242,500 |
|
|
Lisa
Meier
|
|
|
– |
|
|
|
242,500 |
|
|
|
– |
|
|
|
242,500 |
|
|
Loren
J. O’Toole
|
|
|
– |
|
|
|
242,500 |
|
|
|
– |
|
|
|
242,500 |
|
|
Carter
Stewart
|
|
|
– |
|
|
|
242,500 |
|
|
|
– |
|
|
|
242,500 |
|
(1)
Each non-employee director received a grant of 8,334 shares of common
stock and 16,666 shares of restricted common stock, on December 7, 2009.
Valuation of awards based on the grant date fair value of those awards computed
in accordance with FASB ASC Topic 718 utilizing assumptions discussed in
note 8 to our consolidated financial statements for the fiscal year ended
December 31, 2009.
(2)
As of December 31, 2009, each non-employee director held 16,666 shares of
unvested restricted common stock.
(3)
As of December 31, 2009, each of Mr. King, Ms. Meier and Mr. O’Toole held
stock options to purchase 100,000 shares of common stock at $5.18 per share and
each of Mr. Grabb and Mr. Stewart held no stock options.
COMPENSATION COMMITTEE
REPORT
Compensation
Committee Activities
The
Compensation Committee of our board consists of three independent directors. As
the Compensation Committee, we authorize and evaluate programs and, where
appropriate, establish relevant performance criteria to determine management
compensation. Our Compensation Committee Charter grants the Compensation
Committee full authority to review and approve annual base salary and incentive
compensation levels, employment agreements and benefits of executive officers
and other key employees. We intend to adopt performance criteria to measure the
performance of our executive management and determine the appropriateness of
awarding year-end cash bonuses based on performance company
performance.
Employment
Agreements
All
employees, including the officers named in the summary compensation table, have
entered into written employment agreements with our company. All such agreements
provide that year-end cash bonuses are at the discretion of the Compensation
Committee or board of directors, to be determined according to our company’s
achievement of specified predetermined and mutually agreed upon performance
objectives each year.
Compensation
Committee Interlocks and Insider Participation
There are
no compensation committee interlocks.
Review
of Compensation Discussion and Analysis
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis presented on the preceding pages. Based on its review and
discussions, the Compensation Committee recommended to the board of directors
that the Compensation Discussion and Analysis be included in the Company’s proxy
statement for its 2010 Annual Meeting of Stockholders.
The name
of each person who serves as a member of our Compensation Committee is set forth
below.
|
Loren
J. O’Toole
|
Robert
Grabb
|
Lisa
Meier
|
AUDIT
COMMITTEE REPORT
The Audit
Committee of the board consists of three members who are neither officers nor
employees of our company and who meet NYSE Amex independence requirements.
Information as to these persons, as well as their duties, is provided under the
caption “Our board of directors and Committees.” The Committee met eight times
during 2009 and reviewed a wide range of issues, including the objectivity of
the financial reporting process and the adequacy of internal controls. The
Committee ratified the selection of Mantyla McReynolds LLC (“Mantyla
McReynolds”) as our independent registered public accounting firm and considered
factors relating to its independence. In addition, the Committee received
reports and reviewed matters regarding ethical considerations and business
conduct and monitored compliance with laws and regulations. Prior to filing our
annual report on Form 10-K, the Committee also met with our management and
internal auditors and reviewed the current audit activities, plans and results
of selected internal audits. The Committee also met privately with the internal
auditors and with representatives of Mantyla McReynolds to encourage
confidential discussions as to any accounting or auditing matters.
The Audit
Committee has (a) reviewed and discussed with management and representatives of
our company’s independent registered public accountants our company’s audited
financial statements contained for the year ended December 31, 2009; (b)
discussed with our company’s independent registered public accountants the
matters required to be discussed by the statement on Auditing Standards No. 61,
as amended (AICPA, Professional Standards, Vol.
1. AU Section 380), as adopted by the Public Company Accounting Oversight Board
(the “PCAOB”) in Rule 3200T; and (c). received the written disclosures and the
letter from our company’s independent registered public accounting firm as
required by applicable requirements of the PCAOB regarding the independent
accountant’s communications with the audit committee concerning independence and
discussed with representatives of our company’s independent registered public
accounting firm its independence.
Based on
the review and discussions referred to above, the Audit Committee recommended to
the board of directors that the audited financial statements be included in our
Annual Report on Form 10-K for the year ended December 31, 2009, for filing with
the SEC.
The name
of each person who serves as a member of our Audit Committee is set forth
below.
|
Loren
J. O’Toole
|
Robert
Grabb
|
Lisa
Meier
|
Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters
The following table presents
information, to the best of our knowledge, about the beneficial ownership of our
common stock on March 31, 2010, held by those persons known to beneficially own
more than 5% of our capital stock and by our directors and executive officers.
The percentage of beneficial ownership for the following table is based on
44,926,331 shares of common stock outstanding as of March 31, 2010.
Beneficial
ownership is determined in accordance with the rules of the SEC and does not
necessarily indicate beneficial ownership for any other purpose. Under these
rules, beneficial ownership includes those shares of common stock over which the
stockholder has sole or shared voting or investment power. It also includes
(unless footnoted) shares of common stock that the stockholder has a right to
acquire within 60 days after March 31, 2010 through the exercise of any option
or other right. The percentage ownership of the outstanding common stock,
however, is based on the assumption, expressly required by the rules of the SEC,
that only the person or entity whose ownership is being reported has converted
options into shares of our common stock.
|
Name
(1)
|
|
Number
of Shares
|
|
|
Percent
of
Common Stock
(2)
|
|
|
Certain
Beneficial Owners:
|
|
|
|
|
|
|
|
FMR
LLC
82
Devonshire Street
Boston,
MA 02109
|
|
|
6,496,677 |
(3) |
|
|
14.46 |
% |
|
Gilder,
Gagnon, Howe & Co. LLC
1775
Broadway, 26th Floor
New
York, NY 10019
|
|
|
2,907,431 |
(4) |
|
|
6.47 |
% |
|
Palo
Alto Investors, LLC
470
University Ave
Palo
Alto, CA 94301
|
|
|
2,571,275 |
(5) |
|
|
5.72 |
% |
|
Directors
and Executive Officers:
|
|
|
|
|
|
|
|
|
|
Michael
L. Reger
|
|
|
3,999,991 |
(6) |
|
|
8.90 |
% |
|
Ryan
R. Gilbertson
|
|
|
965,013 |
(7) |
|
|
2.15 |
% |
|
Robert
Grabb
|
|
|
124,200 |
(8) |
|
|
* |
|
|
Lisa
Meier
|
|
|
132,916 |
(8)
|
|
|
* |
|
|
Loren
J. O’Toole
|
|
|
125,000 |
(8)
|
|
|
* |
|
|
Carter
Stewart
|
|
|
134,875 |
(9) |
|
|
* |
|
|
Jack
King
|
|
|
119,000 |
(8)
|
|
|
* |
|
|
James
R. Sankovitz
|
|
|
252,500 |
|
|
|
* |
|
|
Chad
D. Winter
|
|
|
252,528 |
|
|
|
* |
|
|
Directors
and Officers as a Group (9 persons)
|
|
|
6,106,023 |
(10) |
|
|
13.50 |
% |
(1)
As used in this table, “beneficial ownership” means the sole or shared
power to vote, or to direct the voting of, a security, or the sole or shared
investment power with respect to a security (i.e., the power to dispose of, or
to direct the disposition of, a security). The address of each member of
management and each director is care of our company.
(2)
Figures are rounded to the nearest tenth of a percent.
(3)
As set forth on Amendment No. 1 to Schedule 13G filed with the SEC on
February 16, 2010, the Fidelity Management & Research Company, a
wholly-owned subsidiary of FMR LLC and an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, is the beneficial owner of
6,278,647 shares of the company’s common stock as a result of acting as
investment adviser to various investment companies registered under Section 8 of
the Investment Company Act of 1940.
The
ownership of one investment company, Fidelity Contrafund, amounted to 3,786,862
shares of the company’s common stock. Edward C. Johnson 3d and FMR, LLC, through
its control of Fidelity Management & Research Company and the funds each has
sole power to dispose of the 5,226, 000 shares owned by the funds.
Members
of the family of Edward C. Johnson 3d, Chairman of FMR LLC, are the predominant
owners, directly or through trusts, of Series B voting common shares of FMR LLC,
representing 49% of the voting power of FMR LLC. The Johnson family group and
all other Series B shareholders have entered into a shareholders’ voting
agreement under which all Series B voting common shares will be voted in
accordance with the majority vote of Series B voting common shares. Accordingly,
through their ownership of voting common shares and the execution of the
shareholders’ voting agreement, members of the Johnson family may be deemed,
under the Investment Company Act of 1940, to form a controlling group with
respect to FMR LLC.
Neither
FMR LLC nor Edward C. Johnson 3d, Chairman of FMR LLC, has the sole power to
vote or direct the voting of the shares owned directly by the Fidelity funds,
which power resides with the funds’ boards of trustees. Fidelity Management
& Research Company carries out the voting of the shares under written
guidelines established by the funds’ boards of trustees.
Pyramis
Global Advisors, LLC, an indirect wholly-owned subsidiary of FMR LLC and an
investment adviser registered under Section 203 of the Investment Advisers Act
of 1940, is the beneficial owner of 218,030 shares of the company’s common stock
as a result of its serving as investment adviser to institutional accounts,
non-U.S. mutual funds, or investment companies registered under Section 8 of the
Investment Company Act of 1940 owning such shares. Edward C. Johnson 3d and FMR
LLC, through its control of Pyramis Global Advisors, LLC, each has sole
dispositive power over 218,030 shares and sole power to vote or to direct the
voting of the same shares of the company’s common stock owned by the
institutional accounts or funds advised by Pyramis Global Advisors,
LLC.
(4)
As set forth on Amendment No. 3 to Schedule 13G filed with the SEC on
February 16, 2010, the shares reported include 2,651,504 shares held in customer
accounts over which partners and/or employees of Gilder, Gagnon, Howe & Co.
LLC have discretionary authority to dispose of or direct the disposition of the
shares, 193,684 shares held in accounts owned by the partners of Gilder, Gagnon,
Howe & Co. LLC and their families and 62,243 shares held in the account of
the profit-sharing plan of Gilder, Gagnon, Howe & Co.
LLC.
(5)
As set forth on Amendment No. 1 to Schedule 13G filed with the SEC on
February 16, 2010, the shares reported include shares held by investment
limited partnerships and investment funds of which Palo Alto Investors LLC
(“PAI”) is the investment adviser and/or general partner. Each of PAI, its
manager, Palo Alto Investors, its controlling shareholder, William Leland
Edwards and the President of PAI and Palo Alto Investors, Anthony Joonkyoo Yun,
MD, disclaims membership in a group and disclaims beneficial ownership of the
shares, except to the extent of that person’s pecuniary interest
therein.
(6)
Includes 1,000 shares held by Mr. Reger’s spouse, which may be deemed to
be beneficially owned by him.
(7)
Includes 80,000 shares held by entities owned and/or controlled by Mr.
Gilbertson, which may be deemed to be beneficially owned by
him.
(8)
Includes 100,000 shares issuable upon exercise of currently exercisable
options granted pursuant to our 2006 Incentive Stock Option
Plan.
(9)
Includes 61,875 shares held by entities owned and/or controlled by Mr.
Stewart, which may be deemed to be beneficially owned by him.
(10)
Includes shares held
indirectly held by Messrs. Reger, Gilbertson and Stewart as set forth in Notes
6, 7 and 9 above,
respectively and an aggregate of 300,000 shares of common stock that directors
presently have the right to acquire upon exercise of currently exercisable
options.
Securities
Authorized for Issuance under Equity Compensation Plans
The
following table summarizes certain information regarding our equity compensation
plans, as of December 31, 2009.
|
Plan
category
|
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
|
|
|
Weighted-average
exercise price of outstanding options, warrants and rights
|
|
|
Number
of securities remaining available for future issuance under equity
compensation plans
|
|
|
Equity
compensation plans approved by security holders
|
|
|
|
|
|
|
|
|
|
|
2006
Incentive Stock Option Plan
|
|
|
300,000 |
|
|
$ |
5.18 |
|
|
|
340,000 |
|
|
2009
Equity Incentive Plan
|
|
|
– |
|
|
|
|
|
|
|
2,357,084 |
|
|
Equity
compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None
|
|
|
– |
|
|
|
|
|
|
– |
|
|
Total:
|
|
|
300,000 |
|
|
|
|
|
|
|
2,697,084 |
|
Item
13. Certain Relationships and
Related Transactions, and Director Independence
As an oil and
gas exploration company, our business strategy is to identify and exploit
resources in and adjacent to existing or indicated producing areas that can be
quickly developed and put in production at low cost. We are focused on low
overhead and, thus, have relied upon various relationships with third-parties
that assist us in identifying and acquiring property in the most exciting new
plays in a nimble and efficient fashion. As a consequence, we have entered into
and may in the future enter into, certain transactions and arrangements with
parties that have a direct or indirect relationship with one or more members of
our management or board of directors.
A majority of
the members of our board of directors have qualified as “independent” as defined
in Section 803(a)(2) of the NYSE Amex company guide since September 2007 and our
board of directors has approved any and all transactions involving any material
obligation by our company to any party. See Directors—Independence and
Committees above for a
complete discussion regarding our Audit Committee and the independence of our
directors. Our Audit Committee Charter, as amended March 18, 2008 and the NYSE
Amex company guide require that Audit Committee review and approve all material
transactions between our company and its directors, officers and 5% or greater
stockholders, as well as all material transactions between our company and any
relative or affiliate of any of the foregoing. We anticipate that our Audit
Committee will review and approve or ratify future transactions involving any
executive officer, director, 5% or greater stockholder or any relative or
affiliate of any of the foregoing.
In September
2007, we commenced a continuous lease program with South Fork Exploration, LLC
(“SFE”), a Montana limited liability Company owned and managed by J.R. Reger,
brother of our Chief Executive Officer and Chairman—Michael Reger. Under the
terms of the program, we paid SFE an aggregate of $501,603 in
2009. J.R. Reger is also a stockholder of our company.
On January
30, 2009, our Compensation Committee and Audit Committee approved the issuance
of non-negotiable, unsecured subordinated promissory notes in the principal
amount of $370,000 to both Mr. Reger and Mr. Gilbertson in lieu of paying cash
bonuses earned in 2008.
On November
17, 2009, the Audit Committee approved the opening of an investment account with
Morgan Stanley Smith Barney LLC for management of a portion of the company’s
excess cash. This account will be managed by Kathleen Gilbertson, a financial
advisor with that firm who is the sister of our President and Director, Ryan
Gilbertson. Depending on liquidity needs, we expect to invest
approximately $30 million to $60 million in this investment account and Kathleen
Gilbertson’s personal interest in any such amount we invest is expected to be
approximately $7,000 to $20,000, depending upon the specific investments chosen
for our funds.
Except as
disclosed above, we had no transactions during 2009 and none are currently
proposed, in which we were a participant and in which any related person had a
direct or indirect material interest.
Item 14. Principal Accountant Fees and
Services
Registered
Public Accountant Fees
Mantyla
McReynolds served as our independent auditor for the two most recently completed
years. Aggregate fees for professional services rendered by Mantyla McReynolds
for the years ended December 31, 2008 and December 31, 2009 were as
follows:
|
|
|
Fiscal
Year Ended
December
31, 2008
|
|
|
Fiscal
Year Ended
December
31, 2009
|
|
|
Audit
Fees
|
|
$ |
140,142 |
|
|
$ |
209,456 |
|
|
Audit-Related
Fees
|
|
|
– |
|
|
|
- |
|
|
Tax
Fees
|
|
|
– |
|
|
|
- |
|
|
All
Other Fees
|
|
|
3,007 |
(1) |
|
|
1,121 |
(2) |
|
Total
|
|
$ |
143,149 |
|
|
$ |
210,577 |
|
(2)
All other fees in 2009 consisted of fees relating to FINRA dispute resolution matter against
UBS Financial Services, Inc.
Audit
fees were for professional services rendered for the audits of the financial
statements, reviews of income tax provisions, audits of statutory financial
statements, consents and the review of documents we filed with the SEC. The
percentage of hours spent by Mantyla McReynolds on these services that were
attributable to work performed by persons not employed by Mantyla McReynolds on
a full-time permanent basis did not exceed 50 percent.
The Audit
Committee of the board of directors has determined that the provision of
services covered by the foregoing fees is compatible with maintaining the
principal accountant’s independence. See Audit Committee
Report.
Pre-Approval
Policies and Procedures of Audit Committee
Our Audit
Committee has adopted pre-approval policies and procedures to ensure the
continued independence of our auditor. As a general rule, we will only engage
our auditors for non-audit-related work if those services enhance and support
the attest function of the audit or are an extension to the audit or
audit-related services.
Our Audit
Committee annual evaluates our auditors’ independence, professional capability
and fees based on a variety of factors. The Committee annually obtains from the
auditor a formal written statement delineating all relationships between the
auditor and our company, consistent with Independence Standards Board Standard 1
and engages in a dialogue with the auditor with respect to any disclosed
relationships or services that may impact the objectivity and independence of
the auditor.
The Audit
Committee takes appropriate action to oversee the independence of the auditor,
which includes review and approval of the auditors’ annual audit plan and audit
scope including a description of key functions and/or locations to be audited, a
general description of each of the non-audit services provided or to be provided
and an estimate of audit and non-audit fees and costs for the year and actual
versus estimated for the preceding year. The Committee ascertains whether
resources are reasonably allocated as to risk and exposure and makes any
recommendations that might be required to more appropriately allocate the
auditors’ efforts.
The Audit
Committee appraises the efficiency and effectiveness of the audit efforts and of
financial accounting and reporting systems through scheduled meetings with the
auditors and ensures that management places no restrictions on the scope of
audits or examinations. The lead audit partner will review with the Committee
the services the auditor expects to provide and the related fees, as
appropriate. In addition, management will provide the Committee with a periodic
updates of any non-audit services that the auditor has been asked to provide or
may be asked to provide in the future.
The
Committee pre-approved all of the services we received from Mantyla McReynolds
during 2009.
Item 15. Exhibits and Financial Statement
Schedules
(b) Exhibits:
|
Exhibit
No.
|
Description
|
Reference
|
|
31.1
|
Certification
of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a)
under the Securities Exchange Act of 1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
|
Filed
herewith
|
|
31.2
|
Certification
of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a)
under the Securities Exchange Act of 1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
|
Filed
herewith
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
NORTHERN
OIL AND GAS, INC.
|
Date:
|
April
30, 2010
|
|
By:
|
/s/
Michael L. Reger
|
|
|
|
|
|
Michael
L. Reger
|
|
|
|
|
|
Chief
Executive Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacity and on the dates indicated:
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/
Michael L. Reger
|
|
Chief
Executive Officer and Director
|
|
April
30, 2010
|
|
Michael
L. Reger
|
|
|
|
|
|
|
|
|
|
|
/s/
Chad D. Winter
|
|
Chief
Financial Officer, Principal Financial Officer and Principal Accounting
Officer
|
|
April
30, 2010
|
|
Chad
D. Winter
|
|
|
|
|
|
|
|
|
|
|
*
|
|
President
and Director
|
|
April
30, 2010
|
|
Ryan
R. Gilbertson
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April
30, 2010
|
|
Loren
J. O’Toole
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April
30, 2010
|
|
Carter
Stewart
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April
30, 2010
|
|
Jack
King
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April
30, 2010
|
|
Robert
Grabb
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
April
30, 2010
|
|
Lisa
Bromiley Meier
|
|
|
|
|
*Michael
L. Reger, by signing his name hereto, does hereby sign this document on behalf
of the above-named directors of the Registrant pursuant to powers of attorney
duly executed by such persons.
|
|
By:
|
/s/
Michael L. Reger
|
|
|
Michael
L. Reger
|
|
|
Attorney-in-Fact
|