def14a_proxy05222009.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A
(RULE
14a-101)
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. ___)
Filed by
the Registrant T
Filed by
a Party other than the Registrant £
Check the
appropriate box:
£ Preliminary
proxy statement.
£ Confidential,
for use of the Commission Only (as permitted by Rule 14a-6(e)(2)).
T Definitive
Proxy Statement.
£ Definitive
Additional Materials.
£ Soliciting
Material Pursuant to Rule 14a-12.
Commission
File No. 001-33999
NORTHERN
OIL AND GAS, INC.
(Name of
Registrant as Specified in Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of filing fee (Check the appropriate box):
T No
fee required.
£ Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1)
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Title
of each class of securities to which transaction applies:
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2)
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Aggregate
number of securities to which transaction applies:
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3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4)
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Proposed
maximum aggregate value of transaction:
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£
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Fee
paid previously with preliminary materials:
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£
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement No.:
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315
Manitoba Ave. ● Suite 200
Wayzata,
Minnesota 55391
May 22,
2009
Dear
Shareholder:
We are
pleased to invite you to attend the 2009 Annual Meeting of Shareholders of
Northern Oil and Gas, Inc., to be held on Thursday, June 18, 2009 at 10:00 a.m.,
local time, in the second floor banquet room at NorthCoast located at 294 East
Grove Lane in Wayzata, Minnesota. The formal notice of the meeting
follows on the next page.
The
formal notice of the meeting and proxy statement follows this cover
letter. Enclosed with this proxy statement is your proxy card, a
return envelope and a copy of our Annual Report on Form 10-K for the year ended
December 31, 2008.
It would
be beneficial for us to know in advance of the annual meeting the number of
shareholders who expect to attend in person. If you plan to attend,
please check the box provided on the proxy card or advise us when voting by
telephone or internet.
We hope
you are able to attend the meeting.
Thank
you.
Northern
Oil and Gas, Inc.
Michael
L. Reger
Chairman
and Chief Executive Officer
NORTHERN
OIL AND GAS, INC.
315
Manitoba Ave. ● Suite 200
Wayzata,
Minnesota 55391
___________________________
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD THURSDAY, JUNE 18, 2009
___________________________
To the
Shareholder of Northern Oil and Gas, Inc.:
Notice is
hereby given that the Annual Meeting of Shareholders of Northern Oil and Gas,
Inc., a Nevada corporation (the “Company”), will be held on Thursday, June 18,
2009, in the second floor banquet room at NorthCoast located at 294 East Grove
Lane in Wayzata, Minnesota, commencing at 10:00 a.m. local time for the
following purposes:
1. To elect
directors to serve until the next meeting of Stockholders;
2.
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To
ratify the appointment of Mantyla McReynolds LLC as our independent
registered public accounting firm for the year fiscal ending December 31,
2009;
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3.
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To
approve the Company’s 2009 Equity Incentive Plan;
and
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4.
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To
act upon such other matters as may properly come before the
meeting.
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Only
Stockholders of record at the close of business on May 22, 2009, are entitled to
notice of and to vote at the Annual Meeting.
You are
invited and urged to attend the meeting in person. Whether or not you
are able to attend the meeting in person, we urge you to vote your shares as
promptly as possible. If you attend the meeting, you may vote your
shares in person if you wish, whether or not you submitted a proxy prior to the
meeting.
By Order
of the board of directors
Michael
L. Reger
Chairman,
Chief Executive Officer
and
Secretary
Wayzata,
Minnesota
May 22,
2009
TABLE
OF CONTENTS
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Page
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NORTHERN
OIL AND GAS, INC
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1
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THE
ANNUAL MEETING
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1
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VOTING
INSTRUCTIONS
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2
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PROPOSAL
1: ELECTION OF DIRECTORS
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4
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OUR
BOARD OF DIRECTORS AND COMMITTEES
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6
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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9
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SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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10
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COMPENSATION
DISCUSSION AND ANALYSIS
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11
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COMPENSATION
COMMITTEE REPORT
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19
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AUDIT
COMMITTEE REPORT
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20
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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21
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PROPOSAL
2: RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTANTS
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22
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PROPOSAL
3: APPROVAL OF THE NORTHERN OIL AND GAS, INC.
2009
EQUITY INCENTIVE PLAN
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24
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NORTHERN
OIL AND GAS, INC. FORM 10-K
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31
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SHAREHOLDER
PROPOSALS FOR 2010 ANNUAL MEETING
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31
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OTHER
MATTERS
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31
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NORTHERN
OIL AND GAS, INC.
315
Manitoba Ave. ● Suite 200
Wayzata,
Minnesota 55391
PROXY
STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS
TO
BE HELD THURSDAY, JUNE 18, 2009
NORTHERN
OIL AND GAS, INC.
We are a
growth-oriented independent energy company engaged in the acquisition,
exploration, exploitation and development of oil and natural gas properties, and
have focused our activities primarily on projects based in the Rocky Mountain
Region of the United States, specifically the Williston Basin. We
believe that we are able to create value via strategic acreage acquisitions and
convert that value or portion thereof into production by utilizing experienced
industry partners specializing in the specific areas of interest. We
have targeted specific prospects and began drilling for oil in the Williston
Basin region in the fourth fiscal quarter of 2007. As of May 20,
2009, we had completed 56 successful discoveries, consisting of 53 targeting the
Bakken/Three Forks formation and three targeting a Red River
Structure. Our principal executive offices are located at 315
Manitoba Ave., Suite 200 in Wayzata, Minnesota 55391, and our telephone number
is (952) 476-9800.
THE
ANNUAL MEETING
We are
furnishing you this proxy statement in connection with the solicitation of
proxies by our board of directors in connection with the Annual Meeting of
Shareholders of Northern Oil and Gas, Inc. to be held on Thursday, June 18, 2009
at 10:00 a.m., local time, in the second floor banquet room at NorthCoast
located at 294 East Grove Lane in Wayzata, Minnesota. No cameras or
recording equipment will be permitted at the meeting.
Definitive
copies of this proxy statement and related proxy card are first being sent on or
about June 1, 2009 to all shareholders of record at the close of business on May
22, 2009 (the “record date”). On the record date there were
34,120,103 shares of our common stock outstanding and entitled to vote at the
meeting, which were held by approximately 421 holders of record.
Quorum;
Abstentions; Broker Non-Votes
A quorum
is necessary to hold a valid meeting. The attendance by proxy or in
person of holders of one-half of the total voting power of the outstanding
shares of the Company’s common stock entitled to vote, represented in person or
by proxy, is required to constitute a quorum to hold the
meeting. Abstentions and broker non-votes are counted as present for
establishing a quorum, but are not counted towards approval of the proposal to
which such abstention or non-vote relates. A broker non-vote occurs
when a broker votes on some matter on the proxy card but not on others because
the broker does not have the authority to do so.
If a
properly executed proxy is returned and the shareholder has not indicated how
the shares are to be voted at the meeting, the shares represented by such proxy
will be considered present at the meeting
for
purposes of determining a quorum and will be voted in favor of each proposal
presented at the meeting. If a properly executed proxy is returned
and the shareholder has withheld authority to vote for one or more nominees or
voted against or abstained from voting on the ratification of our independent
reregistered public accountants, the shares represented by such proxy will be
considered present at the meeting for purposes of determining a quorum and for
purposes of calculating the vote, but will not be considered to have been voted
in favor of such matter.
VOTING
INSTRUCTIONS
You are
entitled to one vote for each share of common stock that you own as of the close
of business on the record date. Please carefully read the
instructions below on how to vote your shares. Because the
instructions vary depending on how you hold your shares, it is important that
you follow the instructions that apply to your particular
situation.
If
Your Shares are Held in Your Name
Voting by
proxy. Even if you plan to attend the meeting, please execute
the proxy promptly by signing, dating and returning the enclosed proxy card by
mail in the return envelope provided.
Voting in person at the
meeting. If you plan to attend the meeting, you can vote in
person. In order to vote at the meeting, you will need to bring your
share certificates or other evidence of your share ownership with you to the
meeting.
Revoking your
proxy. As long as your shares are registered in your name, you
may revoke your proxy at any time before it is exercised at the
meeting. There are several ways you can do this:
—
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by
filing a written notice of revocation with our Corporate Secretary prior
to commencement of the meeting;
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—
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by
submitting another proper proxy with a more recent date than that of the
proxy first given by signing, dating and returning a proxy card to our
company by mail; or
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—
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by
attending the meeting and voting in
person.
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If
Your Shares are Held in “Street Name”
Voting by proxy. If
your shares are registered in the name of your broker or nominee, you will
receive instructions from the holder of record that you must follow in order for
your shares to be voted.
Voting in person at the
meeting. If you plan to attend the meeting and vote in person,
you should contact your broker or nominee to obtain a broker’s proxy card and
bring it and your account statement or other evidence of your share ownership
with you to the meeting.
Revoking your
proxy. If your shares are held in street name, you must
contact your broker to revoke your proxy.
Voting
Rules
By giving
us your proxy, you authorize the individuals named on the proxy card to vote
your shares in the manner you indicate at the meeting or any adjournments
thereof. Shares represented by a
proxy
properly submitted prior to the meeting will be voted at the meeting in the
manner specified on such proxy. With respect to the election of
directors at the meeting, you may:
—
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vote
“for” the election of all nominees;
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—
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“withhold
authority” from voting for all nominees;
or
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—
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“withhold
authority” from voting for any one or more particular
nominees.
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With
respect to the ratification of the appointment of our independent registered
public accountants, , you may:
—
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vote
“for” the proposal;
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—
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vote
“against” the proposal; or
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—
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“abstain”
from voting on the proposal.
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If you
return your proxy but do not specify how you want to vote your shares at the
meeting, your shares will be voted in favor of such matter.
If a
quorum is present at the meeting, nominees receiving the affirmative vote of the
majority of the voting power represented by shares at the meeting and entitled
to vote will be elected to serve as directors. Because of this rule,
failure to submit a proxy prior to the meeting will not affect the outcome of
the election of directors, provided a quorum is present to conduct the
meeting.
We will
bear the cost of soliciting proxies. In addition to this notice by
mail, we request and encourage brokers, custodians, nominees and others to
supply proxy materials to shareholders, and we will reimburse them for their
expenses. Our officers and employees may, by letter, telephone,
facsimile, electronic mail, or in person, make additional requests for the
return of proxies, although we do not reimburse our own employees for soliciting
proxies. We do not intend to engage any outside party to assist us
with soliciting proxies in connection with the Annual Meeting.
Voting
List
Our
Bylaws require that we make available inspection by any shareholder, at least
ten (10) days before each meeting of the shareholders, a complete list of the
shareholders entitled to vote at such meeting or any adjournment thereof, for a
period of ten (10) days prior to such meeting and during the whole time of the
meeting. Such list shall be available for inspection during normal
business hours by appropriate parties at our principal executive offices located
at 315 Manitoba Ave., Suite 200, Wayzata, Minnesota 55391. If you
would like to review such list, please contact Investor Relations in advance via
telephone at (952) 476-9800 or by mail to Northern Oil and Gas, Inc., 315
Manitoba Ave., Suite 200, Wayzata, Minnesota 55391,
Attention: Investor Relations.
Tabulating
the Vote
Our
transfer agent—Standard Registrar and Transfer Company—will tabulate votes in
preparation for the meeting. Our officers and employees will act as
inspectors of election at the meeting. All votes received prior to
the meeting date will be tabulated by our transfer agent, who will separately
tabulate affirmative votes, abstentions and broker non-votes. All
votes cast at the meeting will be
tabulated
by our officers and employees, who will separately tabulate affirmative votes,
abstentions and broker non-votes.
PROPOSAL
1
ELECTION
OF DIRECTORS
Our
directors are elected each year at the annual meeting by our
shareholders. We do not have a classified board of
directors. Seven directors will be elected at this year’s
meeting. Each director’s term lasts until the 2010 Annual Meeting of
Shareholders and until he or she is succeeded by another qualified director who
has been elected. All the nominees are currently directors of our
company. There are no familial relationships between any director or
executive officer.
If a
nominee is unavailable for election, the proxy holders may vote for another
nominee proposed by the board of directors or the board may reduce the number of
directors to be elected at the meeting. Set forth below is
information furnished with respect to each nominee for election as a
director.
Name
|
Age
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Position(s)
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Michael
L. Reger
|
33
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Chairman
of the Board, Chief Executive Officer and Secretary
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Ryan
R. Gilbertson
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33
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Director
and Chief Financial Officer
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Robert
Grabb
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57
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Director
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Jack
E. King
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57
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Director
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Lisa
Meier
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36
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Director
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Loren
J. O’Toole
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78
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Director
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Carter
Stewart
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51
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Director
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Mr. Reger
has served as Chairman of the Board, Chief Executive Officer and Secretary of
our company since March 20, 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 a director and Chief Financial Officer of our company
since March 20, 2007 and co-founded our predecessor—Northern—in
2006. Prior to co-founding Northern, Mr. Gilbertson served as a
portfolio manager at Piper Jaffray in Minneapolis, Minnesota from 2005 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 3,
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.zS. 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 3, 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 sits on the
boards of The Montana Petroleum Association, The Montana Community Foundation,
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 12, 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 3, 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 oil and gas.
Mr.
Stewart has served as a director since May 3, 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 Degree in Geology
from the University of Montana, 1981.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE
FOR ALL OF THE NOMINEES.
OUR
BOARD OF DIRECTORS AND COMMITTEES
The board
of directors represents the interests of our shareholders as a whole and is
responsible for directing the management of the business and affairs of Northern
Oil and Gas, Inc., as provided by Nevada law. Our directors are
elected each year at the annual meeting by our shareholders. We do
not have a classified board of directors. Seven directors were
elected at our 2008 Annual Shareholder Meeting. Each director’s term
lasts until the 2010 Annual Meeting of Shareholders and until he or she is
succeeded by another qualified director who has been elected.
Directors
Our
directors are elected each year at the annual meeting by our
shareholders. We do not have a classified board of
directors. Seven directors were elected at our 2008 Annual
Shareholder Meeting. Each director’s term lasts until the 2009 Annual
Meeting of Shareholders and until he or she is succeeded by another qualified
director who has been elected.
Independence
A
majority of our board consists of “independent” directors as defined in Section
803(a)(2) of the American Stock Exchange listed company guide, including Robert
Grabb, Jack King, Lisa Meier and Loren J. O’Toole. In this regard,
the board of directors has affirmatively determined that a majority of its
members has no material relationship with our company either directly or as a
partner, shareholder or officer of an organization that has a relationship with
our company. There are no familial relationships between
any director or executive officer.
Committees
The board
of directors has standing Audit, Compensation and Nominating
Committees. Our Audit and Compensation Committees consist solely of
independent directors. Consistent with Section 804 of the American
Stock Exchange listed company guide, our Nominating Committee Charter requires
that our Nominating Committee be comprised of at least three members, one of
whom need not be independent in the event that such individual is not a current
officer or employee (or an immediate family member of an officer of employee)
and the board of directors, under exceptional and limited circumstances,
determines that membership on the Nominating Committee by such individual is
required by the best interests of our company and its
shareholders. Our Nominating Committee currently consists of two
independent directors and one director who is not independent—namely, Carter
Stewart—whose membership on our Nominating Committee was permitted by the board
of directors due to his extensive experience in the oil and natural gas industry
and his unique knowledge of individuals and companies that constitute candidates
for future employment or engagement by our company.
The table
on the following page 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
|
X
|
X
|
X*
|
X
|
Jack
King
|
|
|
X
|
X
|
Lisa
Meier
|
X*
|
X*
|
|
X
|
Loren
J. O’Toole
|
X
|
X
|
|
X
|
Michael
L. Reger
|
|
|
|
|
Carter
Stewart
|
|
|
X
|
|
* 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.
Board
and Committee Meetings
The board
held two meetings in 2008, the Audit Committee held five meetings in 2008 and
our Nominating and Compensation Committees each held one meeting in
2008. Each incumbent director attended at least 75% of the board of
directors meetings and each member of the Audit, Compensation and Nominating
Committees attended the Committee meeting in 2008, except that Loren O’Toole was
unable to attend one of the board of directors meetings and Bob Grabb was unable
to attend two of the Audit Committee meetings.
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
serves the Audit Committee’s designated financial expert and an “independent”
director as defined in Section 803(a)(2) of the American Stock Exchange listed
company guide.
Our Audit
Committee Charter also requires that Audit Committee review and approve all
material transactions between our company and its directors, officers and 5% or
greater shareholders, 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 discretion if it deems
such action to be necessary.
Nominating
Committee
Our Nominating Committee Charter
provides that persons nominated for election or appointment as directors shall
be evaluated by the Committee in light of their education, reputation,
experience, independence, leadership qualities, personal integrity, and such
other criteria as the Committee deems relevant. Our Nominating
Committee has not adopted a specific procedure for considering
candidates
recommended
by security holders because our board of directors, but our Nominating Committee
Charter provides that the Committee will develop policies and procedures for
shareholders to nominate candidates for evaluation by the
Committee. The Nominating Committee is expected to identify and
evaluate nominees through internal discussions with Committee members,
management and other board members.
The Nominating Committee Charter
provides that the Committee may retain consultants and advisors to assist it in
the process of identifying and evaluating candidates. The Committee
may also seek advice from our regular counsel or retain separate counsel to
assist it in the execution of its responsibilities.
Compensation
Committee
Our Compensation Committee Charter
authorizes our Compensation Committee to review and approve annual base salary
and incentive compensation levels, employment agreements, and benefits of the
chief executive officer and other key executives. The Compensation
Committee Charter provides that the Committee may retain consultants and
advisors to advise the Committee on compensation issues requiring outside
expertise. The Committee may also consult with our Audit Committee
and our independent auditors regarding an annual review of the expense accounts
of executives and for the purpose of reviewing any calculations required under
any company incentive compensation plans.
Shareholder
Communications with Board Members
The board
of directors has provided the following process for shareholders to send
communications to the board and/or individual directors. All
communications from shareholders should be addressed to Northern Oil and Gas,
Inc., 315 Manitoba Ave., Suite 200 in Wayzata, Minnesota 55391, Attention:
Corporate Secretary. Communications to individual directors,
including the Chairman of the Board, may also be made to such director at the
Company’s address. All communications sent to the Chair of the Audit
Committee or to any individual director will be received directly by such
individuals and will not be screened or reviewed by any company
personnel. Any communications sent to the board of directors, or the
non-management directors as a group, in the care of the Corporate Secretary will
be reviewed by him to ensure that such communications relate to the business of
our company before being reviewed by the board or the non-management directors,
as applicable.
Code
of Business Conduct and Ethics
The board
of directors has adopted the Northern Oil and Gas, Inc. Code of Business Conduct
and Ethics that applies to our directors and employees. A current
copy of our Code of Business Conduct and Ethics 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.
Board
Member Attendance at Annual Meetings
We
encourage all of our directors to attend the annual meeting of
shareholders. We generally hold a board meeting coincident with the
shareholders’ meeting to minimize director travel obligations and facilitate
their attendance at the shareholders’ meeting.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table presents information, to the best of our knowledge, about the
beneficial ownership of our common stock on April 28, 2009, 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 34,120,103 shares of common
stock outstanding as of April 28, 2009.
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
April 28, 2009 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.
|
|
Number
of Shares
|
|
Percent
of Common Stock(2)
|
|
Certain
Beneficial Owners:
|
|
|
|
|
|
Palo
Alto Investors LLC (3)
470
University Ave
Palo
Alto, CA 94301
|
|
1,930,700
|
|
5.66
|
%
|
Gilder,
Gagnon, Howe & Co. LLC (4)
1775
Broadway, 26th
Floor
New
York, NY 10019
|
|
1,761,899
|
|
5.16
|
%
|
Joseph
A. Geraci, II (5)
80
South 8th
Street, Suite 900
Minneapolis,
MN 55402
|
|
1,741,300
|
|
5.10
|
%
|
Directors
and Executive Officers:
|
|
|
|
|
|
Michael
L. Reger (6)
|
|
4,199,991
|
|
12.31
|
%
|
Ryan
R. Gilbertson (7)
|
|
1,909,413
|
|
5.60
|
%
|
Robert
Grabb (8)
|
|
180,000
|
|
*
|
|
Lisa
Meier (8)
|
|
110,000
|
|
*
|
|
Loren
J. O’Toole (8)
|
|
110,000
|
|
*
|
|
Carter
Stewart (9)
|
|
109,875
|
|
*
|
|
Jack
King (8)
|
|
100,000
|
|
*
|
|
James
R. Sankovitz (10)
|
|
20,000
|
|
*
|
|
Chad
D. Winter (10)
|
|
-0-
|
|
|
|
Directors
and Officers as a Group (11)
|
|
6,339,279
|
|
19.52
|
%
|
____________________________
*
|
Less
than 1%.
|
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 Schedule 13G filed with the SEC on April 28, 2009, 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 parent holding company and control
persons disclaim beneficial ownership of the shares reported except
to the extent of that person's pecuniary interest
therein.
|
4.
|
As
set forth on Amendment No. 1 to Schedule 13G filed with the SEC
on February 17, 2009, the shares reported include 1,625,189 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, 122,385 shares held in accounts
owned by the partners of Gilder, Gagnon, Howe & Co. LLC and
their families, and 14,325 shares held in the account of the
profit-sharing plan of Gilder, Gagnon, Howe &
Co. LLC.
|
5.
|
Includes
1,687,400 shares held by entities controlled by Mr. Geraci for which he
may be deemed the beneficial owner and 53,900 shares held by Mr. Geraci’s
spouse. Excludes 213,000 shares held by Lantern Advisers, LLC,
because Mr. Geraci disclaims beneficial ownership of such
shares. All shares beneficially held by Mr. Geraci are subject
to an Irrevocable Proxy appointing our Corporate Secretary as proxy to
vote such shares of common stock on all matters considered by our
shareholders.
|
6.
|
Includes
1,000 shares held by Mr. Reger’s spouse, which may be deemed to be
beneficially owned by him.
|
7.
|
Includes
1,450,000 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 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.
|
Excludes 45,000 shares authorized for issuance
pursuant to the Northern Oil and Gas,
Inc. 2009 Equity Incentive Plan,
which plan was adopted by our board of directors on January 30, 2009 and
is subject to shareholder approval.
|
11.
|
Includes
shares held indirectly held by Messrs. Reger, Gilbertson and Stewart as
set forth in Notes 5, 6 and 8 above and an aggregate of 400,000 shares of
common stock which directors presently have the right to acquire upon
exercise of currently exercisable options granted pursuant to our
Incentive Stock Option Plan.
|
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 shareholders 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, except that one
report on Form 4 setting forth the indirect sale by Joseph A. Geraci II of 2,500
shares of common stock held by Mill City Ventures LP on May 29, 2008, among
other things, was not filed on a timely basis.
COMPENSATION
DISCUSSION AND ANALYSIS
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 Secretary
Ryan R.
Gilbertson
Chief Financial Officer and Director
Chad D.
Winter
Vice President of
Operations
James R.
Sankovitz
General Counsel
Mr. Winter joined our company on
November 1, 2007 and Mr. Sankovitz joined our company on March 11,
2008. Messrs. Winter and Sankovitz are not considered executive
officers (though they both qualify as a “named executive officer” pursuant to
Item 402(m)(2) of Regulation S-K) because their positions do not entail any
specific policy-making function or authority. None of our named
executive officers received any salary during fiscal years 2006 or
2007.
Summary
Compensation Table
The table
below shows compensation for our named executive officers for services in all
capacities to our company during fiscal years 2006, 2007 and
2008. 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(a)
|
Year
|
Salary ($)
|
Bonus
($)(b)
|
Stock
Awards
($)(c)
|
|
Non-Equity
Incentive Plan Compen-
sation
(d)
|
|
All
Other Compen-
sation
($)(e)
|
|
Total
Compen-
sation
($)
|
|
|
|
|
|
|
|
|
|
|
|
Michael
L. Reger
|
2006
|
-0-
|
-0-
|
$
400,000
|
|
-0-
|
|
-0-
|
|
$
400,000
|
Chairman,
Chief Executive Officer and Secretary
|
2007
|
-0-
|
$
120,000
|
-0-
|
|
-0-
|
|
$ 1,367
|
|
$
121,367
|
2008
|
$
185,000
|
$
100,000
|
-0-
|
|
$
370,000
|
|
$
155,833
|
|
$
810,833
|
|
|
|
|
|
|
|
|
|
|
|
Ryan
R. Gilbertson
|
2006
|
-0-
|
-0-
|
$
400,000
|
|
-0-
|
|
-0-
|
|
$
400,000
|
Chief
Financial Officer
|
2007
|
-0-
|
$
120,000
|
-0-
|
|
-0-
|
|
$ 1,955
|
|
$
121,955
|
|
2008
|
$
185,000
|
$
100,000
|
-0-
|
|
$
370,000
|
|
$
156,964
|
|
$
811,964
|
|
|
|
|
|
|
|
|
|
|
|
Chad
D. Winter
|
2006
|
---
|
---
|
---
|
|
-0-
|
|
---
|
|
---
|
Vice
Pres. of Operations
|
2007
|
-0-
|
-0-
|
$
551,892
|
|
-0-
|
|
-0-
|
|
$
551,892
|
|
2008
|
$
105,000
|
-0-
|
-0-
|
|
-0-
|
|
$ 677
|
|
$
105,677
|
|
|
|
|
|
|
|
|
|
|
|
James
R. Sankovitz
|
2006
|
---
|
---
|
---
|
|
-0-
|
|
---
|
|
---
|
General
Counsel
|
2007
|
---
|
---
|
---
|
|
-0-
|
|
---
|
|
---
|
|
2008
|
$
100,000
|
-0-
|
$
105,375
|
|
-0-
|
|
$ 1,802
|
|
$
207,177
|
____________________
(a)
|
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.
|
(b)
|
The
amounts reported for Messrs. Reger and Gilbertson represents a year-end
cash bonus in 2007 and a $100,000 signing bonus upon execution of
employment agreements in 2008.
|
(c)
|
We
account for stock-based compensation under the provisions of Statement of
Financial Accounting Standards No. 123(R), Share Based
Payment. This statement requires us to record an expense
associated with the fair value of stock-based compensation. We
currently use the Black-Scholes option valuation model to calculate stock
based compensation at the date of grant. A more complete
description of the assumptions and processes involved in determining the
value of stock based compensation can be found in Note 8 – Stock
Options/Stock Based Compensation of our Notes to the Financial Statements
in our Form 10-K for the year ended December 31,
2008.
|
For 2006,
amounts reported for Messrs. Reger and Gilbertson represents the value of
500,000 stock options issued under the Incentive Stock Option Plan of our
predecessor—Northern Oil and Gas, Inc.—to both Mr. Reger and Mr. Gilbertson in
consideration of their services for our predecessor. 250,000 options
vested on June 15, 2007, and the balance vested on December 15,
2007. Such options were exercisable at $1.05 per share for a period
of ten (10) years, expiring on December 15, 2016.
For 2007,
$163,392 of such amount reported for Mr. Winter represents the value of shares
issuable upon the exercise of options to purchase 60,000 shares of common stock
granted to Mr. Winter under our Incentive Stock Option Plan and the remaining
$388,500 represents the value of 75,000 shares of common stock issued to Mr.
Winter upon commencement of his employment with our company. The
stock options issued to Mr. Winter were completely exercisable at the time of
grant at $5.18 per share, and expire on November 1, 2017
For 2008,
the amount reported for Mr. Sankovitz reflects the amount accrued by our company
for 20,000 shares of restricted common stock issued to Mr. Sankovitz upon
commencement of his employment with our company, which shares were subject to
vesting in a single lump sum on January 2, 2009.
(d)
|
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 not paid in cash (see Issuance of Promissory Notes
in Lieu of 2008 Cash Bonus in Item 11 of this Part
III).
|
(e)
|
Reflects
personal use of company-leased vehicles for Messrs. Reger and Gilbertson
in 2007 and for Messrs. Winter and Sankovitz in 2008. For 2008,
the amount reported includes $2,098 for Mr. Reger’s personal use of a
company-leased vehicle and $3,229 for Mr. Gilbertson’s personal use of a
company-leased vehicle.
|
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.
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 shareholder 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
Our Chief
Executive Officer—Michael Reger—and Chief Financial Officer—Ryan R.
Gilbertson—both hold a significant number of shares of our outstanding common
stock. See Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters of Part
III of this report. In addition, our Vice President of
Operations—Chad D. Winter—and our General Counsel—James R. Sankovitz—both
received stock grants upon commencement of their employment. As such,
we have traditionally utilized stock incentives as a means to align the
interests of our management with the interests of our shareholders and motivate
our management to enhance shareholder value. Stock issuances to-date
have been designed to serve as both short-term rewards and long-term
incentives.
Comparable
Company Analysis
The
Compensation Committee examined the compensation policies and practices of
numerous exploration and production companies having a similar size and similar
business objectives to our company in determining 2008 bonus and 2009 base
salary values. 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 attempted to establish a 2008 bonus
and 2009 base salary consistent with the levels of comparable executive officers
at the foregoing companies.
Performance
Objectives
Our
Compensation Committee establishes predetermined and agreed upon annual
performance objectives to measure management’s achievements. The
primary factors utilized to guide 2008 performance included the following
production, quarter growth and profitability targets:
|
Graduate
our company to a national exchange (AMEX, NASDAQ,
etc.);
|
|
Increase
production by 100% (not to include the following wells that were producing
as of January 2008: Richardson 25#1; Bergstrom 26 #1H; Reiss 34
#1H);
|
|
Achieve
increasing profit, quarter-over-quarter;
and
|
|
Achieve
net profit for the 2008 fiscal
year.
|
Our
company and its executive officers exceeded all performance objectives
established for the fiscal year ended December 31, 2008. Our
Compensation Committee has informally discussed new performance objectives for
2009 based upon the results achieved in 2008 and our management’s intended
development plans for 2009, but the committee has not yet finalized 2009
performance objectives as of the time of this filing. Our
Compensation Committee will continue to monitor our company’s performance as
well as market conditions throughout the year and expects to establish formal
2009 performance objectives some time in the second quarter of
2009.
Issuance
of Promissory Notes in Lieu of 2008 Cash Bonus
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. The notes bear interest at
a
rate of
twelve percent (12.0%) per annum and originally required monthly interest-only
payments to Messrs. Reger and Gilbertson. Any unpaid principal amount
and all accrued but unpaid interest on the notes is due and payable in full in a
single lump sum on February 1, 2010. The notes are subordinate to any
secured debt of the Company.
In
connection with the CIT Facility completed February 27, 2009, Messrs. Reger and
Gilbertson agreed to subordinate any and all payments under these promissory
notes to the debts and payments under the CIT Facility. We paid
accrued interest of $3,406 to both Mr. Reger and Mr. Gilbertson prior to the
closing of the CIT Facility, and may only make future payments on the notes on a
semi-annual basis upon re-determination of our reserve calculations and provided
we otherwise remain in compliance with the CIT Facility. In
consideration of their willingness to accept bonus compensation in the form of
unsecured notes rather than cash, the Compensation Committee agreed to provide
an additional bonus to Messrs. Reger and Gilbertson 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
funds. The Compensation Committee determined that such additional
bonus was appropriate in light of the increased risk assumed by Messrs. Reger
and Gilbertson in accepting unsecured notes from our company and the incremental
benefit our company would receive by deferring the payment of such bonuses in
cash and, instead, having the ability to utilize available cash for drilling and
other activities.
2009
Equity Incentive Plan
On
January 30, 2009, our board of directors approved the 2009 Equity Incentive Plan
(the “Plan”), pending shareholder approval. 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. 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 upon a “change in control” of the
Company.
On
February 23, 2009, our Compensation Committee approved the issuance of 45,000
fully vested shares of common stock to both Mr. Winter and Mr. Sankovitz in
recognition of their prior services to the Company. In addition, the
Compensation Committee approved the issuance of 30,000 restricted shares of
common stock to both Mr. Winter and Mr. Sankovitz vesting in two equal
installments on January 1, 2010 and January 1, 2011 to serve as incentives for
future services of Mr. Winter and Mr. Sankovitz.
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.
General
Employment Agreement Provisions
The
current employment agreements entitle Messrs. Reger and Gilbertson 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. Messrs. Winter and Sankovitz each receive an
annual base salary of $155,000. 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, 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
shareholders 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 Messrs. Reger and
Gilbertson 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 and must pay Messrs. Winter and Sankovitz a lump sum payment
equal to 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, 2008, and assuming
then-applicable base salaries, Messrs. Reger and Gilbertson each would have been
entitled to receive a lump sum cash payment of $370,000, Mr. Winter would have
been entitled to receive a lump sum cash payment of $105,000 and Mr. Sankovitz
would have been entitled to receive a lump sum cash payment of
$120,000. Assuming current base salaries, Messrs. Reger and
Gilbertson each would have been entitled to receive a lump sum cash payment of
$570,000 and Messrs. Winter and Sankovitz each 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
$30,000 toward their vehicle lease and related insurance and Messrs. Winter and
Sankovitz each would have been entitled to payment of approximately $40,000
toward their vehicle lease and related insurance. At December 31,
2008, the value of stock or similar change-in-control compensation to be awarded
to both Messrs. Winter and Sankovitz would have approximated
$78,000.
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 equity-based awards during the year ended
December 31, 2008. No stock options were granted in
2008.
Name
|
Grant
Date
|
Number
of Shares of Common Stock
|
Grant
Date Fair Value of Stock
|
Michael
L. Reger
|
|
-0-
|
----
|
Ryan
R. Gilbertson
|
|
-0-
|
----
|
Chad
D. Winter
|
|
-0-
|
----
|
James
R. Sankovitz
|
3/22/2008
|
20,000
(a)
|
$
142,000
|
|
(a)
|
Consists
of common stock issued to Mr. Sankovitz upon commencement of his
employment with our company, which shares are subject to vesting in a
single lump sum on January 2, 2009.
|
Outstanding
Equity Awards
The
following table sets forth the outstanding equity awards to our named executive
officers as of December 31, 2008.
|
|
|
Name
|
Number
of Shares That Had Not Vested
|
Market
Value of Shares That Had Not Vested
|
Michael
L. Reger
|
-0-
|
----
|
Ryan
R. Gilbertson
|
-0-
|
----
|
Chad
D. Winter
|
-0-
|
----
|
James
R. Sankovitz
|
20,000
(a)
|
$
52,000
|
____________________
|
(a)
|
Consists
of common stock issued to Mr. Sankovitz upon commencement of his
employment with our company, which shares were subject to vesting in a
single lump sum on January 2, 2009.
|
Option
Exercises
The
following table sets forth stock options exercised by each named executive
officers during the year ended December 31, 2008.
|
|
|
Name
|
Number
of Shares Acquired on Exercise
|
Value
Realized on Exercise
|
Michael
L. Reger
|
-0-
|
----
|
Ryan
R. Gilbertson
|
-0-
|
----
|
Chad
D. Winter
|
60,000
|
$
235,000
|
James
R. Sankovitz
|
-0-
|
----
|
Defined
Benefit Plans
We did
not maintain any defined benefit plans as of December 31, 2008.
|
Non-Employee
Director Compensation
|
Our
directors receive no fees or cash compensation 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 outside
directors received an option to purchase 100,000 shares of common stock pursuant
to our 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).
Securities
Authorized for Issuance under Equity Compensation
Plans
As of
December 31, 2008, we had authorized the issuance of up to 2,000,000 shares of
common stock underlying options that may be granted, of which options for
1,660,000 shares of common stock had already been granted, and of those granted,
400,000 remain outstanding, pursuant to our 2006 Incentive Stock Option
Plan. The following table details the outstanding grants under that
plan as of December 31, 2008.
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
Equity Incentive Stock Option Plan
|
400,000
|
$5.18
|
340,000
|
Equity
compensation plans not approved by security holders
|
|
|
|
None
|
-0-
|
----
|
-0-
|
Total:
|
400,000
|
|
340,000
|
(a)
|
Includes
the following stock grants approved by our Compensation Committee subject
to shareholder approval of our 2009 Equity Incentive Plan: (i)
45,000 fully vested shares of common stock to both Mr. Winter and Mr.
Sankovitz in recognition of their prior services to the Company, (ii)
30,000 restricted shares of common stock to both Mr. Winter and Mr.
Sankovitz vesting in two equal installments on January 1, 2010 and January
1, 2011 to serve as incentives for future services and (iii) 2,000 fully
vested shares of common stock to our administrative assistant in
recognition of prior services to the
Company.
|
On
January 30, 2009, our board of directors also adopted the 2009 Equity Incentive
Plan, pursuant to which we may issue up to 3,000,000 shares of our common stock
either upon exercise of stock options granted under such plan or through
restricted stock awards under such plan, pending shareholder
approval. If the holders of outstanding options exercise those
options or our Compensation
Committee
determines to grant restricted stock awards under our incentive plan,
stockholders may experience dilution in the net tangible book value of our
common stock. Further, the sale or availability for sale of the
underlying shares in the marketplace could depress our stock price.
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 executives.
In
January 2008, we established formal performance objectives for the purpose of
determining the extent and propriety of awarding bonuses to Michael Reger and
Ryan Gilbertson as our Chief Executive Officer and Chief Financial Officer,
respectively, pursuant to such officers’ employment agreements. Such
objectives were established following several discussions between our Committee
Chairperson and executive management and after considering the various 2008
business goals (including, but not limited to, production and profitability
objectives).
We intend
to annually 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. Though we did not
work with executive compensation consultants to establish the current
compensation philosophy, we may work with consultants in the future to establish
long-term incentive programs.
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 this proxy
statement.
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 American Stock Exchange 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 five times during 2008, 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 accountants, and considered factors relating to
their 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 reviewed and discussed with management and representatives of
Mantyla McReynolds the audited financial statements contained in our Annual
Report on Form 10-K for the year ended December 31, 2008. The
Committee has also discussed with Mantyla McReynolds the matters required to be
discussed by Statement on Auditing Standards No. 61 (Codification of
Statements on Auditing Standards, AU §380), and has received the written
disclosure and letter from Mantyla McReynolds required by Independence Standards
Board Standard No. 1 (“Independence Discussions with Audit
Committees”) delineating all relationships they have with us and has discussed
with them their independence. Based on the review and discussions
referred to above, the members of the 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, 2008, for filing with the
Securities and Exchange Commission. The Committee also determined
that Mantyla McReynolds’s fees and services are consistent with the maintenance
of their independence as our independent registered public
accountants.
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
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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 American Stock Exchange
listed 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 in Item 10
of Part III of this report 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 American Stock Exchange listed
company guide require that Audit Committee review and approve all material
transactions between our company and its directors, officers and 5% or greater
shareholders, 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 shareholder 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 $815,100 in 2008. J.R. Reger is also a
shareholder 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. For a complete discussion of the
transaction, see Issuance of
Promissory Notes in Lieu of 2008 Cash Bonus in Item 11 of this Part
III.
Except as disclosed above, we had no transactions
during 2008, and none are currently proposed, in which we were a participant and
in which any related person had a direct or indirect material
interest.
PROPOSAL
2
RATIFICATION
OF APPOINTMENT OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
The Audit
Committee previously selected the firm of Mantyla McReynolds LLC (“Mantyla
McReynolds”) as independent registered public accountants to audit our financial
statements for fiscal year 2008, and our shareholders ratified that selection at
our 2008 Annual Meeting. Mantyla McReynolds continues to serve as our
independent registered public accountants and has been engaged to audit our
financial statements for fiscal year 2009. A proposal to ratify that
appointment will be presented to shareholders at the meeting. If
shareholders do not ratify such appointment, the Committee will select another
firm of independent registered public accountants.
Representatives
of Mantyla McReynolds are expected to be present at the meeting and they will
have the opportunity to make a statement if they desire to do so. In
addition, they are expected to be available to respond to appropriate
questions.
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, 2007 were as
follows:
|
Fiscal
Year Ended
December
31, 2007
|
|
Fiscal
Year Ended
December
31, 2008
|
Audit
Fees
|
$ 38,389
|
|
$
140,142
|
Audit-Related
Fees
|
0
|
|
0
|
Tax
Fees
|
0
|
|
0
|
All
Other Fees
(a)
|
0
|
|
3,007
|
Total
|
$ 38,389
|
|
$
143,149
|
____________________
|
(a)
|
All
other fees in 2008 consisted of fees for contract reviews and the
potential accounting impact.
|
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 2008.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE
FOR PROPOSAL 2.
PROPOSAL
3
APPROVAL
OF THE
NORTHERN
OIL AND GAS, INC. 2009 EQUITY INCENTIVE PLAN
On
January 30, 2009, the board of directors unanimously approved, subject to
stockholder approval, the Northern Oil and Gas, Inc. 2009 Equity
Incentive Plan (the “Plan”) and directed that the Plan be submitted for approval
by our stockholders at our 2009 Annual Meeting of Stockholders.
The Plan
is intended to provide a means whereby we may be able, by granting stock options
and shares of restricted stock, to attract, retain and motivate capable and
loyal employees, non-employee directors, consultants and advisors of our company
and its subsidiaries, for the benefit of our company and its
shareholders. The Plan is intended to continue the objectives of
previously adopted Northern Oil and Gas Incentive Stock Option Plan, under which
only 340,000 shares remain available for issuance upon exercise of stock options
and which plan does not permit restricted stock awards.
The full
text of the Plan is set forth in Exhibit A to this proxy statement and the
following summary description is qualified in its entirety by reference to the
full text of the Plan.
Administration
The Plan
will be administered by the Compensation Committee of our board of directors
(the “Committee”). The Committee is appointed by the board of
directors and will be comprised solely of two or more “non-employee directors”
within the meaning of SEC Rule 16b-3 or any successor rule or
regulation. Each member of the Committee also must be an “outside
director” within the meaning of Internal Revenue Code Section 162(m) or any
successor provision.
The
Committee has the authority to determine to whom awards will be granted, the
timing, type and amount of any award and other terms and conditions of
awards. The Committee determines which persons will be granted awards
under the Plan, the types of awards to be granted, the number of shares included
in each award, any limitations on the exercise or vesting of awards and any
other terms and conditions of awards. The Committee may also approve
amendments to outstanding awards, provided there is no conflict with the terms
of the Plan, applicable law, or applicable stock market rules and
regulations. The Committee has full power to construe and interpret
the Plan and to establish and amend rules and regulations for its
administration, subject to the express provisions of the Plan.
Eligibility
A stock
option may be granted to any employee, non-employee director, consultant or
advisor of our company or its subsidiaries, except that no consultant or advisor
may be granted awards in connection with the offer and sale of securities in a
capital raising transaction on behalf of our company. Restricted
stock may only be granted to employees and any non-employee
director.
Number of Shares Available for
Issuance
A total
of 3,000,000 shares of our common stock are authorized for grant under the
Plan. The total number of shares available for issuance is subject to
adjustment in connection with certain changes in capitalization, and may be
increased under circumstances described in the following
paragraph. As of May 20, 2008, the Committee had approved the grant
of 152,000 shares of common stock, subject to shareholder approval of the Plan,
leaving a total of 2,848,000 shares available for future grants under the
Plan.
If any
shares included in an award are not purchased or are forfeited, or if an award
otherwise terminates without delivery of any shares, then the number of shares
included in the award, to the extent of any such forfeiture or termination, will
again be available for granting awards under the Plan. Shares
reserved for issue as under the Plan will cease to be reserved upon termination
of the Plan.
The
maximum number of shares for which any person may be granted awards under the
Plan in any calendar year is limited to 500,000 shares. The maximum
number of shares for which awards may be granted under the Plan to all persons
in any calendar year is limited to ten percent (10%) of the total outstanding
shares of our common stock.
Stock
Option Awards
Option Agreement
Provisions. Each option granted under the Plan will be
evidenced by a Stock Option Agreement and shall be further subject to certain
terms and conditions set forth in the Plan, and such other terms and conditions
as may be prescribed by the Committee:
Incentive Stock
Options. Each option grant to an employee will constitute an
“incentive stock option” eligible for favorable tax treatment under Section 422
of the Internal Revenue Code (the “Code”), provided that no more than $100,000
of such options (based upon the fair market value of the underlying Shares as of
the date of grant) can first become exercisable for any employee in any calendar
year. To the extent any option grant exceeds the $100,000 dollar
limitation, it will constitute a “nonqualified stock option.” No
incentive stock option may be granted to any employee who at the time directly
or indirectly owns more than ten percent (10%) of the combined voting power of
all classes of stock of our company or of a subsidiary, unless the exercise
price is not less than 110 percent (110%) of the fair market value of our common
stock on the date of grant, and unless the option is not exercisable more than
five (5) years after the date of grant.
Option
Exercises. The full purchase price of the shares acquired upon
exercise of any option will be paid in cash, by certified or cashier’s check, or
in the form of shares of our common stock with a fair market value equal to the
full purchase price and free and clear of all liens and
encumbrances. The Committee may also permit the “cashless exercise”
of an option. In the event of a cashless exercise, the optionee will
surrender the option, and we will issue the optionee the number of shares using
a specified formula set forth in the Plan.
Exercise
Period. The period within which an option must be exercised
will be determined by the Committee at the time of grant, subject to a maximum
of ten (10) years, or five (5) years for an incentive stock option granted to an
employee who directly or indirectly owns more than ten percent (10%) of the
combined voting power of all classes of stock of our company or a
subsidiary.
Vesting. Unless
modified by the Committee, each option will become exercisable to the extent of
twenty-five percent (25%) of the shares on each of the first four (4)
anniversaries of the date of grant. To the extent exercisable, an
option may be exercised in whole or in part. The Committee may impose
different or additional conditions with respect to length of service or
attainment of specified performance goals which must be satisfied prior to
exercise of all or any part of an option.
Termination of
Employment. If an optionee is an employee, and his or her
employment is terminated other than by death, disability, or for conduct which
is contrary to the employer’s best interests, the optionee may, within ninety
(90) days of such termination (or longer, if approved by the Committee),
exercise any unexercised portion of his or her option to the extent he or she
was entitled to do so at the time of such termination. If termination
of employment is effected by death or disability of the optionee, the option, or
any portion thereof, may be exercised to the extent the optionee was
entitled
to do so
at the time of his or her death or disability, by the optionee or his or her
personal representative, at any time within one year subsequent to the date of
his or her termination of employment. If an optionee’s employment is
terminated by his or her employer for conduct which is contrary to the best
interests of the employer, as determined by the employer in its sole discretion,
the unexercised portion of the optionee’s option will expire automatically on
the date of termination. The Committee may, in its discretion, amend
or eliminate any one or more of the foregoing provisions in connection with the
grant of any individual option.
Termination of Service by Directors,
Consultants and Advisors. If an optionee is a director,
consultant, or advisor, and his or her position with our company terminates for
any reason, the optionee may, within ninety (90) days of such termination, or
within one (1) year of such termination if the optionee is a director (or longer
in either case, if approved by the Committee), exercise any unexercised portion
of his or her option to the extent he or she was entitled to do so at the time
of such termination. If termination is effected by death of the
optionee, the option may be exercised for the applicable period to the extent
the optionee was entitled to do so at the time of his or her death by the
optionee’s personal representative.
Non-transferability of
Options. No option will be transferable by the optionee
otherwise than by will or by the laws of descent and distribution, and each
option will be exercisable during the optionee’s lifetime only by the
optionee. No option may be attached or subject to levy by an
optionee’s creditors.
Option Exercise
Price. The per share exercise price for each option will be
determined by the Committee at the time of grant, provided that the per share
exercise price for any incentive stock option may not be less than the fair
market value of our common stock on the date the option is granted, as defined
in the Plan.
Restricted
Stock Awards
Grant of Restricted
Stock. The Committee may grant restricted stock awards subject
to any vesting limitations and performance objectives it deems appropriate, or
none at all. Agreements for each grant will set forth any objective
performance goals which must be satisfied in order for the restricted stock to
vest and the forfeiture and transfer restrictions to lapse. The
Committee may base performance goals on factors which the Committee determines
appropriate from time to time, including but not limited to the Company’s stock
price, market share, revenues, net income, and return on equity. The
agreement may also set forth a period of time during which the employee must
remain in the continuous employment of the Company in order for the forfeiture
and transfer restrictions to lapse. If the Committee so determines,
the restrictions may lapse during such restricted period in installments with
respect to specified portions of the shares covered by the restricted stock
grant.
Escrow of Restricted
Stock. At the time of a restricted stock grant, a certificate
representing the number of Shares awarded thereunder shall be registered in the
name of the recipient. Such certificate shall be held by our transfer
agent as escrow agent until vested subject to the terms and conditions of the
Plan, and will bear a legend setting forth the restrictions imposed by the
Committee. The recipient of such restricted stock will have all
rights of a shareholder with respect to the shares, including the right to
receive dividends and the right to vote such shares, subject to the following
restrictions:
§
|
the
recipient will not be entitled to delivery of a stock certificate until
the expiration of the restricted period and the fulfillment of any other
restrictive conditions set forth in the
agreement;
|
§
|
none
of the shares may be sold, assigned, transferred, pledged, hypothecated or
otherwise encumbered or disposed of during such restricted period or until
after the fulfillment of any other restrictive conditions;
and
|
§
|
except
as otherwise determined by the Committee, all of the shares to the extent
not vested shall be forfeited and all rights of the recipient to such
Shares shall terminate, without further obligation on the part of our
company, unless the recipient remains in the continuous employment of our
company for the entire restricted period in relation to which such common
stock was granted and unless any other restrictive conditions relating to
the restricted stock award are met.
|
Any
common stock, any other securities of our company and any other property (except
for cash dividends) distributed with respect to shares subject to restricted
stock awards will be subject to the same restrictions, terms and conditions as
the restricted stock.
Termination of
Restrictions. At the end of the applicable restricted period
and provided that any other restrictive conditions of the grant of restricted
stock are met, or at an earlier time as determined by the Committee, the shares
will be considered vested and all restrictions set forth in the agreement
relating to the grant of restricted stock or in the Plan will lapse, and a stock
certificate for the appropriate number of Shares, free of the restrictions and
the restricted stock legend, will be delivered to the recipient or his or her
beneficiary or estate, as the case may be.
Effect
of a Change in Control
Unless
otherwise provided in an award agreement, all outstanding options will
immediately vest and become immediately exercisable in full, and all grants of
restricted stock will become immediately fully-vested and free of all forfeiture
and transfer restrictions, upon any “change in control” of our
company. Any of the following constitutes a “change in control” for
the purposes of the Plan:
§
|
The
consummation of a reorganization, merger, share exchange, consolidation or
similar transaction, the acquisition of a majority of the outstanding
common stock by a person or group acting in concert, 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
shareholders approve a complete liquidation or dissolution of our
company.
|
Corporate
Transactions
In the
event of a recapitalization, merger, consolidation, reorganization, stock
dividend, stock split or other change in capitalization affecting our present
capital stock, appropriate adjustment may be made by the Committee in the number
and kind of shares included in any award, and the exercise or purchase price of
any award.
Duration, Amendment and
Termination
The Plan
automatically terminates January 30, 2019, which is ten years after the date of
its approval by our board of directors, unless sooner terminated by issuance of
all Shares reserved for issuance under the Plan. No award may be
granted under the Plan after the termination date. Our board of
directors may at any time terminate the Plan, or make such modifications of the
Plan as it deems advisable, subject to shareholder approval to the extent
required by applicable law or stock market rule or regulation. No
termination or amendment of the Plan may, without the consent of the
participants to whom any awards previously have been granted, adversely affect
the rights of such participants under such awards.
Federal Tax
Considerations
The
following summary sets forth the tax events generally expected for United States
citizens under current United States federal income tax laws in connection with
awards under the Plan.
Incentive Stock
Options. A recipient will realize no taxable income, and we
will not be entitled to any related deduction, at the time an incentive stock
option is granted under the Plan. If certain statutory employment and
holding period conditions are satisfied before the recipient disposes of shares
acquired pursuant to the exercise of such an option, then no taxable income will
result upon the exercise of such option, and we will not be entitled to any
deduction in connection with such exercise. Upon disposition of the
shares after expiration of the statutory holding periods, any gain or loss
realized by a recipient will be a long-term capital gain or loss. We
will not be entitled to a deduction with respect to a disposition of the shares
by a recipient after the expiration of the statutory holding
periods.
Except in
the event of death, if shares acquired by a recipient upon the exercise of an
incentive stock option are disposed of by such recipient before the expiration
of the statutory holding periods (a “disqualifying disposition”), the recipient
will be considered to have realized as compensation, taxable as ordinary income
in the year of disposition, an amount, not exceeding the gain realized on such
disposition, equal to the difference between the exercise price and the fair
market value of the shares on the date of exercise of the option. We
will be entitled to a deduction at the same time and in the same amount as the
recipient is deemed to have realized ordinary income. Any gain
realized on the disposition in excess of the amount treated as compensation or
any loss realized on the disposition will constitute capital gain or loss,
respectively. Such capital gain or loss will be long-term or
short-term based upon how long the shares were held. If the recipient
pays the option price with shares that were originally acquired pursuant to the
exercise of an incentive stock option and the statutory holding periods for such
shares have not been met, the recipient will be treated as having made a
disqualifying disposition of such shares, and the tax consequence of such
disqualifying disposition will be as described above.
The
foregoing discussion applies only for regular tax purposes. For
alternative minimum tax purposes, an incentive stock option will be treated as
if it were a non-qualified stock option, the tax consequences of which are
discussed below.
Non-Qualified Stock
Options. A recipient will realize no taxable income, and we
will not be entitled to any related deduction, at the time a non-qualified stock
option is granted under the Plan. At the time of exercise of a
non-qualified stock option, the recipient will realize ordinary income, and we
will be entitled to a deduction, equal to the excess of the fair market value of
the stock on the date of exercise over the option price. Upon
disposition of the shares, any additional gain or loss realized by the recipient
will be taxed as a capital gain or loss, long-term or short-term, based upon how
long the shares are held.
Restricted and Unrestricted
Stock. Unless the recipient files an election to be taxed
under Section 83(b) of the Code: (a) the recipient will not realize income
upon the grant of restricted stock; (b) the recipient will realize ordinary
income, and we will be entitled to a corresponding deduction, when the
restrictions have been removed or expire; and (c) the amount of such
ordinary income and deduction will
be the
fair market value of the restricted stock on the date the restrictions are
removed or expire. If the recipient files an election to be taxed
under Section 83(b) of the Code, the tax consequences to the recipient will be
determined as of the date of the grant of the restricted stock rather than as of
the date of the removal or expiration of the restrictions. With
respect to awards of unrestricted stock: (a) the recipient will realize
ordinary income, and we will be entitled to a corresponding deduction upon the
grant of the unrestricted stock and (b) the amount of such ordinary income and
deduction will be the fair market value of such unrestricted stock on the date
of grant.
When the
recipient disposes of restricted or unrestricted stock, the difference between
the amount received upon such disposition and the fair market value of such
shares on the date the recipient realizes ordinary income will be treated as a
capital gain or loss, long-term or short-term, based upon how long the shares
are held.
Withholding. The
Plan permits us to make such provisions and take such steps as we may deem
necessary or appropriate for the withholding of any taxes that we are required
by any law or regulation to withhold in connection with any award including, but
not limited to, withholding a portion of the shares issuable pursuant to the
award, or requiring the recipient to pay to our company, in cash, an amount
sufficient to cover our withholding obligations. The Committee, in
its discretion, has the authority, at the time of grant of any award under the
Plan or at any time thereafter, to approve cash bonuses to designated recipients
to be paid upon their exercise or receipt of (or the lapse of restrictions
relating to) awards in order to provide funds to pay all or a portion of federal
and state taxes due as a result of such exercise or receipt (or the lapse of
such restrictions). The Committee also has authority in its
discretion to determine the amount of any such tax bonus and to withhold and pay
such tax bonuses over to the appropriate taxing authorities on the recipient’s
behalf.
New Plan Benefits
When and
if this proposal is approved, and subject to Committee approval, we anticipate
that initial awards under the Plan will result in the benefits described in the
table below, which would be subject to a three-year vesting schedule by which
restrictions would lapse as to one third of the shares on each of the first,
second and third anniversaries of the grant date. Awards for other
plan participants have not yet been defined and will be at the discretion of the
Committee.
Northern
Oil and Gas, Inc. 2009 Equity Incentive Plan
Name
and Position
|
|
Dollar
Value ($) (a)
|
|
Number
of Units (b)
|
Michael
L. Reger – Chairman, Chief Executive Officer and
Secretary
|
|
-0-
|
|
----
|
Ryan
R. Gilbertson – Chief Financial Officer
|
|
-0-
|
|
----
|
Chad
D. Winter – Vice Pres. of Operations
|
|
$
213,000
|
|
75,000
|
James
R. Sankovitz – General Counsel
|
|
$
213,000
|
|
75,000
|
Executive
Group
(c)
|
|
-0-
|
|
----
|
Non-Executive
Director
Group
|
|
-0-
|
|
----
|
Non-Executive
Officer Employee Group (c)
|
|
$
431,680
|
|
152,000
|
__________________
(a)
|
The
dollar value of stock awards is determined by multiplying the number of
shares proposed to be awarded by the closing price of a share of our
common stock on the NYSE Amex market on February 23, 2009—the date such
grants were approved by our Compensation
Committee.
|
(b)
|
For
both Mr. Winter and Mr. Sankovitz, consists of the following shares of
common stock to be issued upon shareholder approval of the
Plan: (i) 45,000 shares not subject to any restriction on
resale other than ordinary restrictions under the Securities Act of 1933,
as amended (the “Act”), and applicable state securities laws, (ii) an
additional 15,000 restricted shares of common stock subject to vesting on
January 1, 2010 and (iii) an additional 15,000 restricted shares of common
stock subject to vesting on January 1, 2011. For other
non-executive officer employees, consists of 2,000 shares of common stock
to be issued upon shareholder approval of the Plan and not subject to any
restriction on resale other than ordinary restrictions under the Act and
applicable state securities laws.
|
(c)
|
Messrs.
Winter and Sankovitz are not considered executive officers (though they
both qualify as a “named executive officer” pursuant to Item 402(m)(2) of
Regulation S-K) because their positions do not entail any specific
policy-making function or authority. As such, shares of common
stock issuable to Messrs. Winter and Sankovitz under the Plan are excluded
from the “Executive Group” and, instead, included in the “Non-Executive
Officer Employee Group.”
|
Vote
Required and Board Recommendation
Under the
rules of the NYSE Amex, approval of the Plan requires the affirmative vote of
the holders of a majority of the outstanding shares of common stock represented
in person or by proxy at the Annual Meeting.
The board
unanimously recommends that the stockholders vote “for” the approval of the
Northern Oil and Gas, Inc. 2009 Equity Incentive Plan.
VOTE
FOR PROPOSAL 3.
NORTHERN
OIL AND GAS, INC. FORM 10-K
A copy of
our Form 10-K for the year ended December 31, 2008, as amended, has been
mailed concurrently with this Proxy Statement to all stockholders entitled to
notice of and to vote at the Annual Meeting. We will send a copy of
our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, or
any exhibit thereto, as filed with the Securities and Exchange Commission, to
any shareholder without charge, upon written request to Northern Oil and Gas,
Inc., 315 Manitoba Ave., Suite 200, Wayzata, Minnesota 55391,
Attention: Investor Relations.
SHAREHOLDER
PROPOSALS FOR
2010
ANNUAL MEETING
Our
Bylaws require that we hold our annual meeting in May of each year or at such
other time designated by our board of directors. If you wish to have
a proposal considered for inclusion in our 2010 proxy statement, we must receive
your proposal at our principal executive offices on or before February 23,
2010. Proposals should be mailed to Northern Oil and Gas, Inc., 315
Manitoba Ave., Suite 200 in Wayzata, Minnesota 55391,
Attention: Corporate Secretary.
OTHER
MATTERS
The board
of directors does not know of any other matter that will be presented at the
annual meeting other than the proposals discussed in this proxy
statement. Under our bylaws, generally no business besides the
proposals in this proxy statement may be transacted at the
meeting. However, if any other matter properly comes before the
meeting, your proxies will act on such matter in their discretion.
By Order
of the board of directors
Michael
L. Reger
Chairman,
Chief Executive Officer
and
Secretary
EXHIBIT
A
NORTHERN
OIL AND GAS, INC.
2009
EQUITY INCENTIVE PLAN
(Adopted
by the Board of Directors on January 30, 2009)
ARTICLE
I.
PURPOSE
The
purpose of this Plan is to provide a means whereby Northern Oil and Gas, Inc.
(the “Company”) may be able, by granting stock options (”Options”) and shares of
restricted stock (“Restricted Stock”), to attract, retain and motivate capable
and loyal employees, non-employee directors, consultants and advisors of the
Company and its subsidiaries, for the benefit of the Company and its
shareholders. 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 (the “Code”), or Nonqualified Stock Options which do not
qualify for favorable tax treatment. Options and Restricted Stock are
referred to collectively in this Plan as “Awards”.
ARTICLE
II.
RESERVATION OF
SHARES
A total
of 3,000,000 shares (“Shares”) of the Company’s common stock, par
value $0.001 per share (the “Common Stock”) are reserved for issuance pursuant
to Awards granted under the Plan. If any Shares included in an Award
are not purchased or are forfeited, or if an Award otherwise terminates without
delivery of any Shares, then the number of Shares included in the Award, to the
extent of any such forfeiture or termination, shall again be available for
granting Awards under the Plan. Shares reserved for issue as provided
herein shall cease to be reserved upon termination of the Plan.
The
maximum number of Shares for which any person may be granted Awards under the
Plan in any calendar year shall be limited to 500,000 Shares. 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.
ARTICLE
III.
ADMINISTRATION
(a) The Plan
shall be administered by the Compensation Committee of the Board of Directors of
the Company (the “Committee”). The Committee shall be appointed by
the Board of Directors and shall be comprised solely of two or more
“non-employee directors” within the meaning of SEC Rule 16b-3 or any successor
rule or regulation. Each member of the Committee shall also be an
“outside director” within the meaning of Internal Revenue Code Section 162(m) or
any successor provision. Vacancies in the Committee shall be filled
by the Board.
(b) The
Committee shall have full power to construe and interpret the Plan and to
establish and amend rules and regulations for its administration, subject to the
express provisions of the Plan.
(c) The
Committee shall determine which persons shall be granted Awards under the Plan,
the types of Awards to be granted, the number of Shares included in each Award,
any limitations on the exercise or vesting of Awards in addition to those
imposed by this Plan, and any other terms and conditions of
Awards. The Committee may also approve amendments to outstanding
Awards, provided there is no conflict with the terms of the Plan, applicable
law, or applicable stock market rules and regulations.
ARTICLE
IV.
ELIGIBILITY
An Option
may be granted to any employee, non-employee director, consultant or advisor of
the Company or its subsidiaries, except that no consultant or advisor shall be
granted Awards in connection with the offer and sale of securities in a capital
raising transaction on behalf of the Company. Restricted Stock may
only be granted to employees and any non-employee director. A person
who has received an Award of an Option or Restricted Stock is referred to in
this Plan as a “Participant.”
ARTICLE
V.
CHANGES IN PRESENT STOCK AND
EFFECT OF CHANGE OF CONTROL
(a) In
the event of a recapitalization, merger, consolidation, reorganization, stock
dividend, stock split or other change in capitalization affecting the Company’s
present capital stock, appropriate adjustment may be made by the Committee in
the number and kind of shares included in any Award, and the exercise or
purchase price of any Award.
(b) All
outstanding Options shall immediately vest and become immediately exercisable in
full and all grants of Restricted Stock shall become immediately fully-vested
and free of all forfeiture and transfer restrictions upon any “change in
control” of the Company. Any of the following shall constitute a
“change in control” for the purposes hereof:
(i) The
consummation of a reorganization, merger, share exchange, consolidation or
similar transaction, the acquisition of a majority of the outstanding Common
Stock by a person or group acting in concert or the sale or disposition of all
or substantially all of the assets of the Company, unless, in any case, the
persons beneficially owning the voting securities of the 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 the 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 the Company immediately prior
to the transaction;
(ii) Individuals
who constitute the incumbent Board of Directors cease for any reason to
constitute at least a majority of the Board of Directors; or
(iii) The
Company’s shareholders approve a complete liquidation or dissolution of the
Company.
ARTICLE
VI.
OPTIONS
(a) Option Exercise
Price. The per share exercise price for each Option shall be
determined by the Committee at the time of grant, provided that the per share
exercise price for any Incentive Stock Option shall be not less than the fair
market value of the Common Stock on the date the Option is
granted. The “fair market value” of the Common Stock as of any date
shall be the closing sale price for the Common Stock on the most recent day on
which the Common stock traded prior to the grant date. If there is no
closing sale price for the Common Stock, the Committee shall use such other
information deemed appropriate by the Committee to determine the fair market
value of the Common Stock on the date of any grant. No Incentive
Stock Option shall be granted to any employee who at the time directly or
indirectly owns more than ten percent (10%) of the combined voting power of all
classes of stock of the Company or of a subsidiary, unless the exercise price is
not less than 110 percent (110%) of the fair market value of the Common Stock on
the date of grant, and unless the Option is not exercisable more than five (5)
years after the date of grant.
(b) Exercise of
Options. An optionee shall exercise an Option by delivery of a
signed, written notice to the Company, specifying the number of Shares to be
purchased, together with payment of the full purchase price for the
Shares. The Company may accept payment from a broker on behalf of the
optionee and may, upon receipt of signed, written instructions from the
optionee, deliver the Shares directly to the broker. The date of
receipt by the Company of the final item required under this paragraph shall be
the date of exercise of the Option.
(c) Option
Agreement Provisions. Each Option granted under the Plan shall be
evidenced by a Stock Option Agreement executed by the Company and the optionee,
and shall be subject to the following terms and conditions, and such other terms
and conditions as may be prescribed by the Committee:
(i) Incentive
Stock Option Dollar
Limitation. Each Option grant to an employee shall constitute
an Incentive Stock Option eligible for favorable tax treatment under Section 422
of the Code, provided that no more than $100,000 of such Options (based upon the
fair market value of the underlying Shares as of the date of grant) can first
become exercisable for any employee in any calendar year. To the
extent any Option grant exceeds the $100,000 dollar limitation, it shall
constitute a Nonqualified Stock Option. Each stock option agreement
shall specify the extent to which it is an Incentive and/or a Nonqualified Stock
Option. For purposes of applying the $100,000 limitation, options
granted under this Plan and under all other plans of the Company and its
subsidiaries which are qualified under Section 422 of the Code shall be
included.
(ii) Payment. The
full purchase price of the Shares acquired upon exercise of any Option shall be
paid in cash, by certified or cashier’s check, or in the form of Shares of the
Company’s Common Stock with a fair market value equal to the full purchase price
and free and clear of all liens and encumbrances.
The Committee in its sole discretion
may also permit the “cashless exercise” of an Option. In the event of
a cashless exercise, the optionee shall surrender the Option to the Company, and
the Company shall issue the optionee the number of Shares determined as
follows:
|
X =
the number of Shares to be issued to the
optionee.
|
|
Y =
the number of Shares with respect to which the Option is being
exercised.
|
|
A =
the closing sale price of the Common Stock on the date of exercise, or in
the absence thereof, the fair market value on the date of
exercise.
|
|
B =
the Option exercise price.
|
(iii) Exercise
Period. The period within which an Option must be exercised
shall be determined by the Committee at the time of grant. The
exercise period for an Incentive Stock Option or a Nonqualified Stock Option
shall be subject to a maximum of ten (10) years, or five (5) years for an
Incentive Stock Option granted to an employee who directly or indirectly owns
more than ten percent (10%) of the combined voting power of all classes of stock
of the Company or a subsidiary. Unless modified by the Committee,
each Option shall become exercisable to the extent of twenty-five percent (25%)
of the shares on each of the first four (4) anniversaries of the date of
grant. To the extent exercisable, an Option may be exercised in whole
or in part. The Committee may impose different or additional
conditions with respect to length of service or attainment of specified
performance goals which must be satisfied prior to exercise of all or any part
of an option.
(iv) Rights of Optionee Before
Exercise. The holder of an Option shall not have the rights of
a shareholder with respect to the Shares covered by his or her Option until such
Shares have been issued to him or her upon exercise of the Option.
(v) Termination of
Employment. If an optionee is an employee, and his or her
employment is terminated other than by death, disability, or for conduct which
is contrary to the employer’s best interests, the optionee may, within ninety
(90) days of such termination (or longer, if approved by the Committee),
exercise any unexercised portion of his or her Option to the extent he or she
was entitled to do so at the time of such termination.
If
termination of employment is effected by death or disability of the optionee,
the Option, or any portion thereof, may be exercised to the extent the optionee
was entitled to do so at the time of his or her death or disability, by the
optionee or his or her personal representative, at any time within one year
subsequent to the date of his or her termination of employment.
If an
optionee’s employment is terminated by his or her employer for conduct which is
contrary to the best interests of the employer, as determined by the employer in
its sole discretion, the unexercised portion of the optionee’s Option shall
expire automatically on the date of termination of his or her
employment.
The
Committee may, in its discretion, amend or eliminate any one or more of the
provisions of this paragraph (v) in connection with the grant of any individual
Option(s).
Notwithstanding
the foregoing, no Option shall be exercisable subsequent to the date of
expiration of the Option term and no Option shall be exercisable subsequent to
the termination of the optionee’s employment except as specifically provided in
this paragraph (v).
(vi) Termination of Service by
Directors, Consultants and Advisors. If an optionee is a
director, consultant, or advisor, and his or her position with the Company
terminates for any reason, the optionee may, within ninety (90) days of such
termination, or within one (1) year of such termination if the optionee is a
director (or longer in either case, if approved by the Committee), exercise any
unexercised portion of his or her Option to the extent he or she was entitled to
do so at the time of such termination. If termination is effected by
death of the optionee, the Option may be exercised for the
applicable
period to the extent the optionee was entitled to do so at the time of his or
her death by the optionee’s personal representative. No Option shall
be exercisable subsequent to the date of expiration of the Option term and no
Option shall be exercisable subsequent to the termination of the optionee’s
position with the Company, except as specifically provided in this paragraph
(vi).
(vii) Non-transferability of
Option. No Option shall be transferable by the optionee
otherwise than by will or by the laws of descent and distribution, and each
Option shall be exercisable during the optionee’s lifetime only by the
optionee. No Option may be attached or subject to levy by an
optionee’s creditors.
(viii) Date of
Grant. The date on which the exercise price becomes fixed for
an Option shall be considered the date on which the Option is
granted.
ARTICLE
VII.
RESTRICTED
STOCK
(a) Grant of Restricted
Stock. Each grant of Restricted Stock made under the Plan
shall be for such number of Shares as shall be determined by the Committee and
set forth in the agreement containing the terms of such grant. The
agreement for each grant shall set forth any objective performance goals which
must be satisfied in order for the Restricted Stock to vest and the forfeiture
and transfer restrictions to lapse. The Committee may base
performance goals on factors which the Committee determines appropriate from
time to time, including but not limited to the Company’s stock price, market
share, revenues, net income, and return on equity. The agreement may
also set forth a period of time during which the employee must remain in the
continuous employment of the Company in order for the forfeiture and transfer
restrictions to lapse. If the Committee so determines, the
restrictions may lapse during such restricted period in installments with
respect to specified portions of the shares covered by the Restricted Stock
grant.
(b) Agreements. Awards
of Restricted Stock shall be evidenced by agreements in such form as the
Committee shall from time to time approve, which agreements shall be subject to
the terms and conditions contained in the Plan and any additional terms and
conditions established by the Committee that are consistent with the
Plan.
(c) Delivery of Common Stock and
Restrictions. At the time of a Restricted Stock grant, a
certificate representing the number of Shares awarded thereunder shall be
registered in the name of the Participant. Such certificate shall be
held by an escrow agent appointed by the Company for the account of the
Participant until vested subject to the terms and conditions of the Plan, and
shall bear such a legend setting forth the restrictions imposed thereon as the
Committee, in its discretion, may determine. The Participant shall
have all rights of a shareholder with respect to the Shares, including the right
to receive dividends and the right to vote such shares, subject to the following
restrictions:
(i) the
Participant shall not be entitled to delivery of a stock certificate until the
expiration of the restricted period and the fulfillment of any other restrictive
conditions set forth in the agreement with respect to such Shares;
(ii) none
of the Shares may be sold, assigned, transferred, pledged, hypothecated or
otherwise encumbered or disposed of during such restricted period or until after
the fulfillment of any such other restrictive conditions; and
(iii) except
as otherwise determined by the Committee, all of the Shares to the extent not
vested shall be forfeited and all rights of the Participant to such Shares shall
terminate, without further
obligation
on the part of the Company, unless the Participant remains in the continuous
employment of the Company for the entire restricted period in relation to which
such Common Stock was granted and unless any other restrictive conditions
relating to the Restricted Stock Award are met.
Any
Common Stock, any other securities of the Company and any other property (except
for cash dividends) distributed with respect to the Shares subject to Restricted
Stock Awards shall be subject to the same restrictions, terms and conditions as
such Restricted Stock.
(d) Termination of
Restrictions. At the end of the applicable restricted period
and provided that any other restrictive conditions of the grant of Restricted
Stock are met, or at such earlier time as otherwise determined by the Committee,
the Shares shall be considered vested and all restrictions set forth in the
agreement relating to the grant of Restricted Stock or in the Plan shall lapse
as to the Restricted Stock subject thereto, and a stock certificate for the
appropriate number of Shares, free of the restrictions and the Restricted Stock
legend, shall be delivered to the Participant or his or her beneficiary or
estate, as the case may be.
ARTICLE
VIII.
GENERAL
(a) No Cash Consideration for
Awards. Awards shall be granted for no cash consideration or
for such minimal cash consideration as may be required by applicable
law.
(b) Awards May Be Granted
Separately or Together. Awards may, in the discretion of the
Committee, be granted either alone or in addition to, in tandem with or in
substitution for any other Award. Awards granted in addition to or in
tandem with other Awards may be granted either at the same time as or at a
different time from the grant of such other Awards.
(c) Term of
Awards. The term of each Award shall be for such period as may
be determined by the Committee.
(d) Restrictions; Stock Market
Listing. All certificates for Shares or other securities
delivered under the Plan pursuant to any Award or the exercise thereof shall be
subject to such stop transfer orders and other restrictions as the Committee may
deem advisable under the Plan, or the rules, regulations and other requirements
of the Securities and Exchange Commission and any applicable federal or state
securities laws, and the Committee may cause a legend or legends to be placed on
any such certificates to make appropriate reference to such
restrictions. If the Shares are traded on a securities market, the
Company shall not be required to deliver any Shares covered by an Award unless
and until such Shares have been admitted for trading on such securities
market.
(e) No Right to Continued
Employment. Nothing in the Plan or in any Award document shall
be construed to confer upon any employee any right to continue in the employ of
the Company or a subsidiary, or to interfere in any way with the right of the
Company or a subsidiary as employer to terminate his or her employment at any
time, nor to derogate from the terms of any written employment agreement between
such corporation and the optionee.
(f) Section 16
Compliance. The Plan is
intended to comply in all respects with SEC Rule 16b-3, as amended, and in all
events the Plan shall be construed in accordance with the requirements of Rule
16b-3. If any Plan provision does not comply with Rule 16b-3, the
provision shall be deemed inoperative. The Board of Directors, in its
absolute discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan with respect to persons who are
officers or directors subject to Section 16 of the Securities
and
Exchange Act of 1934, as amended, without so restricting, limiting or
conditioning the Plan with respect to other Participants.
ARTICLE
IX.
WITHHOLDING OF TAXES; TAX
BONUSES
The
Company shall make such provisions and take such steps as it may deem necessary
or appropriate for the withholding of any taxes that the Company is required by
any law or regulation to withhold in connection with any Award including, but
not limited to, withholding a portion of the Shares issuable pursuant to the
Award, or requiring the Participant to pay to the Company, in cash, an amount
sufficient to cover the Company’s withholding obligations.
The
Committee, in its discretion, shall have the authority, at the time of grant of
any Award under this Plan or at any time thereafter, to approve cash bonuses to
designated Participants to be paid upon their exercise or receipt of (or the
lapse of restrictions relating to) Awards in order to provide funds to pay all
or a portion of federal and state taxes due as a result of such exercise or
receipt (or the lapse of such restrictions). The Committee shall have
full authority in its discretion to determine the amount of any such tax bonus
and the Company shall have the authority to withhold and pay such tax bonuses
over to the appropriate taxing authorities on the Participants’
behalf.
ARTICLE
X.
EFFECTIVE DATE OF
PLAN
The
effective date of the Plan shall be the date of its original adoption by the
Board of Directors of the Company as indicated on the first page
hereof.
ARTICLE
XI.
DURATION OF THE
PLAN
The Plan
shall terminate January 30, 2019, which is ten years after the date of its
approval by the Board of Directors, unless sooner terminated by issuance of all
Shares reserved for issuance hereunder. No Award shall be granted
under the Plan after such termination date.
ARTICLE
XII.
TERMINATION OR AMENDMENT OF
THE PLAN
The Board
of Directors of the Company may at any time terminate the Plan, or make such
modifications of the Plan as it shall deem advisable, subject to shareholder
approval to the extent required by applicable law or stock market rule or
regulation. No termination or amendment of the Plan may, without the
consent of the Participants to whom any Awards shall previously have been
granted, adversely affect the rights of such Participants under such
Awards.
ARTICLE
XIII.
SHAREHOLDER
APPROVAL
The Board
of Directors shall submit the Plan to the shareholders for their approval within
12 months of the date of its adoption by the Board. Awards granted
prior to such approval are contingent on receipt of such
approval,
and shall automatically lapse and become null and void ab initio if such
approval is not granted. If any grants of Restricted Stock lapse due
to failure to obtain shareholder approval, the Company shall pay to the affected
Participants, in cash, an amount equal to the total fair market value of the
Shares of Restricted Stock granted to the Participant as of the grant date or
the date the shareholders fail to approve the Plan, whichever is
greater. The Board shall also submit any amendments to the
shareholders for approval if required by applicable law or stock market rule or
regulation.
ARTICLE
XIV.
INTERPRETATION
The Plan
shall be interpreted in accordance with Minnesota law.
* * * * *
* * * * * * * * * * * * * * * *
ANNUAL
MEETING OF SHAREHOLDERS
Thursday,
June 18, 2009
10:00
a.m. Minneapolis Time
Second
Floor Banquet Room at NorthCoast
294
East Grove Lane
Wayzata,
Minnesota
This
proxy is solicited on behalf of the board of directors of Northern Oil and Gas,
Inc. Whether or not
you are able to attend the Annual Meeting in person, we urge you to sign and
date below and return it in the enclosed envelope.
The
shareholder of Northern Oil and Gas, Inc. whose name and signature appear on the
reverse side of this card, having received the notice of Annual Meeting of
shareholders and the related proxy statement for Northern Oil and Gas, Inc.’s
Annual Meeting of Shareholders to be held in the second floor banquet room at
NorthCoast located at 294 East Grove Lane in Wayzata, Minnesota, on Thursday,
June 18, 2009, at 10:00 a.m., local time, hereby constitutes and appoints
Michael L. Reger and Ryan R. Gilbertson, and each of them, his, her or its true
and lawful agents and proxies with full power of substitution in each, to
represent such shareholder at the Annual Meeting, and at any adjournments
thereof, and to vote at the Annual Meeting, and at any adjournments thereof, all
shares of common stock held of record by the shareholder as of the close of
business on May 22, 2009, in the manner shown on the reverse side of this
card.
IF A
PROPERLY EXECUTED PROXY IS RETURNED AND THE SHAREHOLDER HAS NOT INDICATED HOW
THE SHARES ARE TO BE VOTED AT THE MEETING, THE SHARES REPRESENTED BY SUCH PROXY
WILL BE CONSIDERED PRESENT AT THE MEETING FOR PURPOSES OF DETERMINING A QUORUM
AND WILL BE VOTED FOR EACH PROPOSAL PRESENTED AT THE MEETING.
See
reverse for voting instructions.
Please
detach here
The
board of directors Recommends a Vote FOR the Election of All Nominees and
FOR Proposal 2 and 3.
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1.
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Election
of directors of the Company to serve until the next meeting of
Stockholders:
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01 Michael
L. Reger
02 Robert
Grabb
03 Ryan
R. Gilbertson
04 Loren
J. O’Toole
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05 Jack
King
06 Lisa
Bromiley Meier
07 Carter
Stewart
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Vote
FOR
all
nominees
(except
as
marked)
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Vote
WITHHELD
from
all nominees
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(Instructions:
To withhold authority to vote for any indicated nominee, write the
number(s) of the nominee(s) in the box provided to the
right.)
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2.
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To
ratify the appointment of Mantyla McReynolds LLC as our independent
registered public accounting firm for the fiscal year ending
December 31, 2009
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For
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Against
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Abstain
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3.
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To
approve the Northern Oil and Gas, Inc. 2009 Equity Incentive
Plan
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For
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Against
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Abstain
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In
their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting. If a properly
executed proxy is returned and the shareholder has withheld authority to
vote for one or more nominees or voted against or abstained from voting on
the ratification of our independent reregistered public accountants, the
shares represented by such proxy will be considered present at the meeting
for purposes of determining a quorum and for purposes of calculating the
vote, but will not be considered to have been voted in favor of such
matter.
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Address
Change? Mark Box Indicate changes
below:
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Date
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Signature(s)
in Box
The
undersigned hereby revokes any proxy previously given with respect to our
common shares and hereby ratifies and confirms all that the proxies, their
substitutes or any of them may lawfully do by virtue
hereof. When shares are held by joint tenants, both should
sign. If a corporation, please sign the full corporate name by
any authorized officer. If a partnership, LLC or other entity,
including trusts, please sign the entity name by an authorized person and
indicate such person’s position with the entity.
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