UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

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Definitive Proxy Statement



 

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Soliciting Material Pursuant to §240.14a-12



VAALCO ENERGY, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)



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VAALCO ENERGY, INC. 2020 Proxy Statement |    1

 


 



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VAALCO ENERGY, INC.

9800 Richmond Avenue, Suite 700

Houston, Texas 77042



Dear Fellow Stockholders:



Although we are currently facing unprecedented challenges in our industry, VAALCO has executed on its near-term strategy extremely well over the past 18 months. In 2018, we strengthened VAALCO’s financial position by eliminating all outstanding debt, and we were able to negotiate the extension of our Production Sharing Contract (PSC) at our Etame Marin field offshore Gabon. This provided VAALCO the runway necessary to maximize value, grow reserves and increase production from our world-class Etame asset. In the first half of 2019, we were able to remove the $15 million obligation associated with our exit from Angola by completing a settlement agreement for $4.5 million in cash and the elimination of the $3.3 million receivable from Sonangol. This agreement removes all outstanding liabilities and obligations for VAALCO related to Block 5 in Angola. On September 26, 2019, we began trading on the London Stock Exchange under the trading symbol “EGY” which complements our listing on the New York Stock Exchange.  



In September of 2019, we began our 2019/2020 drilling program at Etame. This program has been transformational for VAALCO, nearly doubling our production while adding only minimal variable costs. We are also proud to say that throughout the entire drilling campaign, there were no environmental or safety incidents, and we were able to execute the entire drilling program on time, within our initial budget and with cash on hand and through operational cash flow.



Notwithstanding our recent successes, the oil and gas industry is in the midst of an unprecedented disruption due to a combination of factors, including the substantial decline in global demand for oil caused by the coronavirus (“COVID-19”) pandemic and subsequent mitigation efforts. While we believe that our operational and financial execution has better positioned VAALCO to weather the near-term uncertainties, these market conditions have significantly impacted us and our outlook globally and we expect that 2020 will be a challenging year for our business. Given the dynamic nature of these events, we cannot reasonably estimate the period of time that the COVID-19 pandemic and related market conditions will persist, the full extent of the impact they will have on our business, financial condition, results of operations or cash flows or the pace or extent of any subsequent recovery. Despite these challenges, we remain committed to generating long-term value for our stockholders by focusing on capital efficiency, controlling costs and optimizing production.



We know that this is a difficult time for many and we are grateful for your continued support. We look forward to engaging with you at our 2020 Annual Meeting. 



The Board of Directors remains committed to maintaining high standards of ethical conduct and governance.  We believe clear communications with investors is crucial and look forward to engagement on a wide variety of topics at our 2020 Annual Meeting.



Your vote is important. Even if you plan to attend the meeting in person, please follow the instructions provided to you and vote your shares today. This will not prevent you from voting your shares in person if you are able to attend.



On behalf of your Board of Directors, thank you for your continued support of and interest in our business.



Signed,

VAALCO ENERGY, INC. 2020 Proxy Statement |    2

 


 



The Board of Directors



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VAALCO ENERGY, INC.



9800 Richmond Avenue, Suite 700

Houston, Texas 77042



NOTICE OF ANNUAL MEETING OF STOCKHOLDERS



To the Stockholders of VAALCO Energy, Inc.:



Notice is hereby given that the 2020 Annual Meeting of Stockholders of VAALCO Energy, Inc. (the “Company”) will be held at the Marriott Houston Westchase, 2900 Briarpark Drive, Houston, Texas 77042, on Thursday, June 25, 2020, at 9:00 a.m. Central Time (the “Annual Meeting”). We intend to hold our annual meeting in person. However, we are sensitive to the public health and travel concerns our stockholders may have and recommendations that public health officials may issue in light of the evolving coronavirus (“COVID-19”) situation. We are monitoring COVID-19 developments and the related recommendations and protocols issued by public health authorities and federal, state and local governments.



As a result, we may impose additional procedures or limitations on meeting attendees (beyond those described above) or may decide to hold the meeting in a different location or solely by means of remote communication (i.e., a virtual-only meeting). If we determine that alternative annual meeting arrangements are advisable or required, then we will issue a press release announcing our decision and post additional information on our website at www.VAALCO.com and we encourage you to check this website prior to the meeting if you plan to attend.



The Annual Meeting is being held for the following purposes:

1.

To elect four directors, each for a term of one year;

2.

To ratify the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for 2020;

3.

To approve, on an advisory basis, the compensation of our named executive officers;

4.

To approve the VAALCO Energy, Inc. 2020 Long Term Incentive Plan; and

5.

To transact such other business as may properly come before the Annual Meeting or any adjournments, postponements, or recesses thereof.

These proposals are described in the accompanying proxy materials. You will be able to vote at the Annual Meeting, or any adjournment, postponement or recess thereof, only if you were a stockholder of record at the close of business on April 27, 2020.



We are providing access to our proxy materials over the Internet. To do this, we are mailing to our stockholders a Notice of Internet Availability of Proxy Materials, which we refer to in the proxy statement as a Notice. The Notice contains instructions on how to access those documents over the Internet, as well as instructions on how to request a paper copy of our proxy materials. We believe that the Notice process will allow us to provide the information you need in a timelier manner and will save the cost of printing and mailing documents to you.



In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. Stockholders who receive future proxy materials by email will save us the cost of printing and mailing documents and will reduce the impact of meetings of stockholders on the environment.  A

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stockholder’s election to receive proxy materials by email will remain in effect until the stockholder terminates that election.





 



By Order of the Board of Directors,



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Andrew L. Fawthrop



Chairman of the Board



Houston, Texas



April 29, 2020

 

YOUR VOTE IS IMPORTANT!



IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF THE STOCKHOLDERS TO BE HELD ON JUNE 25, 2020, AT 9:00 a.m., CENTRAL DAYLIGHT TIME:



The Proxy Statement and our Annual Report for 2019 are available at www.proxyvote.com.



If you have any questions or need assistance voting your shares, please call our proxy solicitor:



D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, NY 11005



Banks and Brokerage Firms, please call: (212) 269-5550



Stockholders, please call toll free: (888)  564-8149







VAALCO ENERGY, INC. 2020 Proxy Statement |    5

 


 

TABLE OF CONTENTS





 



 

Leadership Letter

Notice of 2020 Annual Meeting of Stockholders

Proxy Statement Summary

Proposal No. 1—Election of Directors

15 

Directors

15 

Board’s Role and Responsibilities

25 

Meetings and Committees of Directors

25 

Director Compensation

29 

Proposal No. 2—Ratification of Appointment of Independent Registered Public Accounting Firm

31 

Audit Committee Report

33 

Proposal No. 3—Advisory Resolution on Executive Compensation

34 

Compensation Discussion and Analysis

38 

Executive Compensation Philosophy

40 

Compensation Committee Report

51 

2019 Summary Compensation Table

52 

Grants of Plan-Based Awards during 2019

53 

Outstanding Equity Awards at 2019 Fiscal Year-End

54 

Security Ownership of Certain Beneficial Owners and Management

60 

Proposal No. 4—Approval of the VAALCO Energy, Inc. 2020 Long Term Incentive Plan

61 

Additional Information

71 

Appendix A—Non-GAAP Financial Measures

72 

Appendix B—VAALCO Energy, Inc. 2020 Long Term Incentive Plan

73 

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VAALCO ENERGY, INC.

9800 Richmond Avenue, Suite 700

Houston, Texas 77042



PROXY STATEMENT

2020 ANNUAL MEETING OF STOCKHOLDERS



We are providing you these proxy materials in connection with the solicitation of proxies by our Board of Directors (the “Board of Directors” or the “Board”) to be voted at our 2020 Annual Meeting of Stockholders (our “Annual Meeting”), and at any postponement, adjournment or recess of the Annual Meeting. In this proxy statement, VAALCO Energy, Inc. is referred to as the “Company,” “our company,” “we,” “our,” “us” or “VAALCO.”



Matters To Be Voted On







 

 

 



Item for Business

Board Vote Recommendation

Further Details (Page No.)

1.

Election of four directors

FOR EACH DIRECTOR NOMINEE

15

2.

Ratification of the appointment of independent registered public accounting firm

FOR

31

3.

Advisory resolution on executive compensation

FOR

33

4.

Approval of the VAALCO Energy, Inc. 2020 Long Term Incentive Plan

FOR

61




YOUR VOTE IS IMPORTANT

 

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, WE ENCOURAGE YOU TO VOTE AND SUBMIT

YOUR PROXY BY INTERNET, TELEPHONE OR BY MAIL.


 

Governance Principles



The Board of Directors’ Corporate Governance Principles, which include guidelines for determining director independence and qualifications for directors, are published on VAALCO’s website at www.VAALCO.com. The website makes available all of VAALCO’s corporate governance materials, including Board committee charters. These materials are also available in print to any stockholder upon request. The Board regularly reviews corporate governance developments and modifies its Governance Principles, committee charters and key practices as warranted.

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PROXY STATEMENT SUMMARY



This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider in making a voting decision, and you should read the entire Proxy Statement carefully before voting.



Annual Meeting Information



The Board of VAALCO is soliciting proxies for the 2020 annual meeting of stockholders and any adjournment, postponement or recess of such meeting.







 

Time and Date:

9:00 a.m. Central Daylight Time, on June 25,  2020



 

Location:

Marriott Houston Westchase, 2900 Briarpark Drive,

Houston, Texas 77042*



 

Record Date:

April 27, 2020



 

Proxy Materials Distribution Date:

April 29, 2020



 

Voting Rights:

Each share of common stock is entitled to one vote



 

Electronic Access to Proxy

Materials and Voting:

www.proxyvote.com



*Depending on concerns about the coronavirus or COVID-19, we might hold a Virtual Annual Meeting instead of holding an in-person meeting at an established location in Texas. We would publicly announce a determination to hold a Virtual Annual Meeting in a press release available at www.VAALCO.com as soon as practicable before the meeting. In that event, the 2020 Annual Meeting of Stockholders would be conducted solely virtually, at the above date and time, via live audio webcast.



Items of Business and Voting Recommendations







 

 

 



 

 

 



Item for Business

Board Vote Recommendation

Further Details (Page No.)

1.

Election of four directors

FOR EACH DIRECTOR NOMINEE

15

2.

Ratification of the appointment of independent registered public accounting firm

FOR

31

3.

Advisory resolution on executive compensation

FOR

34

4.

Approval of the VAALCO Energy, Inc. 2020 Long Term Incentive Plan

FOR

61



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Financial and Business Information



We are a Houston, Texas-based independent energy company primarily engaged in the acquisition, development and production of crude oil. Our primary source of revenue has been from a production sharing contract that we have entered into with the Republic of Gabon related to the Etame Marin block located offshore Gabon in West Africa. We also currently own interests in an undeveloped block offshore Equatorial Guinea, West Africa.



With the successful launch of our 2019/2020 drilling program, 2019 represented the beginning of the first phase of growth strategy and a return to converting resources to reserves to deliver value to our stockholders. Key highlights of our business and our performance in 2019 and the first part of 2020 include, among other things:



·

produced 3,476 net revenue interest (“NRI”)(1) barrels of crude oil per day (“BOPD”), or 3,995 working interest (“WI”)(2) BOPD, and sold 1.3 million barrels of crude oil (“MMBO”) in the full year 2019;



·

for the full year 2019, reported net income of $2.6 million ($0.04 per diluted share) and Adjusted Net Income(3) of $18.6 million ($0.31 per diluted share) and generated Adjusted EBITDAX(3) of $37.5 million;



·

successfully drilled and brought the Etame 9H and Etame 11H wells on production at higher-than-expected initial flow rates in December 2019 and January 2020, respectively;



·

successfully drilled 750 feet of horizontal section in good-quality Gamba reservoir at the South East Etame 4H well with first production of 2,200 BOPD gross, 600 BOPD NRI or 680 BOPD WI, in March 2020;



·

estimates 2020 operational breakeven has decreased to approximately $31 per barrel due to a 35% increase in year-over-year production;



·

added 1.1 MMBO proved reserves offset by 0.2 MMBO due to lower average pricing during 2019; and



·

reported unrestricted cash balance of $45.9 million as of December 31, 2019.



































___________________________

(1) All NRI production rates and volumes are VAALCO’s 31.1% WI less 13% royalty volumes.

(2) All WI production rates and volumes are VAALCO’s 31.1% WI.

(3) Adjusted EBITDAX and Adjusted Net Income (Loss) are non-GAAP financial measures and are defined and reconciled to the nearest GAAP measure in “Appendix A—Non-GAAP Financial Measures.”

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During the first quarter of 2020, we drilled the remaining appraisal wellbore required to fulfill the terms of the PSC Extension. In addition, we commenced drilling a third development well, which was completed in late March of 2020.



Notwithstanding our recent successes, the oil and gas industry is in the midst of an unprecedented disruption due to a combination of factors, including the substantial decline in global demand for oil caused by the COVID-19 pandemic and subsequent mitigation efforts. While we believe that our operational and financial execution has better positioned VAALCO to weather the near-term uncertainties, these market conditions have significantly impacted us and our outlook globally and we expect that 2020 will be a challenging year for our business.



Proposal No. 1—Election of Directors

Director Nominees

The Board of Directors is asking you to elect the four nominees named below as directors for terms that expire at the 2021 annual meeting of stockholders. The following table provides summary information about the four director nominees. The Board of Directors has nominated two of the existing directors for election at the Annual Meeting. In addition, recognizing a need to refresh the Board of Directors and to bring in diverse perspectives, the Board of Directors has nominated two new independent director nominees for election at the Annual Meeting, including one female director nominee. Each of Mr. Knapp and Mr. Pully will serve the remainder of their current terms. For more information about the director nominees, see page 15.  

 





 

 

 



 

 

 

Name

Director Since

Independence Status

Board Committees

Andrew L. Fawthrop

2014

Independent

Audit, Compensation, Strategic, Nominating and Corporate Governance

Cary M. Bounds

2016

Not Independent

Strategic

George Maxwell

Independent

Cathy Stubbs

Independent



If elected, we currently expect that Mr. Maxwell and Ms. Stubbs would each serve on our Audit, Compensation, Strategic and Nominating and Corporate Governance Committees.



Vote Required



The four nominees for election as directors at the Annual Meeting who receive the greatest number of “FOR” votes cast by the stockholders, a plurality, will be elected as our directors. For this purpose, abstentions and broker non-votes will not be taken into account for purposes of determining the outcome of the election of directors. Accordingly, if you own your shares through a broker, you must give the broker instructions to vote your shares in the election of directors. Otherwise, your shares will not be voted.



Proposal No. 2—Ratification of Appointment of Independent Registered Public Accounting Firm



Auditor Ratification



The Board is asking you to ratify the selection of BDO USA, LLP (“BDO”) as our independent registered public accounting firm for the fiscal year ending December 31, 2020. For additional information concerning BDO, including the fees billed to us for services provided by BDO during 2019 and 2018, see pages 31 and 32.



Vote Required



The approval of the ratification of the appointment of BDO as the Company’s independent registered public accounting firm requires the vote of the holders of a majority in voting power of the shares of our common stock that are present in person or by proxy at the Annual Meeting. For this proposal, abstentions will have the same effect as votes cast “against” the proposal. Broker non-votes are not applicable to the proposal because your broker has discretionary authority to vote your common stock in the absence of affirmative instructions from you with respect to this proposal.

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Proposal No. 3—Advisory Resolution on Executive Compensation



Say-on-Pay



Pursuant to Section 14A(a)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are asking our stockholders to approve, on an advisory or non-binding basis, the compensation of our named executive officers as disclosed in this Proxy Statement. For a detailed description of our executive compensation program, see “Compensation Discussion and Analysis” beginning on page 38.



Vote Required



The approval, on an advisory basis, of the compensation of our named executive officers requires the vote of the holders of a majority in voting power of the shares of our common stock that are present in person or by proxy at the Annual Meeting. For this proposal, abstentions and broker non-votes will have the same effect as votes cast “against” the proposal.



Proposal No. 4—Approval of the VAALCO Energy, Inc. 2020 Long Term Incentive Plan



VAALCO Energy, Inc. 2020 Long Term Incentive Plan



The Board is asking you to approve of the VAALCO Energy, Inc. 2020 Long Term Incentive Plan (the “2020 LTIP”). The Board adopted the 2020 LTIP upon the recommendation of the Compensation Committee, subject to stockholder approval. Our Board and our Compensation Committee approved the 2020 LTIP because they believe that the number of shares of common stock currently available under the VAALCO Energy, Inc. 2014 Long Term Incentive Plan (the “2014 LTIP”) is insufficient to meet our current and future equity compensation needs. Stockholder approval of the 2020 LTIP is intended to ensure that the Company has sufficient shares available to attract and retain key employees, key contractors and outside directors, and to further the Company’s growth and development. 



For more information on the 2020 LTIP, see page 61.



Vote Required



Pursuant to NYSE listing rules, the approval of the 2020 LTIP requires the affirmative vote of the majority of votes cast in person or by proxy at the Annual Meeting. For this proposal, abstentions are considered votes “cast” under NYSE rules and will have the same effect as votes cast “against” the proposal. Broker non-votes are not considered votes “cast” and will not be taken into account for purposes of determining the approval of the 2020 LTIP.



Voting and Other Procedures Related to the Annual Meeting



Record Date and Persons Entitled to Vote



The Board of Directors has set the close of business on April 27, 2020 as the record date for stockholders entitled to notice of and to vote at the meeting. At the close of business on the record date, there were 57,456,138 shares of VAALCO common stock outstanding and entitled to vote at the Annual Meeting. Each share of common stock is entitled to one vote.



Procedure to Access Proxy Materials Over the Internet



Your Notice or (if you received paper copies of the proxy materials) your proxy card will contain instructions on how to view our proxy materials for the Annual Meeting on the Internet. Our proxy materials are also available at www.proxyvote.com.



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How to Vote



The Board encourages you to exercise your right to vote. Your vote is important. Stockholders can vote in person at the Annual Meeting or by proxy. Giving us your proxy means you authorize us to vote your shares at the Annual Meeting in the manner you direct. If you are a stockholder of record (you own shares in your name), there are three ways to vote by proxy:

·

By Internet—You may vote over the Internet at www.proxyvote.com by following the instructions on the Notice or, if you received your proxy materials by mail, by following the instructions on the proxy card.

·

By telephone—Stockholders located in the United States that receive proxy materials by mail may vote by telephone by calling 1-800-690-6903 and following the instructions on the proxy card.

·

By mail—If you received proxy materials by mail, you can vote by mail by marking, dating, signing and returning the proxy card in the postage-paid envelope.

Telephone and Internet voting will be available 24 hours a day and will close at 11:59 p.m. Eastern Daylight time on June 24, 2020.



Voting by proxy will not limit your right to vote at the Annual Meeting if you decide to attend in person. The Board recommends that you vote by proxy since it is not practical for most stockholders to attend the Annual Meeting.



If you are a street name stockholder (that is, if your shares are held of record in the name of a bank, broker or other holder of record), you will receive instructions from the bank, broker or other record holder of your shares. You must follow the instructions of the holder of record in order for your shares to be voted. If you are a street name stockholder, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at the Annual Meeting.



The shares represented by all valid proxies received by telephone, by Internet or by mail will be voted in the manner specified. Where specific choices are not indicated, the shares represented by all valid proxies will be voted:

·

for the nominees for directors named in this proxy statement;

·

for ratification of the appointment of the independent registered public accounting firm;  

·

for approval of the advisory resolution on executive compensation; and

·

for approval of the VAALCO Energy, Inc. 2020 Long Term Incentive Plan.



How to Change Your Vote; Revocability of Proxy



If you are a stockholder of record, you may later revoke your proxy instructions by:

·

sending a written statement to that effect to the Corporate Secretary at the address listed on the first page of this proxy statement;

·

voting again by the Internet or telephone (only the last vote cast will be counted), provided that the stockholder does so before 11:59 p.m. Eastern time on June 24, 2020;

·

submitting a properly signed proxy with a later date; or

·

voting in person at the Annual Meeting.



If you are a street name stockholder, you may later revoke your proxy instructions by following the procedures provided by your bank, broker or other nominee.



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Quorum



Your stock is counted as present at the Annual Meeting if you attend the Annual Meeting and vote in person or if you properly vote by Internet, telephone or mail. In order for us to hold our Annual Meeting, holders of a majority of the stock issued and outstanding and entitled to vote at the Annual Meeting must be present in person or represented by proxy at the Annual Meeting. This is referred to as a quorum. Abstentions and broker non-votes will be counted as present for purposes of determining a quorum.



Routine and Non-Routine Matters; Abstentions and Broker Non-Votes



The NYSE permits brokers to vote their customers’ stock held in street name on “routine matters” when the brokers have not received voting instructions from their customers. The NYSE does not, however, allow brokers to vote their customers’ stock held in street name on non-routine matters unless they have received voting instructions from their customers. In such cases, the uninstructed shares for which the broker is unable to vote are called “broker non-votes.”



The ratification of the appointment of the independent registered public accounting firm is a routine matter on which brokers may vote in their discretion on behalf of customers who have not provided voting instructions.



The election of directors, the advisory vote to approve our executive compensation and the approval of the 2020 LTIP are non-routine matters on which brokers are not allowed to vote unless they have received voting instructions from their customers.



Vote Required for Each Proposal

·

Election of Directors. The four nominees for election as directors at the Annual Meeting who receive the greatest number of “FOR” votes cast by the stockholders, a plurality, will be elected as our directors. For this purpose, abstentions and broker non-votes will not be taken into account for purposes of determining the outcome of the election of directors. Accordingly, if you own your shares through a broker, you must give the broker instructions to vote your shares in the election of directors. Otherwise, your shares will not be voted.

·

Independent Registered Public Accounting Firm. The ratification of the appointment of the independent registered public accounting firm requires the affirmative vote of a majority of the stock present in person or by proxy at the Annual Meeting. Abstentions will have the same effect as votes cast “against” the proposal. Broker non-votes are not applicable to the proposal to ratify the appointment of the independent auditor because your broker has discretionary authority to vote your common stock in the absence of affirmative instructions from you with respect to this proposal.

·

Named Executive Officer Compensation. Our named executive officer compensation will be considered approved by our stockholders in an advisory manner upon the affirmative vote of a majority of the stock present in person or by proxy at the Annual Meeting. For this purpose, abstentions and broker non-votes will have the same effect as votes cast “against” the proposal. If you own your shares through a broker, you must give the broker instructions to vote your shares in the advisory vote on compensation of our executive officers. Otherwise, your shares will not be voted and will have the same effect as a vote cast “against” this proposal.

·

Approval of the 2020 LTIP. The 2020 LTIP will be considered approved by our stockholders upon the affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting. For this purpose, abstentions are considered votes “cast” under NYSE rules will have the same effect as votes cast “against” the proposal. Broker non-votes are not considered votes “cast” and will not be taken into account for purposes of determining the approval of the 2020 LTIP. If you own your shares through a broker, you must give the broker instructions to vote your shares on the proposal to approve the 2020 LTIP. Otherwise, your shares will not be voted.

Proxy Solicitation



In addition to sending you these materials or otherwise providing you access to these materials, some of our directors and officers as well as management and non-management employees may contact you by telephone, mail, e-mail or in person. You may also be solicited by means of press releases issued by VAALCO, postings on our website at www.VAALCO.com, advertisements in periodicals, or other media forms. None of our

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officers or employees will receive any extra compensation for soliciting you. We will also reimburse banks, nominees, fiduciaries, brokers and other custodians for their costs of sending the proxy materials to the beneficial owners of our common stock. In addition, to assist us with our solicitation efforts, we have retained the services of D.F. King & Co., Inc. for a fee of approximately $5,000, plus out-of-pocket expenses.



Tabulation



Our General Counsel will tabulate and certify the vote at the Annual Meeting.



Results of the Vote



We will announce the preliminary voting results at the Annual Meeting and disclose the final voting results in a current report on Form 8-K filed with the SEC within four business days of the date of the Annual Meeting unless only preliminary voting results are available at that time of filing the Form 8-K. To the extent necessary, we will file an amended report on Form 8-K to disclose the final voting results within four business days after the final voting results are known. You may access or obtain a copy of these and other reports free of charge on the Company’s website at www.VAALCO.com. Also, the referenced Form 8-K, any amendments thereto and other reports we file with the SEC are available to you over the Internet at the SEC’s website at www.sec.gov.  



List of Stockholders



A complete list of all stockholders entitled to vote at the Annual Meeting will be open for examination by any stockholder during normal business hours for a period of ten days prior to the Annual Meeting at our offices, 9800 Richmond Avenue, Suite 700, Houston, Texas, 77042. Such list will also be available at the Annual Meeting and may be inspected by any stockholder who is present.



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PROPOSAL NO. 1—ELECTION OF DIRECTORS



Overview



At the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors has nominated the following individuals for election as directors of the Company to serve for a one-year term beginning at the Annual Meeting and expiring at the 2021 Annual Meeting of Stockholders and until either they are reelected or their successors are elected and qualified:



Andrew L. Fawthrop



Cary M. Bounds



George Maxwell



Cathy Stubbs



Two of the above nominees are currently serving as directors of the Company. Biographical information for each nominee is contained below. No proposed nominee is being nominated for election pursuant to any arrangement or understanding between the nominee and any other person.  



The Board of Directors has no reason to believe that any of its nominees will be unable or unwilling to serve if elected. If a nominee becomes unable or unwilling to accept nomination or election, either the number of the Company's directors will be reduced or the persons named as proxies on the accompanying proxy card, or their substitutes, will vote for the election of a substitute nominee that the Board of Directors recommends. Only the nominees designated by the Board of Directors will be eligible to stand for election as directors at the Annual Meeting.



The Board of Directors has nominated two of the existing directors for election at the Annual Meeting.  In addition, recognizing a need to refresh the Board of Directors and to bring in diverse perspectives, the Board of Directors has nominated two new independent director nominees for election at the Annual Meeting, including one female director nominee. Each of Mr. Knapp and Mr. Pully will serve the remainder of their current terms. Effective April 26, 2020, Mr. William R. Thomas resigned from his positions as President and as a member of the Board of Directors.



Director Nominee Information and Qualifications



The following table provides information with respect to each of the current directors of the Company, two of which also constitute nominees, as well as two new independent director nominees who are up for election at the Annual Meeting. Each nominated director will be elected to serve until the next annual meeting of stockholders and thereafter until the earlier of his death or resignation or until his successor is elected and qualified. 







 

 



 

 

Name

Age

Title

Andrew L. Fawthrop

67

Director and Chairman of the Board

Cary M. Bounds

52

Director and Chief Executive Officer

A. John Knapp, Jr. (1) 

68

Director

Steven J. Pully (1) 

60

Director

George Maxwell

54

Director Nominee

Cathy Stubbs

53

Director Nominee



(1)Mr. Pully and Mr. Knapp will each serve the remainders of their terms



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The following is a brief description of the background and principal occupation of each director nominee:





 



 

Picture 24

Andrew L. Fawthrop — Mr. Fawthrop has served on the Board since October 2014 and as the Chairman of the Board since December 2015. Mr. Fawthrop has deep and broad-based experience in the oil and gas industry, including in West Africa, having served for 37 years with Unocal Corporation and Chevron Corporation (following its acquisition of Unocal in 2005) in a vast number of international leadership positions. Most recently, from January 2009 until his retirement in 2014, Mr. Fawthrop served as Chairman and Managing Director for Chevron Nigeria. Prior to his assignment in Nigeria, Mr. Fawthrop served as President and Managing Director for Unocal/Chevron Bangladesh from 2003 until 2007. In his professional career, Mr. Fawthrop held various positions of increasing responsibility for exploration activities around the world in geographies including China, Egypt, Indonesia, South America, Africa, Latin America and Europe. Mr. Fawthrop served as a Member of the Advisory Board of Eurasia Group. He served as a Director of Hindustan Oil Exploration Co. Ltd. from 2003 to 2005. He was an active member of the United States Azerbaijan Chamber of Commerce, the Asia Society of Texas and the Houston World Affairs Council. Mr. Fawthrop holds a Bachelor of Science in Geology and Chemistry and a Master’s degree in Marine Geology from the University of London.

 

Mr. Fawthrop’s significant experience in the international E&P industry, particularly his experience in West Africa, provides a valuable resource to the Board. In addition, through his prior leadership roles and activities, he has extensive operational experience and strategy-making abilities with an executive-level perspective and knowledge base that provides a strong platform for the Board.  





 



 

Picture 23

Cary M. Bounds — Mr. Bounds has been serving as our Chief Executive Officer and as a member of the Board of Directors since December 29, 2016. Prior to that time, he served as our Interim Chief Executive Officer since the effective resignation of our former chief executive officer on September 1, 2016. Mr. Bounds joined VAALCO in July 2015 as our Chief Operating Officer. Mr. Bounds has held a variety of technical and management positions of increasing responsibility with major energy companies as well as independent E&P companies. Prior to joining the Company, Mr. Bounds was Business Unit Manager and Vice President, Noble Energy Equatorial Guinea Limited (“Noble”) from May 2013 until July 2015.  Earlier in his tenure with Noble, Mr. Bounds held the position of North Sea Country Manager from April 2010 until May 2013. Prior to Noble, Mr. Bounds was the global Engineering and Planning Manager for Terralliance Technologies, Inc. and served as their Country Manager in Mozambique from 2007 to 2010. Mr. Bounds was with SM Energy from 2004 to 2007 and held the position of Engineering Manager for their Gulf Coast and Permian regions.  Mr. Bounds spent five years with Dominion E&P serving in corporate development, planning and reservoir engineering positions. Mr. Bounds began his career with ConocoPhillips in 1991 where he held a variety of reservoir and production engineering positions in U.S. onshore regions. Mr. Bounds holds a Bachelor of Science Degree in Petroleum Engineering from Texas A&M University.

 

Mr. Bounds’ many years of significant experience in the international oil and gas industry strengthens the Board’s collective qualifications, skills and experience. His role with the Company and knowledge and insight with respect to VAALCO’s assets, people and day-to-day operations provide valuable contributions to the Board.





 



 



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Picture 17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Picture 8

Cathy Stubbs — Ms. Stubbs has over 30 years of experience in the energy industry. She currently serves as a director of Aspire Holdings, LLC (formerly Endeavour International Corporation), an independent oil and gas exploration and production company in Houston, Texas. Ms. Stubbs has been with Aspire Holdings, LLC since 2004 and has served in numerous roles, including Director Accounting and Financial Controls, Director Treasury and Corporate Development, Vice President and Senior Vice President – Finance and Chief Financial Officer.  In October 2014, while Ms.  Stubbs served as an executive officer, Endeavor International Corporation filed for Chapter 11 bankruptcy protection. Ms. Stubbs was promoted to the position of President and Chief Financial Officer of Aspire Holdings, LLC in  October 2015.

 

Prior to joining Aspire Holdings, LLC she served as Assistant Controller, Financial Reporting and Corporate Accounting at Devon Energy, Inc. (formerly Ocean Energy, Inc.) from 1997 to 2004. Ms. Stubbs began her career in public accounting with KPMG, an international audit and business strategy consulting firm, where she rose to the title of Audit Manager. Ms. Stubbs is a Certified Public Accountant in the State of Texas and she currently serves on the board of directors of various charity and educational institutions. Ms. Stubbs holds a Bachelor of Business Administration and Master in Professional Accounting from the University of Texas at Austin.

 

Ms. Stubbs’ significant experience in accounting, finance, risk management and her service in various director and executive roles are expected to provide a valuable resource to the Board.  

 

George Maxwell — Mr. Maxwell has over 25 years of experience in the oil and gas industry, including in both the producing and service/manufacturing arenas. Mr. Maxwell founded Eland Oil & Gas Plc. in 2009 and served as the company’s Chief Executive Officer from September 2014 to December 2019, Chief Financial Officer from 2010 to 2014, and as a member of the board of directors from 2009 to 2019, until the company was acquired by Seplat Petroleum Development Company Pls. on December 17, 2019. Prior to founding Eland Oil & Gas Plc., Mr. Maxwell served as the business development manager for Addax Petroleum and, prior to this, commercial manager in Geneva. Mr. Maxwell joined Addax Petroleum in 2004 and held the general manager position in Nigeria, where he was responsible for finance, and fiscal and commercial activities. Prior to this, Mr. Maxwell worked with ABB Oil & Gas as vice president of finance based in the UK with responsibilities for Europe and Africa. He held a similar position in Houston, from where the organization ran its operations in ten countries. George was finance director in Singapore for Asia Pacific and Middle East, handling currency swaps and minimizing exposures during the Asian financial crisis of the late 1990s. Mr. Maxwell graduated from Robert Gordon University in Aberdeen with a Masters in Business Administration. George is a Fellow of the Energy Institute in the UK and has formerly served on the boards of directors of Elcrest Exploration and Production Nigeria Ltd. and Westport Oil Limited.

 

Mr. Maxwell’s significant experience serving in executive leadership positions and on the boards of E&P companies, as well as his experience in M&A and strong ties to the London investment community, are expected to provide invaluable insight, making him an important resource for the Board.



Stockholder Arrangements and Settlement Agreements

 

On December 22, 2015, the Company entered into a Settlement Agreement (the “Settlement Agreement”) with Group 42, Inc., a Delaware corporation, Paul A. Bell, Michael Keane, and BLR Partners LP, a Texas limited partnership, BLRPart, LP, a Texas limited partnership, BLRGP Inc., a Texas corporation, Fondren Management, LP, a Texas limited partnership, FMLP Inc., a Texas corporation, The Radoff Family Foundation, a Texas non-profit corporation and Bradley L. Radoff (collectively referred to herein as the “Group 42-BLR Group”).

 

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Under the Settlement Agreement, the Group 42-BLR Group agreed, among other items, that until the Settlement Agreement is terminated, the Group 42-BLR Group would vote in favor of the election of each director nominated by the Board and all recommendations of the Board with respect to any other proposals to be submitted for approval at a meeting of stockholders, unless Institutional Shareholder Services (“ISS”) recommends otherwise. The Group 42-BLR Group also agreed to certain standstill restrictions prohibiting its members from, among other things, acquiring additional securities of the Company, subject to certain limited exceptions. In addition, the Company agreed to nominate a Group 42-BLR Group designee to the Board at each stockholder meeting until the Group 42-BLR Group ceases to own 5% or more of the issued and outstanding shares of Company common stock or until the agreement is otherwise terminated. The Settlement Agreement is currently terminable by either party at will, subject to certain notice provisions set forth in the Settlement Agreement and also subject to certain provisions that will survive for a limited period following the termination of the Settlement Agreement.



Mr. Thomas served as the designee of the Group 42-BLR Group from April 9, 2019 until his resignation from the Board on April 26, 2020. Pursuant to the Settlement Agreement, Group 42-BLR Group has the right to nominate a new director to serve as the designee for the Group 42-BLR Group. The Board of Directors is currently in discussions with Group 42-BLR Group regarding a potential replacement to fill Mr. Thomas’ vacancy. In the interim, the Board of Directors determined to reduce the size of the Board from five to four directors.  



Vote Required



Pursuant to the Delaware General Corporation Law, as amended (“DGCL”), the director nominees shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. For this proposal, abstentions and broker non-votes will not be taken into account for purposes of determining the outcome of the election of directors. Accordingly, if you own your shares through a broker, you must give the broker instructions to vote your shares in the election of directors. Otherwise, your shares will not be voted.



Board Recommendation



The Board of Directors unanimously recommends that stockholders vote “FOR” the election of each of the nominees.



The proxy holders will vote all duly submitted proxies “FOR” each of the director nominees, unless duly instructed otherwise.



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BOARD COMPOSITION, INDEPENDENCE AND COMMUNICATIONS



Board Composition



The following table provides information about each director currently serving on our Board of Directors, including the two director nominees who are up for reelection:







 

 

 

 

 

 



 

 

Committee Membership

Name

Independent

Director
Since

Audit

Compensation

Nominating
and Corporate Governance

Strategic

Andrew L. Fawthrop Picture 9 

2015

Picture 5

Picture 2

Cary M. Bounds

 

2016

 

 

 

A. John Knapp, Jr. (1) Picture 1

2015

Picture 4

Steven J. Pully (1)  Picture 7

2015

Picture 6

(1)Mr. Pully and Mr. Knapp will each serve the remainders of their terms.    





 

 

 

Picture 10 Chairman of the Board

Picture 13  Audit Committee Financial Expert

Picture 30    Chair

  Member



The directors’ experiences, qualifications and skills that the Board considered in their re-nomination are included in their individual biographies set forth above under “Proposal No. 1—Election of Directors.”



Director Independence 



It is the policy of the Board of Directors that a majority of the members of the Board be independent. In addition, our common stock is listed on the NYSE and the London Stock Exchange (the “LSE”) under the symbol “EGY.” The rules of the NYSE require that a majority of the members of our Board be independent and the LSE recommends that at least a majority of the members of the Board of Directors be independent.



In assessing independence, the Board affirmatively determined that, with respect to each of Mr. Fawthrop, Mr. Knapp and Mr. Pully, no material relationship exists that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In addition, the Board also considered:



·

relationships and transactions involving directors or their affiliates or immediate family members that would be required to be disclosed as related party transactions and described under “—Related Party Transactions” below, of which there were none; and



·

other relationships and transactions involving directors or their affiliates or immediate family members that would rise to the level of requiring such disclosure, of which there were none.



Based on the foregoing, the Board affirmatively determined that each of Mr. Fawthrop, Mr. Knapp and Mr. Pully qualify as “independent” for purposes of the Company’s Corporate Governance Principles and NYSE listing rules. The Board determined that Mr. Bounds does not qualify as “independent” because he is an employee of the Company. If elected, the Board expects that each of Mr. Maxwell and Ms. Stubbs would qualify as “independent” for purposes of the Company’s Corporate Governance Principles and NYSE listing rules.



The Board also determined that each member of the Audit Committee qualifies as independent under the audit committee independence rules established by the SEC and meets the NYSE’s financial literacy requirements. In addition, each member of the Compensation Committee qualifies as a “non-employee director” under SEC rules.



There are no family relationships between any of our directors or executive officers.



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Selection of Director Nominees



General Criteria and Process. We believe that our directors should possess the highest personal and professional ethics, integrity and values and be committed to representing the long-term interests of the stockholders. They must also have an inquisitive and objective perspective, practical wisdom and mature judgment. We also endeavor to have a Board representing a range of experiences in business in areas that are relevant to the Company’s global activities. The evaluation of director nominees also takes into account diversity of background, race, ethnicity, gender, age, skills, and professional experiences that enhance the quality of the deliberations and decisions of the Board.



Under its charter, the Nominating and Corporate Governance Committee is responsible for determining criteria and qualifications for Board nominees to be used in reviewing and selecting director candidates, including those described in our Corporate Governance Principles. The criteria and qualifications include, among other things:

·

personal characteristics, including such matters as integrity, age, education, diversity of background and experience;

·

the availability and willingness to devote sufficient time to the duties of a director;

·

experience in corporate management, such as serving as an officer or former officer of a publicly held company;

·

experience in the oil and gas industry and with relevant social policy concerns;

·

whether the candidate possesses a reputation in the community at large of integrity, trust, respect, competence and adherence to the highest ethical standards;

·

experience as a Board member of another publicly held company;

·

whether the candidate is free of conflicts, including whether the candidate would be considered independent under NYSE rules; and

·

practical and mature business judgment.

These criteria and qualifications are not exhaustive and the Nominating and Corporate Governance Committee and the Board of Directors may consider other qualifications and attributes which they believe are appropriate in evaluating the ability of an individual to serve as a member of the Board of Directors. Other than ensuring that at least one member of the Board is a financial expert and a majority of the Board members meet all applicable independence requirements, the Nominating and Corporate Governance Committee does not have any specific skills that it believes are necessary for any individual director to possess. Instead, the Nominating and Corporate Governance Committee evaluates potential nominees based on the contribution such nominee’s background and skills could have upon the overall functioning of the Board in light of the perceived needs of the Board at the time such evaluation is made.



In making its nominations, the Nominating and Corporate Governance Committee identifies nominees by first evaluating the current members of the Board willing to continue their service. Current members with qualifications and skills that are consistent with the Nominating and Corporate Governance Committee’s criteria for Board service are re-nominated. As to new candidates, the Nominating and Corporate Governance Committee will generally poll the Board members and members of management for recommendations. The Nominating and Corporate Governance Committee may also review the composition and qualification of the boards of directors of VAALCO’s peer group and competitors and may seek input from industry experts or analysts. The Nominating and Corporate Governance Committee then reviews the qualifications, experience and background of the candidates. Final candidates are interviewed by the independent directors and executive management. In making its determinations, the Nominating and Corporate Governance Committee evaluates each individual in the context of the Board as a whole, with the objective of assembling a group with diverse backgrounds that can best represent stockholder interests through the exercise of sound judgment. After review and deliberation of all feedback and data, the Nominating and Corporate Governance Committee makes its recommendation to the Board of Directors. The Nominating and Corporate Governance Committee has in the past engaged third-party

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search firms in situations where particular qualifications are required or where existing contacts are not sufficient to identify an appropriate candidate. 



Stockholder Recommendation of Director Candidates. The Nominating and Corporate Governance Committee considers all candidates recommended by our stockholders in accordance with the advance notice provisions of our bylaws. Stockholders may recommend candidates by writing to the Corporate Secretary at VAALCO Energy, Inc., 9800 Richmond Avenue, Suite 700, Houston, Texas 77042, stating the recommended candidate’s name and qualifications for Board membership and otherwise providing all of the information required by the advance notice provisions in our bylaws, as well as complying with the deadlines and timelines specified therein. When considering candidates recommended by stockholders, the Nominating and Corporate Governance Committee follows the same Board membership qualifications evaluation and nomination procedures discussed above. Our Nominating and Corporate Governance Committee has not established a minimum number of shares of common stock that a stockholder must own, or a minimum length of time during which the stockholder must own its shares of common stock, in order to recommend a director candidate for consideration.



Communicating Concerns to Directors



In order to provide our stockholders and other interested parties with a direct and open line of communication to the Board of Directors, the Board of Directors has adopted procedures for communications to directors. Our stockholders and other interested persons may communicate with the Chairman of our Audit Committee or with our non-employee directors as a group, by written communications addressed in care of Corporate Secretary, VAALCO Energy, Inc., 9800 Richmond Avenue, Suite 700, Houston, Texas 77042.



All communications received in accordance with these procedures will be reviewed initially by our senior management. Senior management will relay all such communications to the appropriate director or directors unless it is determined that the communication:

·

does not relate to our business or affairs or the functioning or constitution of the Board of Directors or any of its committees;

·

relates to routine or insignificant matters that do not warrant the attention of the Board of Directors;

·

is an advertisement or other commercial solicitation or communication;

·

is a resume or other form of job inquiry;

·

is frivolous or offensive; or

·

is otherwise not appropriate for delivery to directors.

The director or directors who receive any such communication will have discretion to determine whether the subject matter of the communication should be brought to the attention of the full Board of Directors or one or more of its committees and whether any response to the person sending the communication is appropriate. Any such response will be made only in accordance with applicable law and regulations relating to the disclosure of information.



The Corporate Secretary will retain copies of all communications received pursuant to these procedures for a period of at least one year. The Board of Directors will review the effectiveness of these procedures from time to time and, if appropriate, recommend changes.



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CORPORATE GOVERNANCE



Board Risk Oversight



While the full Board of Directors, with input from each of its committees, oversees VAALCO’s risk management function, VAALCO’s management team is responsible for the execution of our day-to-day risk management process. The Audit Committee reviews with management, as well as internal and external auditors, the Company’s business risk management process, including the adequacy of VAALCO’s overall control environment and controls in selected areas representing significant financial and business risk, such as cybersecurity. The Audit Committee periodically discusses with management its assessment of various risks and considers the impact of risk on our financial position and the adequacy of our risk-related internal controls. Our Compensation Committee also considers risks that could be implicated by our compensation programs, and our Nominating and Corporate Governance Committee annually reviews the effectiveness of our leadership structure and manages succession planning. In addition, each of our committees as well as senior management reports regularly to the full Board of Directors.



Succession Planning



A key responsibility of our CEO and Board in the area of risk management is ensuring that an effective process is in place to provide continuity of leadership over the long-term. Each year, a review of senior leadership succession is conducted by the Board based upon the recommendation of the Nominating and Corporate Governance Committee. During this review, the CEO and the independent directors discuss candidates for senior leadership positions, succession timing for those positions and development plans for the highest-potential candidates. This process forms the basis for ongoing leadership assignments.



Board Leadership Structure



Our current board structure separates the roles of Chief Executive Officer and Chairman of the Board, with Mr. Bounds currently serving as Chief Executive Officer and Mr. Fawthrop currently serving as Chairman of the Board. We believe this leadership structure allows Mr. Bounds to focus primarily on our day-to-day operations and the implementation of our strategic, financial and management policies while allowing Mr. Fawthrop to lead our Board of Directors in identifying strategic priorities and discussion and execution of strategy. The Board of Directors currently believes that this distribution of oversight is the best method of ensuring optimal Company performance and risk management.



Our Corporate Governance Principles provide that, in the event the Chairman of the Board is not an independent director, or when the independent directors determine that it is in the best interests of the Company, the independent directors will also appoint a lead independent director. The primary role of the lead independent director would be to ensure independent leadership of the Board, as well as to act as a liaison between the non-management directors and our Chief Executive Officer. Because our Chairman of the Board is an independent director, our Board has determined that a lead independent director is not necessary at this time.



Board Evaluation



We believe a rigorous Board evaluation process is important to ensure the ongoing effectiveness of our Board. To that end, our Nominating and Governance Committee is responsible for annually assessing the performance of the Board. As part of the evaluation, the Nominating and Governance Committee reviews areas in which the Nominating and Governance Committee or our management believe the Board can make a better contribution to the governance of the Company. Additionally, each of our Board committees conducts a self-evaluation of its performance.



Insider Trading Policy; Prohibition on Hedges and Pledges



We have an insider trading policy that prohibits our officers, directors and employees from purchasing or selling our securities while being aware of material, non-public information about the Company and disclosing such information to others who may trade in securities of the Company.



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Our insider trading policy also prohibits our officers, directors and employees from engaging in hedging activities or other short-term or speculative transactions in the Company’s securities such as zero-cost collars and forward sale contracts. We believe that these hedging transactions would allow the persons covered by our insider trading policy to own our securities without the full risks and rewards of ownership, which could result in misalignment between our general stockholders and the individual engaging in the hedge. In addition, our insider trading policy prohibits all covered persons from pledging our securities or using them as collateral for a loan or as part of a margin account without the consent of our Board. For additional information, see “Compensation Discussion and Analysis—Other Compensation Information—Prohibition on Hedges and Pledges.”



Stock Ownership Guidelines



The Board of Directors believes that it is in the best interest of the Company and its stockholders to align the financial interests of the officers of the Company and non-employee members of the Board with those of the Company’s stockholders. In this regard, the Board enforces minimum stock ownership guidelines.



The guidelines require that the individuals covered by the policy must hold an interest in the Company’s shares equal to the following:







 

 Title

Stock Ownership Requirement



 

Chief Executive Officer

Five (5) times annual base salary



 

Independent Director

Five (5) times annual cash director retainer



 

Chief Financial Officer

Three (3) times annual base salary



 

Other Executive Officers

Two (2) times annual base salary



In general, the forms of equity ownership that can be used to satisfy the ownership requirements include shares held directly, unvested shares of restricted stock and vested share-settled equity awards that have been deferred. Our guidelines do not count unexercised stock options, vested and unexercised stock appreciation rights (“SARs”) and cash-settled awards, among other things, towards the ownership requirements.

 

Each officer or non-employee director has five years from the adoption of the policy or date of appointment, whichever is later, to attain compliance with the ownership requirement and, until a covered individual is in compliance, that individual must retain an amount equal to 60% of the net shares received as a result of the exercise, vesting or payment of any Company equity awards granted. If, for any reason, an individual’s ownership falls below their ownership requirement, that individual is again required to retain 60% of any future awards until the ownership requirement is again attained. The 60% threshold was determined based on an estimate of the number of shares that would remain after disposing of enough shares to satisfy tax withholding requirements.



Compliance with this policy by each officer is reviewed by the Nominating and Governance Committee on an annual basis, and the Nominating and Governance Committee may exercise its discretion in response to any violation of this policy. In addition, the Compensation Committee will take into account compliance with the requirements in determining grants of long term incentive plan awards or annual equity retainers. To date, the Nominating and Governance Committee has not found any violations under the policy.



Code of Conduct and Corporate Governance Documents



We have adopted a Code of Business Conduct and Ethics for Directors, Officers and Employees and a Code of Ethics for the Chief Executive Officer and Senior Financial Officers. Both codes are available on our website at www.VAALCO.com. Our website also includes copies of the other corporate governance policies we have adopted, including our Corporate Governance Principles, Insider Trading Policy, Anti-Bribery and Anti-Tax Avoidance Policy and Information Disclosure Policy, as well as the charters of our Audit, Compensation and Nominating Committee. Print copies of these documents are available upon request by contacting our investor relations group.

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We have not granted any waivers to our codes of conduct. To the extent required by law or regulation, we intend to post any waivers or amendments to our codes of conduct on our website.



Social and Environmental Responsibility



At VAALCO, we believe that the foundation to our long-term success is operating our business ethically and responsibly. Social and environmental values guide how we manage our business and the impact we make around the world in helping local economies thrive. Our philosophy of good corporate citizenship is based on three principle values: (i) a commitment to the safety of our employees and the environment, (ii) a commitment to society and local communities and (iii) a commitment to high ethical standards.



Commitment to World-Class Safety. We have the highest regard for the health and safety of our employees, contractors and communities in which we operate and our commitment to safe operations is a foundation of our business strategy. Our safety record is something we are very proud of and reflects our unwavering commitment to the highest HSE standards as an operator. In light of that commitment, we have recently undertaken efforts to align our safety management systems with international standards, such as ISO 45001, which is the International Organization for Standardization’s standard for management systems of occupational health, and safety published in March 2018. In addition, we regularly engage in process safety management training and have developed our own “people-based” safety program.



We aim to foster environmental stewardship through continuous training programs, dedicated emergency environmental response capabilities and being wholly conscious of any environmental impact of our operations, including impacts on carbon emissions and biodiversity. Not only is it important to us to maintain a zero-incident record for environmental incidents, but we seek to be proactive in understanding and disclosing our environmental impact through transparent communications. In 2019, we began a large baseline study to fully appreciate our carbon footprint. This will allow us to make better and more informed decisions that will shape our carbon reduction strategy and develop specific targets. To that end, we recently implemented an expanded greenhouse gas emissions database and we are in the process of making operational modifications to better align with recognized air emission standards.



Our commitment to safety is also directly reflected in our compensation philosophy. Our Compensation Committee considers safety performance as a significant factor in determining the annual bonus payable to our named executive officers. We believe that linking executive officer remuneration to safety performance helps directly incentivize our executives to instill a safety-first culture.



Commitment to Society and Local Communities. We are committed to improving the Houston area and our Gabon communities by supporting the socioeconomic development of the local communities in which we operate. Our local workforce in Gabon comprises 93.7% national representation, nearly 20% of which are female. Our Houston workforce is also diversified on the basis of merit and qualification without regard to race, religion, color, national origin, physical disability, sex or age, with 41.7% of our Houston workforce being female and 43% of those in Houston serving in senior management roles being female. 



We regularly support, promote and participate in a number of community initiatives in the Houston area and in the countries in which we operate that involve a mix of charitable contributions, training and workforce participation. These initiatives include:



·

education-based programs to provide school supplies, training, facility upgrades and more;



·

social and health development campaigns designed to improve quality of life; and



·

environmental training and sustainability programs.



For instance, in 2019, VAALCO volunteers visited over 11 schools in Gabon to host educational programs that, among other things, taught students the basics of managing a financial budget and ethics-based leadership. We also serve as a sponsor for the MISSION NISSI center in Gabon for young women who are at risk of human trafficking. In Houston, we support the Krause Children’s Center that serves young women between the ages of

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12 to 17 on their road to recovery from difficult domestic situations. Our Houston employees also volunteer with Junior Achievement programs that help students realize the value of education.



Commitment to Ethics. We hold our business and employees to the highest ethical standards. Our corporate governance policies are designed to conform to both SEC guidelines and the U.K. Corporate Governance Code and are overseen by our majority independent Board. We have a zero-tolerance policy with respect to bribery and corruption and we rigorously educate our employees on compliance with applicable anticorruption laws.



We believe a commitment to high ethical standards benefits all of our stakeholders, including investors, employees, customers, suppliers, governments, communities, business partners and others who have a stake in how we operate.



Sustainability Report. We believe that the foundation to our long-term success is operating our business ethically and responsibly, which includes operating in a manner that takes into consideration our environmental impact. We encourage you to review the “Sustainability” section of our website, www.VAALCO.com, for details regarding the steps we have taken to operate our business in a responsible manner, as well as our recently-prepared Sustainability Report. Information appearing on or connected to our website, to include our 2019 Sustainability Report, is not deemed to be incorporated by reference into this Proxy Statement and should not be considered part of this Proxy Statement or any other filing that we file with the SEC. 



Compensation Committee Interlocks and Insider Participation



The directors serving on the Compensation Committee of the Board and their positions during the fiscal year ended December 31, 2019 were: William R. Thomas (Chair), Andrew L. Fawthrop, Steven J. Pully and A. John Knapp. Mr. Thomas ceased serving as a member and Chairman of the Compensation Committee on February 1, 2020 in connection with his appointment as President of the Company. Effective April 26, 2020, Mr. Thomas resigned from his positions as President and as a member of the Board.



None of our executive officers serve as a member of the compensation committee of any other company that has an executive officer serving as a member of our Compensation Committee or our Board of Directors. None of our executive officers serves as a member of the board of directors of any other company that has an executive officer serving as a member of our Compensation Committee. There are no other Compensation Committee interlocks or relationships with the companies with which the members of our Compensation Committee or our other directors are affiliated.



BOARD COMMITTEE MEMBERSHIP AND MEETINGS



Committees of Directors



Our Board has three standing, regular committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. For each of these committees, our Board has adopted a charter that governs the duties and responsibilities of the applicable committee, which are available on VAALCO’s website at www.VAALCO.com. Each committee is operated according to the rules of the NYSE and each member of these committees meets the independence requirements of the NYSE and SEC applicable to each committee. Our Board has also determined that each member of the Compensation Committee constitutes a “non-employee director” for purposes of Rule 16b-3 promulgated under the Exchange Act.



In addition to our three regular committees, Board of Directors formed a Strategic Committee in 2016 to oversee evaluations of certain strategic alternatives for our Company.



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Each of our Board committees reports to the Board as appropriate and as the Board may request. The composition, duties and responsibilities of our Board committees are described below:







 

 



 

 

Audit Committee

Current Membership

 

Committee Functions

Mr. A. John Knapp, Jr. (Chairman)


Mr. Andrew L. Fawthrop


Mr. Steven J. Pully

 

• Selects and reviews the qualifications, performance, and independence of the independent registered public accounting firm


• Reviews reports of independent and internal auditors


• Reviews and pre-approves the scope and cost of all services (including non-audit services) provided by the independent registered public accounting firm


• Monitors the effectiveness of the audit process and financial reporting


• Reviews the adequacy of financial and operating controls


• Monitors the corporate compliance program


• Evaluates the effectiveness of the Audit Committee


• Reviews and approves or ratifies all related person transactions in accordance with Company’s policies and procedures





The Board of Directors has determined that each Audit Committee member is financially literate within the meaning of NYSE listing standards. In addition, the Board has determined that each of Mr. Knapp and Mr. Pully qualify as an “audit committee financial expert” in accordance with SEC rules and the professional experience requirements of the NYSE. The designation of an “audit committee financial expert” does not impose upon such person any duties, obligations, or liabilities that are greater than those that are generally imposed on him or her as a member of the Audit Committee and the Board of Directors, and such designation does not affect the duties, obligations, or liability of any other member of the Audit Committee or the Board of Directors.



Under the terms of the Audit Committee Charter, the Audit Committee is authorized to engage independent advisors, at the Company’s expense, to advise the Audit Committee on any matters within the scope of the Audit Committee’s duties. The Audit Committee may also form subcommittees and delegate its authority to those subcommittees as it deems appropriate.







 

 

Compensation Committee

Current Membership

 

Committee Functions

Mr. Andrew L. Fawthrop (Chairman)

 

Mr. A. John Knapp, Jr.

 

Mr. Steven J. Pully

 

• Approves the salary and other compensation of the Chief Executive Officer


• Review and approve salaries and other compensation for executive officers other than the Chief Executive Officer


• Approves and administers VAALCO’s incentive compensation and equity-based plans


• Prepares the annual report on executive compensation


• Oversees the independent compensation consultant, if any



Under the terms of the Compensation Committee Charter, the Compensation Committee is authorized to engage independent advisors, at the Company’s expense, to advise the Compensation Committee on any matters within the scope of the Compensation Committee’s duties. The Compensation Committee may also form subcommittees and delegate its authority to those subcommittees as it deems appropriate.

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Nominating and Corporate Governance Committee

Current Membership

 

Committee Functions

Mr. Steven J. Pully (Chairman)


Mr. A. John Knapp, Jr.


Mr. Andrew L. Fawthrop

 

• Reviews VAALCO’s corporate governance principles and practices and recommends changes as appropriate

 

• Evaluates the effectiveness of the Board and its committees and recommends changes to improve the effectiveness of the Board, Board committees, Chairmen and individual directors

 

• Assesses the size and composition of the Board and assist with succession planning

 

• Identifies and recommends prospective director nominees

 

• Periodically reviews and recommends changes as appropriate in the Company’s organizational documents and corporate governance policies

 



Under the terms of the Nominating and Corporate Governance Committee Charter, the Nominating and Corporate Governance Committee is authorized to engage independent advisors, at the Company’s expense, to advise the Committee on any matters within the scope of the Nominating and Corporate Governance Committee’s duties. The Nominating and Corporate Governance Committee may also form subcommittees and delegate its authority to those subcommittees as it deems appropriate.







 

 

Strategic Committee

Current Membership

 

Committee Functions

Mr. Andrew L. Fawthrop (Chairman)


Mr. Cary M. Bounds


Mr. A. John Knapp, Jr.


Mr. Steven J. Pully


 

• Identifies and evaluates potential merger and acquisition opportunities


• Assists management with sourcing financing for potential acquisitions or other Company financing needs


• Assess opportunities to divest non-core assets


• Provides additional guidance to management on key strategic decisions





We do not maintain a separate charter governing the duties and responsibilities of the Strategic Committee. Instead, our Board delegates authority to the Strategic Committee to take such actions as are deemed necessary or appropriate by the Board. The Strategic Committee is primarily responsible for, among other things, reviewing all strategic alternatives available to the Company, including, without limitation, potential transactions involving a business combination, a recapitalization, a sale of assets or securities of the Company or other extraordinary transactions and making recommendations to the Board regarding such transaction opportunities. 

If elected, we currently expect that Mr. Maxwell and Ms. Stubbs would each serve on our Audit, Compensation, Strategic and Nominating and Corporate Governance Committees.



Meetings and Attendance



In 2019, the Board held eight Board meetings, five Audit Committee meetings, four Compensation Committee meetings,  five Nominating and Corporate Governance Committee meetings and 12 Strategic Committee meetings. During 2019, each of our directors attended at least 95% of the meetings of the Board of Directors and the meetings of the board committees of the Board of Directors on which that director served at the time. We do not have a policy on whether directors are required to attend the Annual Meeting, although all of our

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directors attended the 2019 Annual Meeting of stockholders and are expected to attend the 2020 Annual Meeting.



Pursuant to our Corporate Governance Principles, executive sessions of independent directors are held, at a minimum, in conjunction with each regularly scheduled Board meeting. Any non-employee director can request that an executive session be scheduled. The sessions are scheduled and presided over by the Chairman of the Board.



Review and Approval of Related Person Transactions



It is our policy that all employees and directors, as well as their family members, must avoid any activity that is or has the appearance of conflicting with our business interest. This policy is included in our Code of Business Conduct and Ethics. Each director and executive officer is instructed to always inform the Chairman of the Board and Corporate Secretary when confronted with any situation that may be perceived as a conflict of interest. In addition, at least annually, each director and executive officer completes a detailed questionnaire specifying any business relationship that may give rise to a conflict of interest. The Nominating and Corporate Governance Committee reviews all relevant information, including the amount of all business transactions involving VAALCO and the entity with which the director is associated, and makes recommendations, as appropriate, to the Board as to whether a transaction involving an actual or perceived conflict of interest should be permitted.



Under SEC rules, related party transactions are those transactions in which the Company was or is to be a participant and the amount involved exceeds $120,000, and in which any “related person” had or will have a direct or indirect material interest. Executive officers, directors, 5% beneficial owners of our common stock, and their respective immediate family members are considered to be related persons under SEC rules. Any related party transactions that occurred since the beginning of fiscal year 2018, and any currently proposed transactions, are required to be disclosed in this proxy statement. We are not aware of any related party transactions during 2018 or 2019. In addition, the Nominating and Corporate Governance Committee reviews and approves or ratifies any related person transaction that is required to be disclosed. In the course of its review and approval or ratification of a disclosable related person transaction, the Committee considers:

·

the nature of the related person’s interest in the transaction;

·

the material terms of the transaction, including, without limitation, the amount and type of transaction;

·

the importance of the transaction to the related person;

·

the importance of the transaction to the company;

·

whether the transaction would impair the judgment of a director or executive officer to act in the best interest of the company; and

·

any other matters the Nominating and Corporate Governance Committee deems appropriate.

Any member of the Nominating and Corporate Governance Committee who is a related person with respect to a transaction under review may not participate in the deliberations or vote for approval or ratification of the transaction, provided, however, that such director may be counted in determining the presence of a quorum at a meeting of the committee that considers the transaction.



Related Party Transactions



Since the beginning of fiscal year 2018, there have been no transactions, and there are no currently proposed transactions, in excess of $120,000, between our Company and any “related person” in which the related person had or will have a direct or indirect material interest, and there are no currently proposed transactions.



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DIRECTOR COMPENSATION



Overview



Our compensation for non-employee directors is designed to be competitive with our peer group of independent energy companies, link rewards to business results and stockholder returns and facilitate increased ownership of our stock to align our directors’ interests with those of our stockholders. We do not have a retirement plan for non-employee directors. Any of our executive officers who serve as directors are not paid additional compensation for their services as directors.



The Compensation Committee is responsible for evaluating and recommending to the independent members of the Board the compensation for non-employee directors, and the independent members of the Board set the compensation. As part of this review, the Compensation Committee considers the significant amount of time expended, and the skill level required, by each non-employee director in fulfilling his duties on the Board, each director’s role and involvement on the Board and its committees, and market data compiled from the Company’s peers and competitors.



Prior to July 2018, our Board of Directors agreed to reduced cash compensation due to the depression in oil and gas prices in prior years. In July 2018, based on the Company’s improved financial position, the Board determined to restore its cash compensation to its former levels. The following table sets forth our policy with respect to the annual cash compensation payable to our non-employee directors during 2019:







 

 Recipient(s)

Cash Compensation ($) 

Per Position Compensation (Annualized)(1)

Non-Employee Directors

45,000

Committee Chair (other than Strategic Committee)

10,000

Strategic Committee Chair

15,000

Chairman of the Board

25,000

Per Meeting Compensation

Board Meeting

   2,000

Committee Meeting

   1,000



(1) Payable in quarterly installments.

Effective April 1, 2020, our Board of Directors determined to reduce its cash compensation in light of the recent decline in oil and gas prices and the uncertain economic impact of the global outbreak of COVID-19 on our business. The revised director compensation policy is set forth below:





 



 



 

 Recipient(s)

Cash Compensation ($) 

Per Position Compensation (Annualized)(1)

Non-Employee Directors

33,750

Committee Chair (other than Strategic Committee)

   7,500

Strategic Committee Chair

11,250

Chairman of the Board

18,750

Per Meeting Compensation

Board Meeting

   1,500

Committee Meeting

    750

(1) Payable in quarterly installments.



Our director compensation policy will revert to the previous compensation levels upon the price of Brent crude oil reaching at least $40.00 per barrel for twenty consecutive trading days.

Under our director compensation policy, each member of the Board is also entitled to an annual equity award in an amount determined by the independent members of the Board. For 2019, our independent directors determined to grant each member of the Board equity awards with an aggregate grant date fair market value of $80,000, consisting of (i) a stock option representing the right to purchase 64,307 shares of common stock at an

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exercise price of $1.43 per share, with such stock option vesting immediately upon grant, and (ii) 27,972 shares of restricted common stock, with such restricted common stock vesting immediately upon grant.

We also reimburse directors for all reasonable out-of-pocket expenses incurred in connection with the performance of their duties as directors, including travel expenses in connection with Board and committee meetings. We do not provide any perquisites to our directors.



2019 Non-Employee Director Compensation



The following table shows compensation paid to each of our non-officer directors who served during the fiscal year ended December 31, 2019.







 

 

 

 

Name

Fees Earned or Paid in Cash ($)(1)

Stock Awards ($)(2)

Option Awards ($)(2)

Total ($)

Andrew L. Fawthrop

103,750  40,000  40,000  183,750 

A. John Knapp, Jr. (3)

75,250  40,000  40,000  155,250 

Steven J. Pully (3)

76,250  40,000  40,000  156,250 

William R. Thomas (4)

47,011  40,000  40,000  127,011 

(1)

Includes annual cash retainer fee, board and committee meeting fees and committee chair and chairman of the board director fees for each non-employee director during fiscal year 2019, as more fully described above.

(2)

The amounts reported in this column reflect the aggregate grant date fair value of stock and option awards granted in fiscal year 2019, computed in accordance with FASB ASC Topic 718. See Note 17, “Stock-Based Compensation and Other Benefit Plans” to the Company’s Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for additional detail regarding assumptions underlying the value of these equity awards. The date of grant of these awards was June 6, 2019.

(3)

Mr. Pully and Mr. Knapp will each serve the remainders of their terms.

(4)

Mr. Thomas served as a non-employee director from April 9, 2019 until his appointment as President effective February 1, 2020.  On April 26, 2020, Mr. Thomas resigned from his positions as President of the Company and as a member of the Board of Directors, effective immediately.

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PROPOSAL NO. 2—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Overview



The Audit Committee has selected BDO USA, LLP (“BDO”) as the independent registered public accounting firm to audit the consolidated financial statements and, if required, the internal control over financial reporting of VAALCO and its subsidiaries for 2020. The Board has endorsed this appointment. BDO has served as the Company’s independent registered public accounting firm since 2016. Representatives of BDO will be present at the Annual Meeting, will have an opportunity to make statements if they desire and will be available to respond to appropriate questions.



Although stockholder approval of this appointment is not required by law and is not binding on the Company, if our stockholders do not ratify the appointment of BDO, the Audit Committee will consider the failure to ratify the appointment when appointing an independent registered public accounting firm for the following year. Even if our stockholders ratify the appointment of BDO, the Audit Committee may, in its sole discretion, terminate such engagement and direct the appointment of another independent registered public accounting firm at any time during the year, although it has no current intention to do so.



Information regarding fees billed by BDO during 2019 and 2018 is set forth below in “Fees Billed by Independent Registered Public Accounting Firm.”



Vote Required



Pursuant to the DGCL and our bylaws, the approval of the ratification of the appointment of BDO as the Company’s independent registered public accounting firm requires the vote of the holders of a majority in voting power of the shares of our common stock that are present in person or by proxy at the Annual Meeting.



For this proposal, abstentions will have the same effect as votes cast “against” the proposal. Broker non-votes are not applicable to the proposal because your broker has discretionary authority to vote your common stock in the absence of affirmative instructions from you with respect to this proposal.



Board Recommendation



The Board of Directors unanimously recommends that stockholders vote “FOR” the ratification of the appointment of BDO as the Company’s independent registered public accounting firm.



The proxy holders will vote all duly submitted proxies “FOR” the ratification of the appointment of BDO as the Company’s independent registered public accounting firm unless duly instructed otherwise.





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FEES BILLED BY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Aggregate fees for professional services billed by BDO to VAALCO during 2019 and 2018 are as follows:







 

 

 

 

 



 

 



2019

 

2018



 

(in thousands)

Audit Fees

$

665 

 

$

632 

Audit-related Fees

 

 

 

Tax Fees

 

 

 

All Other Fees

 

 

 

Total

$

665 

 

$

632 



Audit Fees



For the years ended December 31, 2019 and 2018, audit fees paid by us to BDO were for the audit of our annual financial statements, the related attestation of internal control over financial reporting and the review of our quarterly financial statements.



Audit-Related Fees, Tax Fees and All Other Fees



There were no audit-related fees, tax fees or other fees paid by us to BDO for the years ended December 31, 2019 and 2018.



Audit Committee Pre-Approval Policies and Procedures



Our Audit Committee has in place pre-approval policies and procedures related to the provision of audit and non-audit services. Under these procedures, the Audit Committee pre-approves both the type of services to be provided by our independent registered public accounting firm and the estimated fees related to these services. During the approval process, the Audit Committee considers the impact of the types of services and the related fees on the independence of our independent accounting firm. The services and fees must be deemed compatible with the maintenance of the accounting firm’s independence, including compliance with SEC rules and regulations. Throughout the year, the Audit Committee also reviews any revisions to the estimates of audit and non-audit fees initially approved.

 

During 2019 and 2018, all audit services provided by BDO were pre-approved by the Audit Committee. In addition, during 2019 and 2018, no fees for services outside the audit, review or attestation that exceeded the waiver provisions of 17 CFR 210.2-01(o)(7)(i)(c) were approved by the Audit Committee. 



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AUDIT COMMITTEE REPORT



The Board of Directors has determined that all current Audit Committee members are (i) independent, as defined in Section 10A of the Exchange Act, (ii) independent under the standards set forth by the NYSE and (iii) financially literate. In addition, Mr. Knapp and Mr. Pully qualify as audit committee financial experts under the applicable rules adopted under the Exchange Act. The Audit Committee is a separately designated standing committee of the Board, as defined in Section 3(a)(58)(A) of the Exchange Act, and operates under a written charter approved by the Board, which is reviewed annually.

 

Management is responsible for our system of internal controls and the financial reporting process. The Audit Committee is responsible for monitoring (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, and (iii) the independence and performance of our independent registered public accounting firm.

 

The Audit Committee has reviewed and discussed with our management and the independent registered public accounting firm the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019, including a discussion of the quality, not just the acceptability, of the accounting principles applied, the reasonableness of significant judgments and the clarity of disclosures in the consolidated financial statements. Management represented to the Audit Committee that our consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. The Audit Committee discussed with the independent registered public accounting firm the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 1301 (AS 1301), “Communications with Audit Committees.”

 

Our independent registered public accounting firm also provided to the Audit Committee the written disclosure required by applicable rules of the PCAOB regarding the independent registered public accounting firms’ communications with the Audit Committee concerning independence. The Audit Committee discussed with the independent registered public accounting firm regarding the firm’s independence.

 

Based on the Audit Committee’s discussions with management and the independent registered public accounting firm, and the Audit Committee’s review of the representations of management and the report of the independent registered public accounting firm to the Audit Committee, the Audit Committee recommended that the Board include the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC.





 



Audit Committee of the Board of Directors*

A. John Knapp, Jr., Chairman

Andrew L. Fawthrop

Steven J. Pully

 

The forgoing information contained in this Audit Committee Report and references in this Proxy Statement to the independence of the Audit Committee members shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

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PROPOSAL NO. 3—ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION



Overview



Pursuant to Section 14A(a)(1) of the Exchange Act, we are asking our stockholders to approve, on an advisory or non-binding basis, the compensation of our named executive officers as disclosed in this Proxy Statement. The vote on this matter is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the policies and practices described in this Proxy Statement.



Our Board and the Compensation Committee believe that we maintain a compensation program that is tied to performance, aligns with stockholder interests, and merits stockholder support. Accordingly, we are asking our stockholders to approve the compensation of our named executive officers as disclosed in this Proxy Statement by voting FOR the following resolution:



“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 2020 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the accompanying compensation tables and related narrative discussion.”



Although this vote is non-binding, the Board and the Compensation Committee value the views of our stockholders and will review the results. If there are a significant number of negative votes, we will take steps to understand those concerns that influenced the vote, and consider them in making future decisions about executive compensation.



At the 2017 Annual Meeting of Stockholders, a majority of our stockholders voted in favor of holding an advisory vote to approve executive compensation every year. The Board considered these voting results and decided to adopt a policy providing for an annual advisory stockholder vote to approve our executive compensation. We expect that the next stockholder advisory vote to approve executive compensation will occur at the 2021 Annual Meeting of Stockholders.



Our Compensation Program



We believe that our named executive officer compensation program described throughout the “Compensation Discussion and Analysis” aligns the interests of our executives with those of our stockholders. Our compensation programs are designed to provide a competitive level of compensation to attract, motivate and retain talented and experienced executives and reward our named executive officers for the achievement of short- and long-term strategic and operational goals and increased total stockholder return, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking. We believe we have implemented a number of executive compensation practices and policies that reflect sound governance and promote the long-term interests of our stockholders.



Vote Required



Pursuant to the DGCL and our bylaws, the approval, on an advisory basis, of the compensation of our named executive officers requires the vote of the holders of a majority in voting power of the shares of our common stock that are present in person or by proxy at the Annual Meeting.



For this proposal, abstentions and broker non-votes will have the same effect as votes cast “against” the proposal. If you own your shares through a broker, you must give the broker instructions to vote your shares with respect to this proposal. Otherwise, your shares will not be voted and will have the same effect as a vote cast “against” this proposal.



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Board Recommendation



The Board of Directors unanimously recommends that stockholders vote “FOR” the approval, on an advisory basis, of the compensation of our named executive officers.



The proxy holders will vote all duly submitted proxies “FOR” the approval, on an advisory basis, of the compensation of our named executive officers, unless duly instructed otherwise.

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EXECUTIVE OFFICERS

The following table provides information with respect to current executive officers of VAALCO.  







 

 

Name

Age

Title

Cary M. Bounds

52

Chief Executive Officer (Principal Executive Officer), Chief Operating Officer and Director

Elizabeth D. Prochnow

61

Chief Financial Officer (Principal Financial Officer)

David A. DesAutels

64

Executive Vice President Corporate Development

Michael G. Silver

56

Executive Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary

Jason J. Doornik

50

Chief Accounting Officer and Controller (Principal Accounting Officer)





The following is a brief description of the background and principal occupation of each current non-director executive officer:



Elizabeth D. Prochnow — Ms. Prochnow has served as Chief Financial Officer since April 1, 2019 and was formerly our Controller and Chief Accounting Officer since May 2015. Prior to joining our Company, Ms. Prochnow most recently served as Controller and Chief Accounting Officer for Total Safety, U.S., Inc. from August 2014 to March 2015. Prior to that, she served as a director of Carrtegra, LLC, a financial advisory consulting firm, from June 2013 to August 2014 and as Executive Vice President, Chief Financial Officer of Sterling Construction Company, Inc. (Nasdaq: STRL) from November 2011 to May 2013. Before beginning with Sterling in February 2011, Ms. Prochnow was Vice President, Finance and Chief Financial Officer of Bristow Group Inc. (NYSE: BRS) from May 2009 to June 2010, and Vice President, Chief Accounting Officer and Controller from 2005 to 2009. From 1997 to 2005, Ms. Prochnow served in positions of increasing responsibility at MAXXAM Inc., ultimately as the company’s Vice President and Controller. Before MAXXAM, Ms. Prochnow served as the Controller and Chief Accounting Officer of GulfMark Offshore, Inc. (formerly GulfMark International, Inc. (NYSE:GLF)) from 1990 to 1996. Ms. Prochnow began her career as a public accountant at Arthur Andersen LLP in 1981. Ms. Prochnow holds a Bachelor of Arts degree and a Master of Accounting degree from Rice University and is a certified public accountant in the State of Texas.



David DesAutels  Mr. DesAutels joined the Company in July 2017 and currently serves as Executive Vice President Corporate Development.  Mr. DesAutels is an oil and gas industry executive with over 40 years’ upstream experience.  He has worked on over 100 development projects worldwide, both conventional and unconventional.  Prior to joining our Company, Mr. DesAutels gained senior executive experience by working for Noble (Director, Development Geoscience, 2008-2016) and Occidental Petroleum Corp. (Chief of Production Geoscience and Vice President of Geoscience, 2000-2007) and founding Synertia Energy, LLC and Seregon Energy, LLC, two oil and gas consulting companies.  In addition, he has international experience from working in Colombia, Indonesia, Equatorial Guinea, Qatar, Oman, Argentina, Israel, the U.K., Ecuador, Russia, Canada, and the U.A.E.  Mr. DesAutels holds an M.S. and BA in Geology from the University of Minnesota-Twin Cities. 



Michael Silver  Mr. Silver joined the Company in November 2018 and currently serves as Executive Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary. He has nearly 30 years of experience in the energy industry. Prior to joining the Company, from 2009 to 2018, Mr. Silver served as Managing Counsel for the Petroleum Division of BHP Group plc where he supported the company’s international upstream activities, including major acquisitions and divestments.  From 2007 to 2009, Mr. Silver held the position of Senior Counsel at Constellation Energy Commodities Group, Inc. with responsibilities for U.S. upstream and LNG operations.  Mr. Silver began his career with ExxonMobil Corporation in the law department in 1990 and during the next 17 years served in multiple roles of increasing responsibility. Mr. Silver holds a Bachelor of Arts degree in International Affairs from Lafayette College, an M.B.A. from the Duke University Fuqua School of Business and a J.D. from the Duke University School of Law.  Mr. Silver is a member of the State Bar of Texas.



Jason J. Doornik  Mr. Doornik joined the Company in June 2019 and serves as our Chief Accounting Officer and Controller. Mr. Doornik has over 20 years of diversified accounting and finance experience, balanced among large companies and emerging companies as well as public accounting and industry experience. Prior to joining the Company, Mr. Doornik served as a consultant with Sirius Solutions from 2018 to May 2019. From 2015 to 2018, Mr. Doornik served as the Chief Accounting Officer and Controller of Fairway Energy,  a Houston based midstream company. Prior to joining Fairway Energy, Mr. Doornik was hired by BPZ Resources, Inc. to serve as the Assistant Controller in November 2008 and was promoted to Corporate Controller in May 2011 where he

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served until October 2015. From June 2006 to April 2008 Mr. Doornik served as the Financial Reporting Manager of Grant Prideco, Inc. and its successor company, National Oilwell Varco, Inc. From June 2005 through June 2006, Mr. Doornik served a Senior Associate for The Siegfried Group. From August 1999 through June 2005, Mr. Doornik was employed by Ernst and Young LLP in the Assurance and Advisory practice and prior to that, from 1987 -1991, Mr. Doornik served as a Unit Supply Specialist in the US Army. Mr. Doornik received a Bachelor’s degree in Business Administration and a Master’s degree of Professional Accountancy from the University of Texas at Austin in August 1999.



The biography of Mr. Bounds, who currently serves as a director, is set forth above under “Proposal No. 1—Election of Directors—Director Nominee Information and Qualifications.”

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COMPENSATION DISCUSSION AND ANALYSIS

Introduction



Overview. The purpose of this Compensation Discussion and Analysis section is to provide our stockholders with a clear understanding of our compensation philosophy and objectives, compensation-setting process and 2019 compensation programs and decisions for our named executive officers. The compensation that we paid to our named executive officers in 2019 (shown below) and the compensation decisions that we made in early 2020 predated the recent global outbreak of COVID-19 and the rapid decline in oil prices that occurred in the first quarter of 2019. As a result, these compensatory decisions did not take into account the potential impact of these events on our business or our future results of operations. While we cannot predict the ultimate extent of the impact that these events will have on us, our Compensation Committee is continuously evaluating the situation and may exercise its discretion in amending or adjusting the future compensation of our executive officers and employees in light of recent developments. For 2019, our named executive officers were as follows:







 

Name

Title

Cary M. Bounds

Chief Executive Officer and Chief Operating Officer (Principal Executive Officer)

Elizabeth D. Prochnow

Chief Financial Officer (Principal Financial Officer) 

Philip Patman, Jr.(1)

Former Chief Financial Officer (Former Principal Financial Officer)

David A. DesAutels

Executive Vice President Corporate Development

Michael G. Silver

Executive Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary

Jason J. Doornik

Chief Accounting Officer and Controller (Principal Accounting Officer)



(1) Effective March 31, 2019, Philip Patman, Jr. resigned from the Company and Ms. Prochnow was appointed as our Chief Financial Officer. 



Although we qualify as a “smaller reporting company” under SEC rules, we have elected to follow the disclosure requirements for this Compensation Discussion and Analysis section that are applicable to large accelerated filers and other accelerated filers.



Recent Compensation Changes. As discussed above, our Compensation Committee is monitoring and evaluating the impact caused by the global outbreak of COVID-19 as well as the recent drop in crude oil prices and, as a result, may exercise its discretion to amend and adjust the compensation of our executive officers and employees in light of recent developments.  



Accordingly, in April 2020 we determined to implement temporary salary reductions for our executive officers and certain employees, effective May 1, 2020. The decision to implement temporary salary reductions was made in response to the recent downturn in global economic conditions, including the decline in oil and gas prices, and is intended to retain additional liquidity and maintain a strong balance sheet. When implemented, our executive officers’ base salaries will be temporarily reduced by 20%. Non-executive employee salaries will also be reduced in accordance with a graduated scale depending upon total compensation. Employees whose base salaries are less than $100,000 will not receive a salary reduction. Base salaries for our executive officers and employees will revert to previous levels upon the price of Brent crude oil reaching at least $40.00 per barrel for twenty consecutive trading days.    

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Recent Performance Highlights



With the successful launch of our 2019/2020 drilling program, 2019 represented the beginning of the first phase of growth strategy and a return to converting resources to reserves to deliver value to our stockholders. Key highlights of our business and our performance in 2019 and the first part of 2020 include, among other things:



·

produced 3,476 NRI(1) BOPD, or 3,995 WI(2) BOPD, and sold 1.3 MMBO in the full year 2019;



·

for the full year 2019, reported net income of $2.6 million ($0.04 per diluted share) and Adjusted Net Income(3) of $18.6 million ($0.31 per diluted share) and generated Adjusted EBITDAX(3) of $37.5 million;



·

successfully drilled and brought the Etame 9H and Etame 11H wells on production at higher-than-expected initial flow rates in December 2019 and January 2020, respectively;



·

successfully drilled 750 feet of horizontal section in good-quality Gamba reservoir at the South East Etame 4H well with first production of 2,200 BOPD gross, 600 BOPD NRI or 680 BOPD WI, in March 2020;



·

estimates 2020 operational breakeven has decreased to approximately $31 per barrel due to a 35% increase in year-over-year production;



·

added 1.1 MMBO proved reserves offset by 0.2 MMBO due to lower average pricing during 2019; and



·

reported unrestricted cash balance of $45.9 million as of December 31, 2019.













































___________________________

(1) All NRI production rates and volumes are VAALCO’s 31.1% WI less 13% royalty volumes.

(2) All WI production rates and volumes are VAALCO’s 31.1% WI.

(3) Adjusted EBITDAX and Adjusted Net Income (Loss) are non-GAAP financial measures and are defined and reconciled to the nearest GAAP measure in “Appendix A—Non-GAAP Financial Measures.”

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During the first quarter of 2020, we drilled the remaining appraisal wellbore required to fulfill the terms of the PSC Extension. In addition, we commenced drilling a third development well, which was completed in late March of 2020.



Notwithstanding our recent successes, the oil and gas industry is in the midst of an unprecedented disruption due to a combination of factors, including the substantial decline in global demand for oil caused by the COVID-19 pandemic and subsequent mitigation efforts. While we believe that our operational and financial execution has better positioned VAALCO to weather the near-term uncertainties, these market conditions have significantly impacted us and our outlook globally and we expect that 2020 will be a challenging year for our business.



Compensation Program Objectives and Philosophy



Our executive compensation program is intended to attract, retain and motivate high caliber executives who are committed to supporting the growth of our business and to align our executives’ goals with those of our stockholders. Our compensation program is designed to achieve the following objectives:







 

 



 

 

Value

 

    Appropriately reward executives for increasing stockholder value and align the

      interests of our executive officers and our stockholders.

Talent

 

    Attract and retain talented executive officers by providing reasonable total

      compensation levels competitive with peer organizations.

Individual Performance

 

    Recognize individual performance and promote accountability among

      executives.

Performance Based Compensation

 

    Balance rewards for short-term and long-term results which are tied to

      company and individual performance.

Manage Risk

 

    Select performance metrics, apply appropriate caps and maintain program

      oversight to discourage excessive risk taking.





It is the intention of the Compensation Committee to compensate our named executive officers competitively as compared to other companies in the same and closely related industries, and to align performance-based incentives with stockholder interests. The Compensation Committee retains complete discretion over the actual amounts paid to our executives.



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Highlights of Executive Compensation Practices



Our executive compensation program includes a number of stockholder-friendly features that we believe align with contemporary governance practices, promote alignment with our pay-for-performance philosophy and mitigate risk to our stockholders. The table below summarizes our key executive compensation practices, including practices that we do not follow:







 

 

 

What We Do

What We DON’T Do

Pay for performance. Tie pay to performance by ensuring that a significant portion of executive compensation is performance-based and at-risk.

X

Repricing. Stock option exercise prices are set equal to the grant date fair market value and may not be repriced, except for certain adjustments that may be made in connection with extraordinary transactions.

Performance metrics tied to Company performance. Our annual performance-based cash awards incorporate numerous financial and/or strategic performance metrics to ensure that our named executive officers are motivated to achieve excellence in a wide range of performance metrics.

X

Excessive termination benefits. None of our executive officers, other than our Chief Executive Officer, are party to an employment agreement that provides for termination benefits.

Robust stock ownership requirements. Our Board has adopted robust stock ownership guidelines that require our Chief Executive Officer and non-employee directors to own five times (5x) their annual base salary or retainer, as applicable, in shares of our common stock, our Chief Financial Officer to own three times (3x) her annual base salary in shares of our common stock and our other executive officers to own two times (2x) their salary in shares of our common stock.

X

Tax gross-ups and perquisites. We do not provide for excise tax gross-ups and we do not provide our executives with perquisites that differ materially from those available to employees generally.

Multi-year vesting periods. Our equity-based awards generally incorporate a multi-year vesting period to emphasize long-term performance and executive retention.

X

Hedging or pledging shares. Our insider trading policy prohibits our directors and named executive officers from any hedging or pledging of Company securities.

Listen to our Stockholders. We hold an advisory vote on executive compensation annually and actively review the results of these votes when we make compensation decisions.

X

Employment Agreements. Other than our Chief Executive Officer, our senior executive officers are at-will employees with no employment agreements.



Engagement with Our Stockholders and “Say-on-Pay” Voting Results



We hold an advisory vote on executive compensation annually and actively review the results of these votes when we make compensation decisions. At our annual meeting of stockholders in 2019, a majority of our stockholders voted to approve our 2018 executive compensation program, with approximately 51.3% of stockholders entitled to vote at the annual meeting voting in favor of approving our executive compensation practices.



Our Committee and management design and operate our compensation programs with the objective to obtain 90+% advisory voting support from stockholders. In light of the philosophy and practices described earlier, we were disappointed with the 2019 voting outcome, and sought stockholder feedback to understand how we might improve stockholder support.



In early 2020, prior to the Committee approvals of 2019-2020 compensation actions, we conducted a stockholder engagement campaign with a specific focus on executive compensation. We targeted our 34 largest stockholders, who in combination own over 55% of our shares. We contacted or confirmed immediate support from 30 of those stockholders. Twelve stockholders have thus far agreed to engage in discussion about compensation.



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The table below summarizes the primary themes we heard from stockholders about our executive compensation, and how we have responded to the feedback thus far.







 

What We Heard

VAALCO Response

Some stockholders would prefer a more quantitative and formulaic approach to executive incentives

         We have further described here the quantitative structure of our short- and long-term incentives



         We expect to add absolute stock price performance hurdles to 50% of executive long-term incentive awards in 2020

Some stockholders would prefer a more express cap on incentive compensation outcomes

         We have clarified in this CD&A that our annual short-term incentive program caps payouts at 200% of an executive’s target incentive opportunity

Some stockholders strictly follow proxy advisor recommendations; they suggested we garner proxy advisor support

         We evaluated that the primary proxy advisor criticisms focused on the lack of reported stockholder engagement in response to prior advisory voting outcomes

Overall support of the compensation programs

         We have preserved most features of our underlying compensation programs as described in this CD&A



        Planned revisions to executive compensation practices are intended to respond to severe market volatility in March 2020



In addition to these stockholder engagement activities, we engaged an independent consulting firm, Meridian Compensation Partners, LLC (“Meridian”) to evaluate our program design, provide input on our stockholder engagement activities, and help us respond to stockholder feedback. These efforts were aimed to ensure a strong alignment with stockholders and allow us to more readily respond to the extreme market volatility in March 2020.



We and our Compensation Committee have carefully considered the feedback we have received, the advice from Meridian and input from other outside advisors regarding the design of our compensation programs and the nature and type of metrics used in our performance-based incentive plans. The Compensation Committee values the opinions of stockholders and will continue to consider the outcome of the say-on-pay vote when making future compensation decisions. 



Determining Executive Compensation





Designing Compensation to Reward Pay for Performance. Our compensation program is designed to reward performance that contributes to the achievement of our business strategy on both a short-term and long-term basis. In addition, we reward qualities that we believe help achieve our strategy such as:



·

teamwork;



·

individual performance in light of general economic and industry specific conditions;



·

performance that supports our core values;



·

resourcefulness;



·

the ability to manage our existing corporate assets;



·

the ability to explore new avenues to increase oil and gas production and reserves;

 

·

level of job responsibility; and



·

tenure within the industry.



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We also believe that we ask more of a smaller group of leaders, with each executive having a broader role and impact than they otherwise might at other companies.



Elements of Our Compensation Program. To accomplish our objectives, our compensation program is comprised of four elements: base salary, cash bonus, long-term equity-based compensation and benefits. The table below sets forth a summary of the principal elements of our compensation program and why we believe each form of compensation fits within our overall compensation philosophy:







 

 

 

 

 Compensation Element

Type

Form

Primary
Objectives

Additional Information

Base Salary

Fixed

Cash

Attract and retain talent; provide predictable income based on position and responsibilities

Reviewed annually based on market positioning and individual qualifications



 

 

 

 

Performance-Based Annual Cash Bonus

Variable

Cash

Short-term Company and individual performance; motivates management to achieve key objectives

Earned based on achievement of important near-term financial, operating, safety and environmental objectives



 

 

 

 

Long-Term Service-Based Equity Incentives

Variable

Restricted Stock, Stock Options and Stock Appreciation Rights

Rewards long-term value creation; fosters retention and continuity; enhances stockholder alignment

Awards generally vest ratably over 3 or more years



 

 

 

 



Our named executive officers are entitled to participate in the standard employee benefit plans and programs generally available to our employees, including our 401(k) plan with matching contributions.



How We Determine Each Element of Compensation. In designing the Company’s executive compensation policies, the Compensation Committee considers pay as a whole, and there is no specific weight given to any particular component of compensation. The Compensation Committee may also review competitive market compensation data, but does not target named executive officer compensation to be at any specific percentile of any competitive data that it reviews.



In practice, the total direct compensation opportunity for each of our named executive officers is based on many factors including competitive market data, the executive’s experience, importance of the role within the Company and the executive’s contribution to the Company’s long-term success. In addition, the Compensation Committee considers various measures of Company and industry performance, including total stockholder return, capital expenditures, additions to reserves of oil and gas, operating costs, safety performance, production and other measures, in order to determine earned compensation for each of our named executive officers.



We did not employ an independent compensation consultant to assist us in the design or determination of our executive compensation program for 2019. As discussed above, we have engaged Meridian to assist us further in the design and alignment of compensation with stockholder interests.  



Base Salary



The Compensation Committee meets at least annually to review the base salaries of our executive officers.

 

In setting base salaries, the Compensation Committee seeks to maintain stability and predictability from year-to-year, and usually makes percentage increases based on its view of the cost of living and competitive conditions for executive talent in the oil and gas business. The Compensation Committee also considers subjective factors in setting base salary, including individual achievements, our performance, level of

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responsibility, experience, leadership abilities, increases or changes in duties and responsibilities and contributions to our performance.



We believe that a significant portion of a named executive officer’s compensation should be variable, based on the performance of the Company. Accordingly, base salary is a minority portion of the overall total compensation of the named executive officers.



The following table provides information concerning the annual base salary of each of our named executive officers: 







 

 



 

 

  Name

2019 Base Salary
($)

2018 Base Salary
($)

Cary M. Bounds (1)

420,000

400,000

Elizabeth D. Prochnow (2)

265,000

200,000

Philip Patman, Jr.(3)

325,000

325,000

David A. DesAutels (4)

328,000

309,500

Michael G. Silver (5)

280,000

Jason J. Doornik (6)

197,000



(1)Pursuant to the terms of his employment agreement, Mr. Bounds is entitled to an annual base salary of $400,000. The Compensation Committee determined to increase Mr. Bounds’ annual base salary in 2019 from $400,000 to $420,000, effective March 2019.

(2)Effective March 31, 2019, Ms. Prochnow was appointed as our Chief Financial Officer. In connection with her appointment, Ms. Prochnow’s annual base salary was increased from $200,000 to $265,000. 

(3)Effective March 31, 2019, Philip Patman, Jr. resigned from the Company. Prior to his resignation, Mr. Patman was party to an employment agreement that provided for an annual base salary of $325,000. The Compensation Committee determined not to make any changes to Mr. Patman’s annual base salary in 2019 or 2018.

(4)For 2018, Mr. DesAutels was entitled to an annual base salary of $309,500. For 2019, the Compensation Committee determined to increase Mr. DesAutel’s annual base salary to $328,000 due to his performance.

(5)Effective April 1, 2019, Mr. Silver was appointed as our Executive Vice President and General Counsel. For 2019, Mr. Silver was entitled to an annual base salary of $280,000. 

(6)Effective June 6, 2019, Mr. Doornik was appointed as our Chief Accounting Officer and Controller. For 2019, Mr. Doornik was entitled to an annual base salary of $197,000.



Annual Cash Incentive Bonus. 



Our named executive officers, senior management and other non-management personnel have the potential to receive a meaningful cash bonus if annual financial and operational objectives or goals, pre-established by the Compensation Committee, are met and the Board of Directors approves the payment of bonuses.



In determining the incentive bonuses earned, the Compensation Committee considers both Company and individual performance and, in its discretion, any other context or unforeseen circumstances that contributed to overall performance. Each named executive officer has a pre-established target bonus opportunity, defined as a percentage of salary. Such executives can earn between 0% and 200% of that target opportunity based on Company and individual performance. The target bonus percentages for 2019 were as follows:







 



 

Name

Target Award as a % of Base Salary

Cary M. Bounds

100%

Elizabeth D. Prochnow

40%

Philip F. Patman, Jr.

75%

David A. DesAutels 

40%

Michael G. Silver

50%

Jason J. Doornik

40%



Typically, the ultimate payout of each executive target bonus is based 50% on the achievement of individual performance and accomplishments and 50% on the achievement of corporate goals.



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In order to evaluate the performance of our employees,  early in the fiscal year, the Compensation Committee sets various performance targets for financial and non-financial measures such as oil and gas production levels, operating expenses, safety performance, resource additions and total stockholder return for the current year. These performance measures are based in part on, and intended to align with, the annual operating budget, the financial forecast and the business plan approved by our Board of Directors shortly before the start of our fiscal year.



Once the Compensation Committee has established performance targets for our employees, the performance targets are compiled into “scorecards” for our executive and non-executive employees, with each performance target assigned a different weight by the Compensation Committee, based on the Compensation Committee’s determinations as to the relative importance of each performance target in light of the Company’s overall strategic goals for a given year. For our executive officers, the overall achievement of our non-executives under the non-executive scorecard is typically a performance measure under the executive officer scorecard.



Executive scorecards are evaluated on an individual basis with respect to the 50% individual component of each executive officer’s incentive bonus, and an enterprise-wide basis with respect to the 50% corporate component of each executive officer’s bonus.



In March 2019, the Company established the following performance goals set forth below as the components of the executive scorecard for 2019. A description of each performance goal, and the Company’s results with respect to the corporate performance component of the executive incentive bonuses is set forth below:



 

 

 

 

 



 

 

 

 

 

Goals

Description of Goal

Weight

Actual Results

Actual Results Score

Total Score

(Weight x Actual Results Score)

Non-Executive Company Scorecard

Performance of non-executive employees

20%

A payout of 82.4% of target was achieved.

75%

15%

Transformational Growth

Inorganic growth through mergers and/or acquisitions

30%

A number of alternatives were evaluated and considered by management and the Board.

5%

1.5%

London Stock Exchange Listing

Goals related to listing the Company’s stock on the LSE

10%

Listed on the Main Market of the London Stock Exchange on September 26, 2019.

50%

5.0%

FPSO Life Extension(1)

Extending the FPSO contract

15%

Conducted studies and considered options.

17%

2.6%

Equatorial Guinea

Goals related to the maintenance of our license and rights in Equatorial Guinea

15%

Block P suspension lifted, VAALCO appointed operator and farmout discussions progressed.

100%

15%

Joint Venture Audit Claims

Goals concerning the resolution of certain audit claims related to our joint ventures

10%

Resolved all claims through year-end 2016.

75%

7.5%

Total

 

100%

 

 

46.6%

Total Stockholder Return Modifier(2)

 

 

 

 

150%



 

 

 

 

 

Total Score

 

 

 

 

69.8%



(1)

Refers to the contract governing our leased floating, production, storage and offloading vessel.

(2)

The total stockholder return was calculated based on the performance of our Peer Group consisting of Kosmos Energy Ltd., Orca Exploration Group Inc. Class B, Panoro Energy ASA, SDX Energy, Inc., Seplat Petroleum,

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TransGlobe Energy Corporation and Tullow Oil plc. The total results for the executive scorecard are multiplied by the total stockholder return modifier to equal the total score percentage.



After the achievement of the Company’s performance against the goals set forth above is calculated, the total achievement is subject to a total stockholder return (“TSR”) modifier based on a comparison of the Company’s total stockholder return against a peer group identified by the Company’s management. For 2019, the Company’s total stockholder return compared to the peer group resulted in an overall modifier of 150%. After applying the TSR modifier, the Company’s total score against the corporate performance component of the annual incentive bonuses was 69.8%.



With respect to the individual performance component of the Company’s annual incentive bonuses, the Compensation Committee evaluates the performance of each executive officer in light of the goals set forth in the executive scorecard, taking into account the specific duties and responsibilities of each officer with respect to those goals. In addition, the Compensation Committee considers each executive officer’s performance with respect to the other critical duties of each such officer, as well as the achievements each executive officer made during the year towards the Company’s strategic and financial goals. Finally, the Compensation Committee considers self-assessments from each executive officer and, for executive officers other than Mr. Bounds, Mr. Bounds’ feedback concerning the performance of our executive officers. During 2019, the Compensation Committee determined that, with respect to the 50% individual performance component of the annual incentive bonuses, the individual performance of our named executive officers ranged from a score of 80% to 120%.



After combining the corporate performance and individual performance components of the annual incentive bonuses, our Compensation Committee determined that our named executive officers would receive the following bonuses for their performance during 2019:





 

 



 

 

Name

Target Annual Incentive Bonus

Earned Annual Incentive Bonus

Cary M. Bounds

$420,000

$314,395

Elizabeth D. Prochnow

$106,000

$89,947

David A. DesAutels 

$131,200

$98,211

Michael G. Silver

$105,096

$97,798

Jason J. Doornik

   $78,800

$42,459



Our annual incentive bonuses were paid in April 2020. Mr. Patman was not eligible to receive an annual incentive bonus for 2019 because he no longer served as a named executive officer at year-end.



Long-Term Equity-Based Incentives



Overview and 2019 Equity Compensation. We believe formal long-term equity incentive programs are valuable compensation tools and are consistent with the compensation programs of the companies in our peer group.



We maintain (i) the VAALCO Energy, Inc. 2014 LTIP, which permits the grant of stock, options, restricted stock, restricted stock units, phantom stock, SARs and other awards, any of which may be designated as performance awards or be made subject to other conditions and (ii) the VAALCO Energy, Inc. 2016 Stock Appreciation Rights Plan (the “SAR Plan”), which permits the grant of cash settled SARs that give the holder the right to receive an amount of cash equal to the difference between the exercise price and the fair market value of the SAR on the date of exercise. We believe that long-term equity-based incentive compensation is an important component of our overall compensation program because it:

·

balances short- and long-term objectives;

·

aligns our executives' interests with the long-term interests of our stockholders and the creation of stockholder value;

·

encourages a long-term focus and decision-making in line with our strategic goals;

·

makes our compensation program competitive from a total remuneration standpoint;

·

encourages executive retention; and

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·

gives executives the opportunity to share in our long-term value creation.

The Compensation Committee administers our long-term incentive plans. The Committee confirms eligible recipients, determines grant timing, assigns the number of shares subject to each award, fixes the time and manner in which awards are exercisable and sets exercise prices and vesting and expiration dates.



For compensation decisions regarding the grant of equity compensation to executive officers, our Compensation Committee considers recommendations from our Chief Executive Officer. Typically, awards vest over multiple years, but the Compensation Committee maintains the discretionary authority to vest the equity grant immediately if the individual situation merits. In recent years, the Compensation Committee has generally granted awards that vest ratably over a three-year period. In the event of a change of control, all outstanding equity-based awards will immediately vest.



In general, our Compensation Committee attempts to provide a mix of awards to our executives that is appropriately balanced between incentivizing performance and retention. For 2019, our Compensation Committee determined to grant our named executive officers, subject to limited exceptions, a mix of stock options and SARs, which derive value based on the price of our common stock, thereby encouraging high-level performance by our executives and aligning their interests with those of our stockholders, and awards of restricted stock with service-based vesting requirements that vest ratably over three years, promoting long-term retention of our named executive officers.



Equity awards are generally granted to our named executive officers and other employees on an annual basis.  The Compensation Committee determines the actual award values at its discretion based on individual factors including the individual’s previous and expected future performance, level of responsibilities, retention considerations and internal parity.  Under our employment agreement with Mr. Bounds, he is entitled to receive an annual equity grant consisting of stock options or other incentive awards with a value of up to 200% of his base salary, all as determined by the Compensation Committee in its discretion. In addition, under our former employment agreement with Mr. Patman, he was entitled to receive an annual equity grant consisting of stock options or other incentive awards with a value of up to 125% of his base salary, all as determined by the Compensation Committee in its discretion.



Based on these factors, the Compensation Committee determined to grant the following equity incentive awards to our named executive officers in 2019:







 

 

 

  Name

Restricted Stock (#)

Stock Options (#)

Stock Appreciation Rights (SARs) (#)

Cary M. Bounds (1)(2)(3)

85,837

162,145

324,290

Elizabeth D. Prochnow (1)(2)(3)

10,730

20,268

40,536

Philip Patman, Jr. (1)(2)(3)(4)

43,589

82,339

164,678

David A. DesAutels (1)(2)(3) 

16,604

31,365

62,730

Michael G. Silver (5)

22,926

44,163

Jason J. Doornik (6)



(1)Represents shares of restricted stock granted on February 28, 2019. The shares of restricted stock vest in three equal installments on each of February 28, 2020, 2021 and 2022.

(2)Represents stock options granted on February 28, 2019. Each stock option has an exercise price of $1.23 per share and vests in three equal installments on each of February 28, 2020, 2021 and 2022. 

(3)Represents SARs granted on February 28, 2019. Each SAR has an exercise price of $1.23 per share and vests in three equal installments on each of February 28, 2020, 2021 and 2022.

(4)Effective March 31, 2019, Mr. Patman resigned from the Company. Upon Mr. Patman’s resignation, each outstanding and unvested equity award held by Mr. Patman was automatically forfeited and canceled.

(5)Mr. Silver was appointed as our Vice President and General Counsel effective April 1, 2019. In connection with his appointment, we awarded Mr. Silver (i) 22,926 shares of restricted stock that vest in three equal installments on each of April 1, 2020, 2021 and 2022 and (ii) stock options with an exercise price of $2.29 per share that vest in three equal installments on each of April 1, 2020, 2021 and 2022.

(6)Mr. Doornik was appointed as our Chief Accounting Officer and Controller in June 2019 and did not receive any equity awards in connection with his appointment. 



The vesting of our equity awards is generally contingent on continued service. However, vesting of awards is generally accelerated in the event of a change of control. The vesting of our equity awards does not

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generally accelerate in the event of a termination of employment due to death, disability, or retirement. For additional information, see “Executive Compensation—Potential Payments upon Termination or Change in Control” below. The Compensation Committee’s recent practice has been to provide for three-year ratable vesting of awards.



The equity awards granted to our named executive officers are subject to forfeiture in accordance with the terms of the grant agreements if the executive terminates employment before the award vests, the executive is terminated for cause, or the executive otherwise fails to comply with the terms of his or her award agreement.



Changes in 2020 to Respond to Stockholder Engagement and Market Volatility. In March 2020, the Committee committed to changes to named executive long-term incentive awards. These changes address the input received from stockholder engagement to improve the quantitative performance accountability, and to respond to the extreme market volatility caused by OPEC+ policy changes and the COVID-19 outbreak. They include:



·

a postponement of named executive officer long-term incentive awards until June 2020, upon stockholder approval, if obtained, of the 2020 LTIP;



·

a potential reduction in grant-date target incentive opportunities, should our stock price not exceed $1.75 on the anticipated 2020 grant date; and



·

a planned shift to award 50% of named executive incentive opportunity in performance-based stock options, contingent on meeting absolute stock price-growth hurdles; the remaining incentive opportunity is expected to be made in time-vested restricted shares.



As described herein, our Board and our Compensation Committee approved the 2020 LTIP because they believe that the number of shares of common stock currently available under the 2014 LTIP is insufficient to meet our current and future equity compensation needs, including the anticipated equity grants for 2020 described above. Accordingly, the approval of the 2020 LTIP is an integral component of our strategy to respond to the feedback we received from our stockholders with respect to our executive compensation practices. For additional information concerning the 2020 LTIP, see “Proposal No. 4—Approval of the VAALCO Energy, Inc. 2020 Long Term Incentive Plan.”



Benefits



We provide company benefits that we believe are standard in the industry to all of our employees, including our named executive officers. These benefits consist of a group medical and dental insurance program for employees and their qualified dependents, the majority of which is currently paid for by the Company, and a 401(k) employee savings plan. We also currently make matching contributions to our 401(k) plan of up to 6% of each participant’s salary. The Company pays all administrative costs to maintain the 401(k) plan. We do not provide employee life insurance amounts surpassing the Internal Revenue Service maximum.



Employment Agreements



In the past, we have used employment agreements to retain and attract highly qualified executive officers in a competitive market. Currently, our only named executive officer that is party to an employment agreement is our Chief Executive Officer. 



We believe that employment agreements ensure continued dedication of executives in case of personal uncertainties or risk of job loss and ensure that compensation and benefits expectations are understood and satisfied. We may enter into employment agreements governing compensatory terms such as base salary, target incentive bonus percentage, annual equity target and equity grants upon hire. Employment agreements may also include specific terms regarding relocation (where appropriate), severance payments and other benefits, if any, due to the executive under various employment termination circumstances. See “Executive Compensation—Potential Payments upon Termination or Change in Control for additional information regarding the severance payments our Chief Executive Officer could receive under his employment agreement.



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Severance and Change in Control Payments



We believe that an important aspect of attracting and retaining qualified individuals to serve as executive officers involves providing market termination protection benefits. We have entered into an employment agreement with our Chief Executive Officer pursuant to which Mr. Bounds is entitled to certain benefits upon qualifying terminations of employment. In addition, in May 2019 we adopted a form of change in control agreement for certain of our executives that provides for certain benefits upon a termination following a change in control. For additional information, see “Executive Compensation—Potential Payments upon Termination or Change in Control.”



Perquisites and Indemnification



We do not typically provide perquisites to our named executive officers that are not available to employees generally. However, pursuant to our organizational documents, we are required to indemnify, to the fullest extent permitted by applicable law, any person who was or is made, or is threatened to be made, a party, or is otherwise involved in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that he or she, or a person for whom he or she is a legal representative, is or was a director or an officer of the Company, including our named executive officers.



From time to time, we may provide perquisites for recruitment or retention purposes.



Other Compensation Information



Prohibition on Hedges and Pledges. Our insider trading policy prohibits hedging and pledging transactions and broadly applies to all directors, officers and employees of the Company, as well as their respective family members and other controlled entities in which such persons have influence or control. The foregoing persons are prohibited from (i) executing transactions in Company securities that involve puts, calls or other derivative securities on an exchange or other organized market, (ii) holding Company securities in margin accounts or pledging the Company securities as collateral for loans or other obligations, without the prior consent of the Board of Directors or (iii) engaging in hedging transactions with respect to Company securities, including trading in any derivative security, zero-cost collars, forward sale contracts, or other forms of hedging or monetization transactions, including those that allow such person to own the securities without the full risks and rewards of ownership.



Assessment of Risk.  The Compensation Committee is aware of the need to take risk into account when making compensation decisions. By design, our compensation program for executive officers is designed to avoid excessive risk taking. In particular, incentive awards are not locked into specific metrics, but rather, after review of performance relative to these metrics, the Compensation Committee determines final incentive awards at their discretion.



Stock Ownership Guidelines. We have adopted stock ownership guidelines that apply to our officers and directors. Pursuant to the guidelines, our directors and officers must own a multiple of their annual base salary in our common stock or certain qualifying derivatives. For additional information, see “Corporate Governance—Stock Ownership Guidelines.”

 

Accounting and Tax Considerations. We may from time to time pay compensation amounts to our executive officers that are not deductible under the Internal Revenue Code of 1986 (the “Code”).  Although we consider tax deductibility in the design and administration of our executive compensation plans and programs, we believe that our interests are best served by providing competitive levels of compensation to our named executive officers even if it results in the non-deductibility of certain amounts under the Code.

Section 409A of the Code sets forth limitations on the deferral and payment of certain benefits. Generally, the Compensation Committee intends to administer our executive compensation program and design individual compensation components, and the compensation plans and arrangements for our employees generally, so that they are either exempt from, or satisfy the requirements of, Section 409A.



Equity awards granted to our employees, including named executive officers, and to our directors have been granted and reflected in our consolidated financial statements, based upon the applicable accounting

VAALCO ENERGY, INC. 2020 Proxy Statement |    49

 


 

guidance, at fair market value on the grant date (and each subsequent reporting date, as applicable) in accordance with ASC Topic 718.



Recoupment Policy.  The Board of Directors recently adopted a customary clawback policy that provides for the recoupment or forfeiture of incentive compensation paid to our executives in the event that we are required to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement under the federal securities laws. 



VAALCO ENERGY, INC. 2020 Proxy Statement |    50

 


 

COMPENSATION COMMITTEE REPORT



The Compensation Committee of the Company has reviewed and discussed the foregoing Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the foregoing Compensation Discussion and Analysis be included in the Company’s proxy statement for the 2020 annual meeting of stockholders, and also incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.





 



Compensation Committee of the Board of Directors*

 

Andrew L. Fawthrop, Chairman

Steven J. Pully

A. John Knapp

 



The information contained in this Compensation Committee Report shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities or the Exchange Act, except to the extent that the Company specifically incorporates such information.





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EXECUTIVE COMPENSATION



2019 Summary Compensation Table 



The following sets forth the annual compensation elements of VAALCO’s named executive officers for the three years ended December 31, 2019, December 31, 2018 and December 31, 2017.







 

 

 

 

 

 

 

Name and Principal Position

Year

Salary ($)

Stock ($)(2)

Option and SAR Awards ($)(2)

Non-Equity Incentive Plan Compensation  ($)(3)

All Other Compensation ($)(4) 

Total ($)

Cary M. Bounds 

2019  415,002  200,000  596,905  314,395  16,800  1,543,103 

Chief Executive Officer

2018  400,008  132,000  392,187  460,000  16,500  1,400,695 

and Chief Operating Officer

2017  400,008 

392,453  100,000  16,200  908,661 

Elizabeth D. Prochnow (1)

2019  248,754  25,001  74,613  89,947  16,800  455,115 

Chief Financial Officer

2018  200,016 

79,230  109,190  15,494  403,930 



2017  195,418 

35,953  57,682  15,234  304,287 

Philip F. Patman, Jr.(1)

2019  273,794  101,562  303,115 

16,800  695,271 

Former Chief Financial Officer

2018  325,008  67,438  200,365  188,906  16,500  798,217 



2017  230,214  101,562  93,736  43,266  13,000  481,778 

David A. DesAutels

2019  323,375  38,687  115,464  98,211  16,800  592,538 

Executive Vice President Corporate Development

 

 

 

 

 

 

 

Michael G. Silver (5)

2019  210,000  52,501  52,470  97,798  12,600  425,368 

Executive Vice President, General Counsel

 

 

 

 

 

 

 

and Corporate Secretary

 

 

 

 

 

 

 

Jason J. Doornik (6)

2019  114,917 

42,459  6,895  164,271 

Chief Accounting Officer and Controller

 

 

 

 

 

 

 



(1)Mr. Patman was the Company’s Chief Financial Officer from April 17, 2017 to March 31, 2019. Ms. Prochnow was the Company’s Controller and Chief Accounting Officer until March 31, 2019 when she was appointed Chief Financial Officer.

(2)The grant date fair value was determined under ASC Topic 718 for financial reporting purposes. For a discussion of the determination of fair value under this Topic for the grants, see Note 17, “Stock-based Compensation and Other Benefit Plans” to the Company’s Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The actual value that can be realized from the exercise of stock options or SARS, if any, depends on the increase of VAALCO’s stock price above the exercise price between the vesting date and the exercise date. All of the options and SARs granted in 2019, 2018 and 2017 vest in three equal installments on the first, second and third anniversaries of the date of grant. The options and SARs all expire on the fifth anniversary of the date of grant. The restricted stock awards all vest in three equal tranches on the first, second and third anniversaries of the date of grant.

(3)Annual bonuses for our executives for 2019 were determined in April 2020 and paid in April 2020 and are reflected in the 2019 non-equity incentive plan compensation column. Annual bonuses for 2018 were determined and paid in March 2019 and are reflected in the 2018 non-equity incentive plan compensation column. Annual bonuses for 2017 were determined and paid in March 2018 are reflected in the 2017 non-equity incentive plan compensation column.

(4)The amounts set forth in the “All Other Compensation” column reflect the 401(k) match we provided to all employees. The named executive officers did not receive any other additional compensation. 

(5)Mr. Silver was appointed as our Vice President and General Counsel effective April 1, 2019.

(6)Mr. Doornik was appointed as our Chief Accounting Officer and Controller in June 2019.



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Grants of Plan-Based Awards during 2019



The following table presents grants of plan-based awards during the fiscal year ending December 31, 2019:







 

 

 

 

 

 

 

 



 

 

 

 

 

 



 

Estimated Future Payouts Under

All other option and SAR awards:



 

Non-Equity Incentive



 

Plan Awards (1)

 

 

 

 

Name of Executive

Grant Date

Threshold ($)

Target ($)

Maximum($)

All other stock awards: Number of shares of stock or units (#)(2)

Number of securities underlying options (#)(3)

Exercise or base price of option and SAR awards ($)

Grant date fair value of stock, SAR and option awards ($)(4)

Cary M. Bounds

2/28/2019

162,145

$2.33

$198,968



2/28/2019

85,837

$200,000



2/28/2019

324,290

$2.33

$397,937



4/3/2020

420,000

840,000

Elizabeth D. Prochnow

2/28/2019

20,268

$2.33

$24,871



2/28/2019

10,730

$25,001



2/28/2019

40,536

$2.33

$49,742



4/3/2020

106,000

212,000

Philip F. Patman, Jr.

2/28/2019

82,339

$2.33

$101,038



2/28/2019

43,589

$101,562



2/28/2019

164,678

$2.33

$202,077



4/3/2020

David A. DesAutels

2/28/2019

31,365

$2.33

$38,488



2/28/2019

16,604

$38,687



2/28/2019

62,730

$2.33

$76,976



4/3/2020

131,200

262,400

Michael G. Silver

4/1/2019

44,163

$2.29

$52,470



4/1/2019

22,926

$52,501



4/3/2020

140,000

280,000

Jason J. Doornik

4/3/2020

78,800

157,600





(1)Actual cash bonus amounts paid to the named executive officers for 2019 were Mr. Bounds: $314,395, Ms. Prochnow: $89,947, Mr. Patman: $0,  Mr. DesAutels: $98,211,  Mr. Silver: $97,798 and Mr. Doornik: $42,459. The grant date represents the date that each annual incentive bonus was paid. However, these bonuses relate to 2019 performance based on performance measures that were determined by the Compensation Committee during 2019.

(2)Amount represents the restricted stock granted on the noted date and vests in three equal annual installments beginning one year from the date of grant.

(3)Amounts represent the stock options and SARs granted on the respectively noted dates. These stock options and SARs vest in three equal installments on the first, second and third anniversaries of the date of grant.

(4)The amounts reflected in the table above for restricted stock, SARs and stock options are reported based upon the grant date fair value computed in accordance FASB ASC Topic 718. See Note 17, “Stock-based Compensation and Other Benefit Plans” to Company’s Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for additional detail regarding assumptions underlying the value of these equity awards.

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Outstanding Equity Awards at 2019 Fiscal Year-End



The following table sets forth specific information with respect to unexercised options and unvested awards for each of our named executive officers outstanding as of December 31, 2019. Except as otherwise noted in the footnotes thereto, all awards reported in the following table vest ratably over a three-year period beginning on the first anniversary of the date of grant.







 

 

 

 

 

 

 

 



Option Awards

 

 

 

 

Stock Awards

Name

Number of securities underlying unexercised options (#) exercisable

Number of securities underlying unexercised options (#) unexercisable

Option exercise price ($)

 

Option expiration date

Number of shares or units or stock that have not vested (#)

 

Market value of shares or units of stock that have not vested ($)(14)

Cary M. Bounds

 

102,326 

(1)

227,164 

Cary M. Bounds

 

85,837 

(2)

190,558 

Cary M. Bounds

150,000 

$1.94 

(3)

7/6/2020

 

Cary M. Bounds

59,860 

$1.04 

(4)

3/18/2021

 

Cary M. Bounds

375,039 

$1.08 

(5)

12/29/2021

 

Cary M. Bounds

162,145  $2.33 

(6)

2/28/2024

 

Cary M. Bounds

179,580 

$1.04 

(7)

3/18/2021

 

Cary M. Bounds

215,643  251,752  $1.20 

(8)

4/21/2022

 

Cary M. Bounds

297,111  594,223  $0.86 

(9)

2/28/2023

 

Cary M. Bounds

324,290  $2.33 

(10)

2/28/2024

 

Elizabeth D. Prochnow

 

10,730 

(11)

23,821 

Elizabeth D. Prochnow

13,000 

$2.20 

(12)

4/13/2020

 

Elizabeth D. Prochnow

54,945 

$1.04 

(13)

3/18/2021

 

Elizabeth D. Prochnow

45,954  22,976  $1.00 

(14)

4/11/2022

 

Elizabeth D. Prochnow

30,011  60,023  $0.86 

(15)

2/28/2023

 

Elizabeth D. Prochnow

20,628 

$2.33 

(16)

2/28/2024

 

Elizabeth D. Prochnow

30,011  60,023  $0.86 

(17)

2/28/2023

 

Elizabeth D. Prochnow

40,536  $2.33 

(18)

2/28/2024

 

Philip F. Patman, Jr. (19)

 

 

David A. DesAutels

 

13,441 

(20)

29,839 

David A. DesAutels

 

29,070 

(21)

64,535 

David A. DesAutels

 

16,604 

(22)

36,861 

David A. DesAutels

26,146  26,146  $0.93 

(23)

11/2/2022

 

David A. DesAutels

31,365  $2.33 

(24)

2/28/2024

 

David A. DesAutels

168,814  $0.86 

(25)

2/28/2023

 

David A. DesAutels

62,730  $2.33 

(26)

2/28/2024

 

Michael G. Silver

 

22,926 

(27)

50,896 

Michael G. Silver

44,163  $2.29 

(28)

4/1/2024

 

Jason J. Doornik

 

 





(1)These amounts represent time-vested restricted stock awards granted on February 28,2018.

(2)These amounts represent time-vested restricted stock awards granted on February 28,2019.  

(3)Represents the exercise price for stock options awarded on July 6, 2015.

(4)Represents the exercise price for stock options awarded on March 18, 2016.

(5)Represents the exercise price for stock options awarded on December 29, 2016.

(6)Represents the exercise price for stock options awarded on February 28, 2019.

(7)Represents the number of cash SARs granted on March 18, 2016.

(8)Represents the number of cash SARs granted on April 21, 2017.

(9)Represents the number of cash SARs granted on February 28, 2018.

(10)Represents the number of cash SARs granted on February 28, 2019.

(11)These amounts represent time-vested restricted stock awards granted on February 28, 2019.

(12)Represents the exercise price for stock options awarded on April 13, 2015.

(13)Represents the exercise price for stock options awarded on March 18, 2016.

(14)Represents the exercise price for stock options awarded on April 11, 2017.

(15)Represents the exercise price for stock options awarded on February 28,2018.

(16)Represents the exercise price for stock options awarded on February 28,2019.

(17)Represents the number of cash SARs granted on February 28, 2018.

(18)Represents the number of cash SARs granted on February 28, 2019.

(19)In connection with his separation from the Company, Mr. Patman’s unvested equity awards were forfeited as of March 31, 2019.

(20)These amounts represent time-vested restricted stock awards granted on November 2,2017.

(21)These amounts represent time-vested restricted stock awards granted on February 28,2018.

(22)These amounts represent time-vested restricted stock awards granted on February 28,2019.

(23)Represents the exercise price for stock options awarded on November 2, 2017.

(24)Represents the exercise price for stock options awarded on February 28,2019.

(25)Represents the number of cash SARs granted on February 28, 2018.

(26)Represents the number of cash SARs granted on February 28, 2019.

(27)These amounts represent time-vested restricted stock awards granted on April 1,2019.

(28)Represents the exercise price for stock options awarded on April 1, 2019.

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Option Exercises and Stock Vested During the Fiscal Year Ended December 31, 2019



The following table sets forth specific information with respect to each exercise of stock options and SARs and each vesting of restricted stock during 2019 for each of our named executive officers on an aggregated basis.







 

 

 

 



 

 

 

 



Option Awards

Stock Awards

Name

Number of shares acquired on exercise (#)

Value realized on exercise ($)

Number of Shares Acquired on Vesting
(#)

Value Realized on
Vesting ($)

Cary M. Bounds

119,720 

114,931 (1)



61,729 

141,359 (2)



51,162 

119,207 (3)



230,002 (4)

Elizabeth D. Prochnow

Philip F. Patman, Jr.

62,235 

99,871 (5)



26,138 

60,902 (6)



247,419 (7)

David A. DesAutels

26,146 

39,742 (8)



13,441 

27,016 (9)



14,535 

33,867 (10)



134,206 (11)

Michael G. Silver

Jason J. Doornik





(1)

Mr. Bounds’ value realized on the exercise of stock options is the result of 119,720 shares with a market price of $2.00 per share on the date exercised.

(2)

Mr. Bounds’ value realized on the vesting of restricted stock is the result of 61,729 shares vesting at a price of $2.29 per share.

(3)

Mr. Bounds’ value realized on the vesting of restricted stock is the result of 51,162 shares vesting at a price of $2.33 per share.

(4)

Mr. Bounds’ value realized on the exercise of SARs is the result of 287,502 SARs with a market price of $2.00 per SAR on the date exercised. Mr. Bounds’ SARs are settled exclusively in cash.

(5)

Mr. Patman's value realized on the exercise of stock options is the result of 62,235 shares with a market price of $2.56 per share on the date exercised.

(6)

Mr. Patman’s value realized on the vesting of restricted stock is the result of 26,138 shares vesting at a price of $2.33 per share.

(7)

Mr. Patman’s value realized on the exercise of SARs is the result of 151,791 SARs with a market price of $2.49 per SAR on the date exercised. Mr. Patman’s SARs are settled exclusively in cash.

(8)

Mr. DesAutels’ value realized on the exercise of stock options is the result of 26,146 shares with a market price of $2.45 per share on the date exercised.

(9)

Mr. DesAutels’ value realized on the vesting of restricted stock is the result of 13,441 shares vesting at a price of $2.01 per share.

(10)

Mr. DesAutels’ value realized on the vesting of restricted stock is the result of 14,535 shares vesting at a price of $2.33 per share.

(11)

Mr. DesAutels’ value realized on the exercise of SARs is the result of 84,406 SARs with a market price of $2.45 per SAR on the date exercised. Mr. DesAutels’ SARs are settled exclusively in cash.



Pension Benefits Table



We do not provide a pension plan or any other tax-qualified or non-tax-qualified defined benefit plan for our employees.

 

Nonqualified Deferred Compensation



We do not contribute to any nonqualified deferred compensation benefit plan or program, or under any contract that would provide deferred compensation benefits.

 

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Potential Payments upon Termination or Change in Control



Named Executive Officer Employment Agreements. We entered into an Amended and Restated Executive Employment Agreement with Cary M. Bounds effective December 29, 2016, in connection with his appointment as our Chief Executive Officer that date. The initial term of this Employment Agreement commenced on December 29, 2016 and is extended for successive one-year terms if neither party gives the other party notice of their intention to terminate the Employment Agreement 60 days’ prior to the end of the term.

 

The Employment Agreement provides Mr. Bounds with certain severance benefits if his employment is terminated due to his death or disability, by us without Cause (as defined in the Employment Agreement), or by Mr. Bounds for Good Reason (as defined in the Employment Agreement), including in connection with a Change in Control (as defined in the Employment Agreement). Specifically, the Employment Agreement provides that, upon a termination of Mr. Bounds’ employment by us without Cause, by Mr. Bounds for Good Reason, or due to Mr. Bounds’ death or disability, Mr. Bounds (or his beneficiaries) will receive, among other benefits, a cash severance payment at least equal to 50% of his annual base salary then in effect plus 50% of the greater of (i) his average annual bonus paid or payable for the preceding two calendar years and (ii) the annual bonus for the calendar year in which the termination occurs (prorated for the portion of the year actually worked). If Mr. Bounds’ employment is terminated by us without Cause, by Mr. Bounds for Good Reason, or due to Mr. Bounds’ death or disability, in each case within one year following a Change in Control, then we will provide Mr. Bounds (or his beneficiaries) with a cash severance payment at least equal to 150% of his annual base salary then in effect plus 150% of the greater of (i) his average annual bonus paid or payable for the preceding two calendar years and (ii) the annual bonus for the calendar year in which the termination occurs (prorated for the portion of the year actually worked).

 

The Company would also be required to pay for continuing health insurance premiums for Mr. Bounds and his eligible spouse and dependents for a period of one year following the termination and accrued and unpaid ba