UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
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the Securities Exchange Act of 1934 (Amendment No. )
 
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Callon Petroleum Company
(Name of Registrant as Specified In Its Charter)
 
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ABOUT CALLON
Callon Petroleum is an independent oil and natural gas company focused on the acquisition, exploration and development of high-quality assets in the leading oil plays of West and South Texas.
 
 
 
 
 
Our Values
 
 
 
 
 
 
 
Responsibility
The safety of our employees, contractors and communities is of utmost importance – this is not negotiable. We recognize that we earn the right to operate every day by developing our assets responsibly and with respect for the environment. We focus on safety and protection of the environment in every operation, and all Callon representatives are authorized to “stop work” if these are at risk.
 
 
 
 
 
 
 
 
 
 
Integrity
We always strive to do the right thing and pride ourselves on being a preferred partner. We are consistently open, honest, ethical and genuine. We do what we say and are accountable for our actions.
 
 
 
 
 
 
 
 
 
 
Drive
Keenly focused on leading, we relentlessly challenge the status quo to meet and exceed our expectations for top-tier performance in all aspects of our business.
 
 
 
 
 
 
 
 
 
 
Respect
We value the ideas and contributions of all team members and show consideration and appreciation for one another. We recognize and embrace each other’s differences and work towards our common goals.
 
 
 
 
 
 
 
 
 
 
Excellence
Our business requires focused innovation and evaluation of new opportunities for resource extraction. We balance the application of new technologies and testing of new concepts with prudent risk management and thorough data analysis.
 
 
 
 
 
Awards and Recognition
We are recognized as one of the top places to work in 2017, 2018, and 2019 by the Houston Chronicle.
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A JOINT LETTER FROM OUR CHAIRMAN AND OUR CHIEF EXECUTIVE OFFICER
 
April 28, 2020
 
DEAR FELLOW SHAREHOLDERS,
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On behalf of the Board of Directors of Callon Petroleum Company, we are pleased to invite you to our 2020 Annual Meeting of Shareholders, which will take place on June 8, 2020 at 9:00 a.m. Central Daylight Time (CDT), in the La Scala Room of The Moran Hotel, located at 800 Sorella Court in Houston, Texas.
Today we are filing the Notice of Annual Meeting of Shareholders and the Proxy Statement which describe the matters to be acted upon at the meeting. This year we are asking our shareholders to elect directors, approve our 2020 incentive plan, ratify the appointment of our auditors, approve, on a non-binding advisory basis, the compensation of our named executive officers, and allow our Board to approve amendments to our certificate of incorporation to effect a reverse stock split and a pro rata reduction to the number of authorized shares .
2019 was a transformational year for Callon. The Company continued its long-term value creation focus with the execution of multiple strategic initiatives across operations, finance, environmental, social and governance. The Company’s development program successfully transitioned to larger projects featuring multi-zone co-development, leading to improved capital efficiency, lower costs and the preservation of industry-leading margins.
 The year culminated with the successful closing of the Carrizo Acquisition, which more than doubled the Company’s production, reserves, acreage, and cash flow. Importantly, the acquisition also brought together two talented organizations that are grounded in strong values and a shared commitment to responsible operations, integrity and a drive to deliver results. Together, we face the challenges brought on by the global outbreak of the COVID-19 virus with a diversified asset base that provides optionality to support cash generation amid commodity price volatility.
Your vote is important, and we encourage you to review this proxy statement and to vote promptly so that your shares will be represented at the meeting. On behalf of everyone at Callon, we want to thank you, our valued shareholders, for your continued support of the work we do.
Sincerely,
L. Richard Flury
Chairman of the Board
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Joseph C. Gatto, Jr. 
President, Chief Executive Officer and Director
 
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L. Richard Flury
Chairman of the Board
Joseph C. Gatto, Jr.
President, Chief Executive Officer and Director
We encourage you to read our 2019 Annual Report, which includes our financial statements as of and for the year ended December 31, 2019. Please also refer to the sections captioned “Risk Factors” and “Special Note Regarding Forward-Looking Statements,” for a description of the substantial risks and uncertainties related to the forward-looking statements included herein.


2020 PROXY STATEMENT      3


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NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS
 
 
 
Dear Shareholders,
You are invited to participate in the 2020 Annual Meeting of Shareholders (the “Annual Meeting”) of Callon Petroleum Company (“Callon,” the “Company,” “us,” “we,” “our” or like terms), a Delaware corporation.
When
June 8, 2020, at 9:00 a.m. Central Daylight Time (“CDT")
Where
The Moran Hotel
La Scala Room
800 Sorella Court
Houston, Texas 77024
We are monitoring coronavirus (COVID-19) developments and the related recommendations and protocols issued by public health authorities and federal, state and local governments, and we are sensitive to the public health and travel concerns that our shareholders may have. In the event we determine it is necessary or appropriate to postpone or move the Annual Meeting to another location or hold the Annual Meeting virtually, we will announce this decision in advance in a press release and post details on our website, which will also be filed with the Securities and Exchange Commission.
Whether or not you plan to attend the Annual Meeting, please vote electronically via the Internet, by telephone, or by mail as soon as possible.
 
 
Voting matters
Board
Recommendation
 
Proposal 1:
To elect three Class II directors to serve on our Board of Directors (the “Board”), each for three years.
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FOR each of the Class II directors
 
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See page 11
 
 
 
Proposal 2:
To approve, on a non-binding advisory basis, the compensation of our named executive officers (“NEOs”).
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FOR
 
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See page 34
 
 
 
Proposal 3: 
To approve the Company's 2020 Omnibus Incentive Plan (the "2020 Plan").
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FOR
 
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See page 62
 
 
 
Proposal 4: 
To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020.
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FOR
 
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See page 70
 
 
 
 
 
Proposal 5: 
To approve an amendment to our certificate of incorporation to permit us to effect a reverse stock split of our issued and outstanding common stock, par value $0.01 per share (the “common stock”), at a ratio that will be determined by the Board and that will be within a range of 1-for-10 and 1-for-50 (the “Reverse Stock Split”), if the Board determines, in its sole discretion, at any time prior to the first anniversary of the Annual Meeting, that the Reverse Stock Split is in the best interests of the Company and its shareholders.
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FOR
 
 
 
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By Internet or telephone following the simple instructions on the enclosed proxy card or voting instruction form
 
 
 
 
 
 
 
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By mail
mark, date and sign your proxy card, and return it in the reply envelope provided
 
 
 
 
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See page 72
 
 
 
Proposal 6: 
To approve an amendment to our certificate of incorporation to reduce the number of authorized shares of common stock by the reverse stock split ratio determined by the Board (the “Authorized Share Reduction”).
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FOR
 
 
 
 
 
 
YOUR VOTE IS IMPORTANT!
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders. This Proxy Statement and our 2019 Annual Report on Form 10-K are available at: www.viewproxy.com/ CallonPetroleum/2020. If you have any questions or need assistance voting your shares, please call our proxy solicitor, Innisfree M&A Incorporated, 501 Madison Avenue, 20th Floor, New York, NY 10022
Banks and Brokerage Firms, please call:  (212) 750-5833
Shareholders, please call toll-free:(888) 750-5834
 
 
w
See page 79
 
 
 
 
 
 
 
 
 
 
 
 
 
 


4 CALLON PETROLEUM


NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 
 
 
We will also transact other business that may properly come before the Annual Meeting.
This Notice of Annual Meeting of Shareholders and the Proxy Statement herein provide further information on the Company’s performance and corporate governance and describe the matters to be presented at the Annual Meeting. The Board set April 14, 2020, as the record date (the “Record Date”) for the Annual Meeting. Holders of record of our common stock at the close of business on the Record Date are entitled to receive this notice of, and vote at, the Annual Meeting. A list of the names of shareholders entitled to vote at the Annual Meeting will be available for ten days prior to the Annual Meeting for examination by any shareholder for any purpose germane to the Annual Meeting between the hours of 9:00 a.m. and 5:00 p.m., Central Time, at our headquarters at 2000 W. Sam Houston Parkway South, Suite 2000, Houston, TX 77042. This list will also be available for such purposes during the Annual Meeting at the place of the Annual Meeting or, in the event that the Annual Meeting is held virtually, at a website to be provided in the announcement notifying shareholders of the change in meeting format.
Beginning on or about April 28, 2020, we mailed an Important Notice Regarding the Availability of Proxy Materials (the “Notice”) to our holders of record. The Notice contained instructions on how to access the Proxy Statement and related materials on the Internet and how to enter your voting instructions. Instructions for requesting a paper copy of the proxy materials are contained in the Notice.
We thank you for your continued support and look forward to seeing you at the Annual Meeting.
By Order of the Board of Directors,
 
 
 
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Michol L. Ecklund 
Senior Vice President, General Counsel
and Corporate Secretary
.
Houston, Texas
April 28, 2020
 
 



2020 PROXY STATEMENT      5


TABLE OF CONTENTS


6 CALLON PETROLEUM


PERFORMANCE HIGHLIGHTS
Callon is an independent oil and natural gas company focused on the acquisition, exploration, and development of high-quality assets in leading Texas oil plays located in the Permian Basin and the Eagle Ford Shale. Callon’s strong foundation spans over 70 years with an ongoing mission to build trust, create long-term value, and drive sustainable cash flow growth for our stakeholders. We are positioned to deliver value for our stakeholders in 2020 and beyond through the following:
PREPARATION
 
PURPOSE
 
EXECUTION OF PURPOSE
    Significant scale and high operational control of ~200,000 net acres in Texas's producer-friendly Permian Basin and Eagle Ford Shale
    Robust infrastructure network from multiple years of thoughtful planning and investment reduces overall capital intensity
    Liquidity flexibility and free cash flow initiatives support long-term co-development for inventory and balance sheet preservation
    Talented workforce with growing technical expertise identifies with a culture of responsibility and adaptability in a cyclical commodity business
 
    Long-term value creation focuses on growing corporate level returns through capital efficiency and reserve recovery optimization
    Sustainable business model balances capital efficiency improvements with longer-term reinvestment reduction initiatives
    Stakeholder alignment through governance structure and ongoing engagement across shareholders, employees, and communities in which we operate
    Expanding ESG oversight to maximize impact of initiatives and ensure corporate responsibility priorities are achieved
 
    Accelerate corporate returns on capital through margin preservation, capital intensity reduction, and portfolio optimization
    Generate meaningful free cash flow through breakeven cost reduction and moderation of production declines
    Improve financial profile with simplified capital structure and no near-term maturities with asset monetization upside
    Long term vision focused on safety and sustainability to maximize reserve capture through prudent co-development operations
2019 was a transformational year for Callon. The Company continued its long-term value creation focus with the execution of multiple strategic initiatives across operations, finance, environmental, social and governance. The Company’s development program successfully transitioned to larger projects featuring multi-zone co-development, leading to improved capital efficiency, lower costs and the preservation of industry-leading margins. The year culminated with the successful closing of the Carrizo Acquisition, which more than doubled the Company’s production, reserves, acreage, and cash flow. The combined Company features a diversified asset base that supports our scaled development model and provides significant optionality to support cash generation amid commodity price volatility. While Callon’s share price was negatively impacted, along with its industry peers, by commodity price volatility and a shift in sector-wide investor sentiment, the Company maintained its commitment to long-term value creation in 2019 as reflected by the achievement of multiple key operational, financial and ESG highlights as described below.


2020 PROXY STATEMENT      7


PERFORMANCE HIGHLIGHTS

 
    With the closing of the Carrizo Acquisition, more than doubled our acreage position to nearly 200,000 net acres in Texas's producer-friendly Permian Basin and Eagle Ford Shale.
    Generated over $500 million in Adjusted EBITDA(i).
    Completed over $300 million of non-core asset monetizations.
    Redeemed approximately $270 million of preferred securities resulting in prospective dividend savings of nearly $25 million annually.
    Generated $58.2 million in free cash flow(ii) during the fourth quarter of 2019 (on a pro forma basis).
    Maintained an industry leading EBITDA margin of $33.28 per Boe for 2019.(i)
    Achieved record production (top of guidance) with operational capital spending below the bottom of full year guidance range.
    Initiated full-field co-development across all asset areas, lowering target development costs and improving capital efficiency.
    Grew total proved reserves to 540 MMBoe with a PV-10(i) value of $5.4 billion as of December 31, 2019.
    Achieved record safety performance metrics, including a Total Recordable Incident Rate that was 50% lower than prior year.
    2x recycled water volumes from 2018, further reducing environmental impact of operations.
    Reduced flaring by more than 40% year over year and was in the lowest third of all Texas producers in flaring intensity per the most recent TX RRC report.(iii)
(i) 
See Appendix A for a reconciliation of Non-GAAP financial measures
(ii) 
Free cash flow is defined as Adjusted EBITDA minus the sum of operational capital, capitalized interest, capitalized G&A, and interest expense. Adjusted EBITDA is a Non-GAAP financial measure; please refer to Appendix A for a reconciliation
(ii) 
TX RRC defines flare intensity as gross daily flare volumes divided by gross daily oil production
Coming off a strong 2019, Callon remains driven by a long-term value focus, and our progress in maturing our operations and production base in recent years now allows us to drive continued improvements in our cash flow profile and corporate-level returns. In 2020 and beyond, the Company is well-positioned to progress efficiencies in our development program through larger pad developments, reduced leasehold obligations and leveraging of established infrastructure for the benefit of our shareholders.


8 CALLON PETROLEUM


SUSTAINABILITY AT
CALLON PETROLEUM
At Callon, our commitment to our shareholders is simple: create value in a responsible manner. Our focus on integrating sustainable business practices and achieving long-term results drives our operations. In alignment with these goals, our Board of Directors oversees the company’s safety and environmental policies, development of a positive corporate culture and an effective corporate governance program. To ensure that sustainability matters remain a priority at Callon, the independent Nominating and Corporate Governance Committee of our Board has direct oversight responsibility for our ESG policies and performance for the development of Company positions related to stakeholder concerns and emerging issues that affect our industry. The entire Callon team is committed to improving returns for our shareholders while positively impacting the communities in which we live and work.
Our corporate focus is anchored by five core values: Responsibility, Integrity, Drive, Respect and Excellence.
Environmental
Callon is committed to safeguarding the environment and conducting our business in a manner designed to comply with applicable environmental laws and regulations and apply responsible standards where such laws or regulations do not exist. We have adopted a Safety and Environmental Policy that sets forth our operating principles and our expectations of Callon employees and contractors to operate safely, responsibly and in an environmentally sound manner.
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WATER
 
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AIR
 
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LAND
Protecting local water supplies and minimizing our use of fresh water resources are high priorities in our operations.
 
As part of our environmental program, Callon monitors and seeks to reduce greenhouse gas (GHG) and other emissions from our operations.
 
At Callon, we strive to be good stewards of the environment and minimize our impact in the areas where we operate.
 
 
 
 
 
 
 
 
 
 
 
2x recycled water volumes from 2018, further reducing environmental impact from operations
 
All of the drilling rigs operating on Callon assets are dual-fuel rigs, which reduce greenhouse gas emissions in our operations.
 
Decreased total fluid spill rate by ~50%
 
 
 
 
 
 
 
 
 
 
 
<20%
permitted water infrastructure utilization rate in Permian Basin minimizes future environmental impact
 
Eliminated diesel-powered generators as a primary source of power and in doing so lowered our emissions and operating costs.
 
>2x increase in average project size in 2020 minimizes surface impact
 
 
 
 
 
 
 
 
 
 
 
60% produced water sourced for Delaware completions
 
>40% reduction in gas flaring intensity(1)
 
>90% of crude and water transported via pipeline
(1) 
Based on flaring intensity MCF/Bbl as defined by the Texas Railroad Commission (TX RRC). TX RRC defines flare intensity as gross daily flare volumes divided by gross daily oil production.
Social
Callon values the perspectives of all stakeholders including employees, contractors, local communities and shareholders. We are focused on protecting, empowering and developing our team members and contributing meaningfully to the communities where we live and work. For us, corporate stewardship is not just a financial obligation, but a social duty as well.


2020 PROXY STATEMENT      9


SUSTAINABILITY AT CALLON PETROLEUM

 
 
 
 
 
 
 
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Safety
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50% reduction in Total Recordable Incident Rate (TRIR) (2019 best year on record for safety performance)
 
 
At Callon, protecting our people and our communities is our top priority. We believe that a strong safety culture is tantamount to being a leading operator in the exploration and production (E&P) business.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Workforce
 
 
 
 
BUILDING A TOP PLACE TO WORK
 
 
 
 
At Callon, a goal is to assemble and inspire a team of passionate and innovative professionals in an environment where they can achieve their professional goals. We empower our employees and engage team members in decision-making at every level while recognizing contributions to our success. This unique environment has helped us achieve top-tier engagement scores, resulting in Callon being named a Top Workplace by Houston Chronicle in 2017 (small company), 2018 (mid-size company), and 2019 (mid-size company).
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EMBRACING DIVERSE BACKGROUNDS AND PERSPECTIVES
 
 
 
 
At Callon, we value the diversity of our employees and their contributions. We are firmly committed to fostering an inclusive environment and providing equal opportunity to all qualified persons.
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MINORITY EMPLOYEES
IN 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Community
 
 
 
OPERATING IN LOCAL COMMUNITIES
SUPPORTING LOCAL COMMUNITIES
 
 
When our assets necessitate development projects near populated areas, we make every effort to mitigate the impact of our activities and work closely with city officials and neighboring landowners to proactively address considerations such as: noise, traffic, greenhouse gas emissions, and liquid spill prevention
Callon has a longstanding history of supporting the local communities in which we operate. It is our privilege to make a positive impact through charitable giving and volunteerism to support key initiatives to support education, community, and the environment.
We also sponsor a charitable matching program to support our employees’ philanthropic priorities.
 
 
 
 
 
 
Governance
At Callon, we are committed to high ethical standards and effective and sustainable corporate governance. We believe this commitment promotes the long-term interests of our shareholders, helps build public trust in our Company and strengthens Board and management accountability. We continually assess our governance principles to ensure that we are operating our business responsibly, ethically and in a manner aligned with the interests of our shareholders. Our CD&A beginning on page 36 provides additional information on governance practices for executive compensation.
Our Board expanded the scope of our independent Nominating & Corporate Governance committee to enhance oversight of the Company’s ESG policies, performance and disclosure.
 
 
 
 
 
 
Two female directors
Less than five year tenure for over half the directors
Independent, non-executive director serves as chair of the Board
 
 
 
 
 
 


10 CALLON PETROLEUM


 
 
 
Proposal 1
Election of
Class II
Directors
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The Board of Directors recommends a vote FOR each of the Class II director nominees named in this Proxy Statement.
    Our director nominees provide experience and perspectives that enhance the overall strategic and oversight functions of Callon’s Board.
    For more information about the nominees’ experience, skills, and qualifications, please see page 13.
 
 
 
Board of Directors
Process for Selecting Directors
Director Identification and Selection
Criteria. The Nominating and Corporate Governance Committee has established guidelines for considering nominations to the Board. The Committee evaluates potential nominees based on the contribution such nominee’s background and skills could have upon achieving the goal of a well-rounded, diverse Board that functions collegially as a unit. While not an exhaustive list, key criteria include:
Relevant oil and gas exploration and production industry knowledge and experience;
Complimentary mix of backgrounds and experience in areas including business, finance, accounting, technology, and strategy;
Personal qualities of leadership, character, judgment and personal and professional integrity and high ethical standards;
The candidate’s ability to exercise independent and informed business judgment;
Whether the candidate is free of conflicts and has the time required for preparation, participation, and attendance at meetings;
Diversity, including differences in viewpoints, background, education, gender, race or ethnicity, age, and other individual qualifications and attributes;
The ability to work with other members of the Board, the Chief Executive Officer (the "CEO"), and senior officers of the Company in a constructive and collaborative fashion to achieve the Company’s goals and implement its strategy; and
In the case of an incumbent director, such director’s past performance on the Board.
The Nominating and Corporate Governance Committee and the Board may also consider other qualifications and attributes that they believe are appropriate in evaluating the ability of an individual to serve as a member of the Board. The Nominating and Corporate Governance Committee’s goal is to assemble a Board that brings to us a variety of perspectives and skills derived from high quality business and professional experience to perform its oversight role satisfactorily for our shareholders. In making its determinations, the Committee evaluates each individual in the context of the Board as a whole, with the objective of assembling a group that can best represent shareholder interests through the active, objective, and constructive participation in meetings and the strategic decision-making processes.
Diversity. Our Corporate Governance Guidelines set forth our policy with respect to Board diversity. We are committed to building a diverse Board comprised of individuals from different backgrounds, including differences in viewpoints, education, gender, race or ethnicity, age, and other individual qualifications and attributes. To accomplish this, the Nominating and Corporate Governance Committee will continue to require that search firms engaged by the Company seek to present a robust selection of women and ethnically diverse candidates in all prospective director candidate pools.
Nominating Process. 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 and any potential need to expand the Board to include additional expertise. Current members with a record of quality contribution to the Board whose experience contributes to a complementary mix of backgrounds that enhance the Board are renominated. When vacancies become available, the Committee may seek input from industry experts or engage third-party search firms to help source particular areas of expertise or backgrounds.


2020 PROXY STATEMENT      11


PROPOSAL 1

Over time, the Board refreshes its membership through a combination of adding or replacing directors to achieve the appropriate balance between maintaining longer-term directors with deep institutional knowledge of the Company and adding directors who bring a diversity of perspectives and experience. As a reflection of this philosophy, if all of the nominees are elected to the Board, following the Annual Meeting:
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6/11
directors will have tenures of five or fewer years.
 
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10/11
directors will be independent.
Majority Vote Standard
Our Corporate Governance Guidelines provide for a majority voting policy in uncontested director elections. The Company believes that the majority vote standard ensures accountability and the opportunity for a positive mandate from the Company’s shareholders. At any shareholder meeting for the election of directors at which a quorum is present, any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” such election (“Majority Withheld Vote”) shall tender his or her resignation for consideration by the Nominating and Corporate Governance Committee following certification of the shareholder vote, unless the number of nominees exceeds the number of directors to be elected as of the Record Date for such meeting, in which event the directors shall be elected by a plurality of the votes cast. Such resignation will only be effective upon Board acceptance of such resignation after receiving the recommendation of the Nominating and Corporate Governance Committee.
If a director nominee receives a Majority Withheld Vote, then promptly following the certification of the election results, the Nominating and Corporate Governance Committee will consider any factors it deems relevant to the best interests of the Company and our shareholders in determining whether to accept the director’s resignation and recommend to the Board that action to be taken with respect to the tendered resignation. Within 120 days following certification of the shareholder vote, the Board shall consider the recommendation and make a determination as to whether to accept or reject such director’s resignation and shall notify the director concerned of its decision. We will also promptly publicly disclose the Board’s decision and process in a periodic or current report filed with or furnished to the SEC.
If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum but will have no effect upon the outcome of the vote. All shares of common stock represented by proxies will be voted “FOR” the election of the director nominees, except where authority to vote in the election of directors has been withheld. Should the nominees become unable or unwilling to serve as a director at the time of the Annual Meeting, the person or persons exercising the proxies will vote for the election of substitute nominees designated by the Board, or the Board may choose to reduce the number of members of the Board to be elected at the Annual Meeting in order to eliminate the vacancy. Your proxy cannot be otherwise voted for a person who is not named in this Proxy Statement as a candidate for director or for a greater number of persons than the number of director nominees named. The Board has no reason to believe that the nominees will be unable or unwilling to serve if elected.
 
The Board recommends a vote FOR each of the three Class II director nominees.
 



12 CALLON PETROLEUM


PROPOSAL 1

Directors Nominated For Re-Election
The Board currently consists of eleven directors. Consistent with our certificate of incorporation, the current Board is divided into three classes designated as Class I, Class II, and Class III, each with staggered, three-year terms. Based on the recommendations from the Nominating and Corporate Governance Committee, the Board has nominated three continuing Class II Directors, Messrs. Matthew R. Bob, Anthony J. Nocchiero and James M. Trimble, to stand for re-election or, in each case, until the election and qualification of their respective successors or until their earlier death, retirement, resignation or removal.
The following biographies reflect the particular experience, qualifications, attributes, and skills that led the Board to conclude that each nominee should stand for re-election to serve on the Board:
Class II Directors
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Matthew R. Bob
 
President of Eagle Oil and Gas; Managing Member of MB Exploration
 
Matthew Bob has served as a member of the Board since 2014. Mr. Bob currently serves as President of Eagle Oil and Gas and has been the founder and managing member of MB Exploration and affiliated companies since 1994. Previously, Mr. Bob served as President of Hall Phoenix Energy LLC, a privately held oil and gas exploration company, from 2009 to 2011. Prior to forming MB Exploration, Mr. Bob was Chief Geophysicist at Pitts Oil Company. He began his career at Union Oil Company of California where he held various geological positions.
Mr. Bob currently serves as an independent director of Southcross Energy, a natural gas processing and transportation company with operations in South Texas.
Mr. Bob holds a B.A. in Geology from St. Louis University and an M.S. in Geology from Memphis University, and is a graduate of Harvard University’s Executive Management Program. He is a member of the American Association of Petroleum Geologists, the Society of Exploration Geophysicists and the Dallas Petroleum Club, and is a registered Geoscientist in the States of Texas, Mississippi and Louisiana.
SKILLS AND QUALIFICATIONS:
Mr. Bob’s extensive knowledge of the exploration and production industry and technical expertise are assets to the Board and qualify him as a director. His experience as a senior executive further strengthens the strategic and oversight functions of the Board.
INDEPENDENT
Age 63
Director Since 2014
Callon Committees:
Compensation (Chairman), Nominating and Corporate Governance, Strategic Planning and Reserves
Other Current Directorships:
Southcross Energy
 
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Anthony J. Nocchiero
 
Former SVP and Chief Financial Officer (Retired) of CF Industries, Inc.
 
Anthony Nocchiero has served as a member of the Board since 2011. Mr. Nocchiero retired as Senior Vice President and Chief Financial Officer for CF Industries, Inc. in 2010, a position he had held since 2007. From 2005 to 2007, he was the Vice President and Chief Financial Officer for Merisant Worldwide, Inc. Prior to that, Mr. Nocchiero was self-employed as an advisor and private consultant from 2002 to 2005. From 1999 to 2001, Mr. Nocchiero served as Vice President and CFO of BP Chemicals, the global petrochemical business of BP plc. Prior to that, he spent 24 years with Amoco Corporation in various financial and management positions, including service as Amoco’s Vice President and Controller from 1998 to 1999.
Mr. Nocchiero has previous experience serving as a board member of various public and private companies, including Terra Nitrogen LP, Keytrade AG, Vysis Corporation and the Chicago Chamber of Commerce.
Mr. Nocchiero holds a B.S. degree in Chemical Engineering from Washington University in St. Louis and an M.B.A. degree from the Kellogg Graduate School of Management at Northwestern University.
SKILLS AND QUALIFICATIONS:
Mr. Nocchiero’s broad financial, accounting and operating experience within the energy industry are valuable to the Board and make him a meaningful contributor as a director. Additionally, Mr. Nocchiero’s status as a “financial expert” and knowledge of public company reporting requirements add meaningful insights to the Board and Audit Committee.
INDEPENDENT
Age 69
Director Since 2011
Callon Committees:
Audit (Chairman), Compensation, Strategic Planning and Reserves
 


2020 PROXY STATEMENT      13


PROPOSAL 1

biophoto_trimble.jpg
 
James M. Trimble
 
Former Chief Executive Officer and President (Retired) of Stone Energy Corporation
 
James Trimble has served as a member of the Board since 2014. Most recently, Mr. Trimble served as the interim Chief Executive Officer and President of Stone Energy Corporation from 2017 to 2018. Prior to that, Mr. Trimble served as CEO and President of PDC Energy, Inc. from 2011 until his retirement in 2015. Mr. Trimble was Managing Director of Grand Gulf Energy Limited, a public company traded on the Australian Securities Exchange, and President and CEO of Grand Gulf’s U.S. subsidiary Grand Gulf Energy Company LLC, an exploration and development company focused primarily on drilling in mature basins in Texas, Louisiana and Oklahoma, from 2005 to 2010. Earlier in his career, Mr. Trimble was CEO of TexCal (formerly Tri-Union Development) and CEO of Elysium Energy, a privately held oil and gas exploration company. Prior to that, he was Senior Vice President of Exploration and Production for Cabot Oil and Gas, a publicly-traded independent energy company.
Mr. Trimble currently serves as a director of Talos Energy, a publicly-traded oil and gas exploration company, and Chairman of the Board of Crestone Peak Resources LLC, a privately held oil and gas exploration company. Previously, Mr. Trimble was a director of Stone Energy Corporation from 2017 to 2018, PDC Energy from 2009 to 2016, C&J Energy Services from 2016 to 2017, Seisgen Exploration from 2008 to 2015, Grand Gulf Energy from 2009 to 2012, and Blue Dolphin Energy from 2002 to 2006.
Mr. Trimble was an officer of PDC Energy in September 2013, when each of the twelve partnerships for which the company was the managing general partner filed for bankruptcy in the federal bankruptcy court, Northern District of Texas, Dallas Division and was on the board of C&J Energy Services when it filed for bankruptcy in the court of the Southern District of Texas, Houston Division in July 2016.
Mr. Trimble graduated from Mississippi State University where he majored in petroleum engineering for undergraduate (Bachelor of Science) and graduate studies. He is a Registered Professional Engineer in the State of Texas.
SKILLS AND QUALIFICATIONS:
Mr. Trimble’s deep knowledge of the exploration and production industry and his leadership experience at previous companies strengthen the strategic and oversight functions of the Board. His experience on the boards of several other public companies provide valuable perspective on best practices relating to corporate governance, management and strategic transactions.
INDEPENDENT
Age 71
Director Since 2014
Callon Committees:
Nominating and Corporate Governance (Chairman), Compensation, Strategic Planning and Reserves
Other Current Directorships:
Talos Energy
 



14 CALLON PETROLEUM


CORPORATE GOVERNANCE
Directors Continuing in Office
Biographical information for our directors continuing in office is set forth below. These individuals are not standing for re-election at this time:
Class I Directors
biophoto_finch.jpg
 
Michael L. Finch
 
Former Chief Financial Officer (Retired) of Stone Energy Corporation
 
Michael Finch has served as a member of the Board since 2015. He spent nearly 20 years affiliated with Stone Energy Corporation, a publicly-traded oil and gas exploration company, from which he retired as Chief Financial Officer and a member of the Board of Directors in 1999. Prior to his service with Stone Energy, he was employed by Arthur Andersen & Co.
Mr. Finch was an independent director of Petroquest Energy, Inc. a publicly-traded oil and gas company, from 2003 to 2016, where he served as chairman of the Audit Committee and as a member of the Compensation Committee and the Nominating and Corporate Governance Committee. Mr. Finch currently serves on the advisory board of C.H. Fenstermaker & Associates, a multi-disciplinary consulting firm that specializes in surveying and mapping, engineering and environmental consulting.
Mr. Finch holds a B.S. in Accounting from the University of South Alabama and was licensed as a Certified Public Accountant (currently inactive).
SKILLS AND QUALIFICATIONS:
Mr. Finch’s extensive financial, accounting, and operating experience within the oil and gas industry are extremely valuable to the Board and qualify him as a director. In particular, Mr. Finch’s accounting background and status as a “financial expert” provide the Board valuable perspective on issues facing audit committees.
INDEPENDENT
Age 64
Director Since 2015
Callon Committees: 
Audit, Compensation, Strategic Planning and Reserves
 
biophoto_johnson.jpg
 
S. P. Johnson IV
 
Former President, Chief Executive Officer and Co-Founder (Retired) of Carrizo Oil & Gas, Inc.
 
Mr. Johnson was a co-founder of Carrizo and served as the President and Chief Executive Officer and as a director from December 1993 to December 2019, when Carrizo merged with the Company. Prior to that, he worked for Shell Oil Company for 15 years, where his managerial positions included Operations Superintendent, Manager of Planning and Finance and Manager of Development Engineering.
Mr. Johnson was also a director of Basic Energy Services, Inc., an oilfield service provider, and served as a director of Pinnacle Gas Resources, Inc., a coalbed methane exploration and production company, from 2003 to 2011.
Mr. Johnson is a Registered Petroleum Engineer and holds a B.S. in Mechanical Engineering from the University of Colorado.
SKILLS AND QUALIFICATIONS:
Mr. Johnson brings to the Board extensive experience in oil and gas exploration and production and the energy industry through his roles at Carrizo and other energy companies.
INDEPENDENT
Age 64
Director Since 2019
Callon Committees:
Strategic Planning and Reserves
 


2020 PROXY STATEMENT      15


CORPORATE GOVERNANCE

biophoto_mcvay.jpg
 
Larry D. McVay
 
Managing Director of Edgewater Energy, LLC
 
Larry McVay has served as a member of the Board since 2007. Mr. McVay has been a Managing Director of Edgewater Energy, LLC, a privately held oil and gas investment company, since 2007. From 2003-2006, he served as Chief Operating Officer of TNK-BP Holding, one of the largest oil producing companies in Russia. From 2000-2003, he served as Technology Vice President and Vice President of Health, Safety and Environment for BP plc. Prior to joining BP, Mr. McVay held numerous positions at Amoco, including engineering management and senior operating leadership positions.
Mr. McVay is a director of Linde plc, a publicly-traded industrial gas and engineering company. Previously, Mr. McVay was a director of Praxair, Inc., an industrial gases company in North and South America, until Praxair, Inc. and Linde AG combined to create Linde plc in 2018. Additionally, Mr. McVay was previously a director of Chicago Bridge and Iron Company, N.V., a publicly-traded engineering, procurement and construction company, until it merged into McDermott International in 2018.
Mr. McVay earned a B.S. in Mechanical Engineering from Texas Tech University, where he was recognized as a Distinguished Engineer in 1995.
SKILLS AND QUALIFICATIONS:
Mr. McVay has been directly involved in nearly all aspects of the oil and gas industry, including drilling, production, finance, environmental, risk, and safety. We believe that this experience and his knowledge of the exploration and production industry, particularly in the Permian Basin, as well as his senior executive experience, service on other boards, and independence, provide valuable insight in the development of our long-term strategies and qualify him for service on the Board.
INDEPENDENT
Age 72
Director Since 2007
Callon Committees:
Strategic Planning and Reserves (Chairman), Audit, Nominating and Corporate Governance
Other Current Directorships:
Linde plc
 
biophoto_webster.jpg
 
Steven A. Webster
 
Former Chairman of the Board and Co-Founder of Carrizo Oil & Gas, Inc.
 
Mr. Webster was a co-founder of Carrizo for which he served as a director since 1993 and as its Chairman of the Board since 1997 until December 2019, when Carrizo merged with the Company. Since 2016, Mr. Webster has served as Managing Partner of AEC Partners, a private equity firm engaged in energy investment which was the successor to Avista Capital Partners, a private equity firm he co-founded in 2005 and for which he served as Co-Managing Partner. From 2000 through 2005, Mr. Webster served as Chairman of Global Energy Partners, an affiliate of DLJ Merchant Banking and CSFB Private Equity. From 1988 through 1999, Mr. Webster was the CEO and President of R&B Falcon Corporation and Chairman and CEO of one of its predecessor companies, Falcon Drilling Company, which he founded. Mr. Webster has been a founder or seed investor in numerous other private and public companies.
He has held numerous board positions and currently serves as a director of ERA Group, Oceaneering International and various private companies. Since its founding in 1993, Mr. Webster has served as a Trust Manager of Camden Property Trust, a REIT.
Mr. Webster holds an M.B.A. from Harvard Business School where he was a Baker Scholar. He also holds a B.S. in Industrial Management and an Honorary Doctorate in Management from Purdue University.
SKILLS AND QUALIFICATIONS:
Mr. Webster brings to the Board experience in, and knowledge of, the energy industry, business leadership skills from his tenure as chief executive officer of publicly traded companies and his over 30-year career in private equity and investment activities, and experience as a director of several other public and private companies.
INDEPENDENT
Age 68
Director Since 2019
Callon Committees:
Audit, Strategic Planning and Reserves
Other Current Directorships:
Camden Property Trust; Era Group Inc.; Oceaneering International, Inc.
 


16 CALLON PETROLEUM


CORPORATE GOVERNANCE

Class III Directors
biophoto_faulkenberry.jpg
 
Major General (Ret.) Barbara J. Faulkenberry
 
Major General (Ret.) of the U.S. Air Force
 
Barbara Faulkenberry has served as a member of the Board since 2018. Ms. Faulkenberry retired from the U.S. Air Force in 2014 as a Major General (2-stars) after a 32-year career, finishing in the top 150 leaders of a 320,000-person global organization. Her last assignment was as Vice Commander (COO) and interim Commander (CEO) of a 37,000-person organization conducting all global Department of Defense air cargo, passenger, and medical patient movements with 1,100 military aircraft plus contracted commercial aircraft.
Ms. Faulkenberry is currently an independent director for USA Truck, a publicly-traded provider of logistics and trucking services across North America, where she serves as chair of the Technology Committee and as a member of the Nominating and Corporate Governance Committee.
Ms. Faulkenberry received a B.S. degree from the Air Force Academy in 1982, an M.B.A. from Georgia College in 1986, and a Master of National Security from the National Defense University in 1999. She has also attended strategic leadership courses at Harvard, Cambridge, and Syracuse Universities.
SKILLS AND QUALIFICATIONS:
Ms. Faulkenberry brings to the Company senior leadership experience in the areas of supply chain management, logistics, strategic planning, risk management, technology, cyber security, and leadership development. Additionally, she is a NACD Board Leadership Fellow and earned the Carnegie Mellon/NACD CERT Certificate in Cybersecurity Oversight, both of which contribute to best practices in corporate governance and cyber security and provide great value to the Board.
INDEPENDENT
Age 60
Director Since 2018
Callon Committees:
Audit, Nominating and Corporate Governance, Strategic Planning and Reserves
Other Current Directorships:
USA Truck, Inc.
 
callon2019proxyimage40.jpg
 
L. Richard Flury
 
Chairman of the Board
Former Chief Executive (Retired) for Gas, Power & Renewables of BP plc
 
Richard Flury has served as a member of the Board since 2004 and has served as Chairman since 2017. He spent over 30 years with Amoco Corporation, and later, BP plc, from which he retired as Chief Executive for Gas and Power and Renewables in 2001. Prior to Amoco’s merger with BP in 1998, he served in various executive positions and was Chief Executive for Worldwide Exploration and Production and Executive Vice President of Amoco Corporation at the time of the merger.
Mr. Flury is a director of McDermott International, a publicly-traded engineering, procurement and construction company, including when it filed voluntary petitions for reorganization in the United States Bankruptcy Court for the Southern District of Texas in January 2020. Mr. Flury was a director and the non-executive Chairman of Chicago Bridge and Iron Company, N.V., a publicly-traded engineering, procurement and construction company, until it merged into McDermott International in 2018. Previously, Mr. Flury was a member of the Board of QEP Resources, Inc., a publicly-traded oil and gas exploration company, from 2010 to 2015.
He is a graduate of the University of Victoria (Canada) where he studied geology.
SKILLS AND QUALIFICATIONS:
Mr. Flury’s deep knowledge of the energy industry and years of executive and management experience provide him with valuable insights into the strategic issues affecting companies in the oil and gas industry that are helpful to our Company and Board. His service on the boards of other publicly-traded companies has provided him exposure to different industries and approaches to governance that we believe further enhances the Board.
INDEPENDENT
Age 72
Director Since 2004
Callon Committees:
Audit, Compensation, Strategic Planning and Reserves
Other Current Directorships:
McDermott International
 


2020 PROXY STATEMENT      17


CORPORATE GOVERNANCE

biophoto_gattojr.gif
 
Joseph C. Gatto, Jr.
 
President, Chief Executive Officer and Director
 
Joseph C. Gatto, Jr. is President, Chief Executive Officer and Director of Callon. Mr. Gatto was elected to the Board in 2018. He has served as the Company's CEO since 2017 and as President since 2016. Prior to his appointment as CEO, he served as Chief Financial Officer and Treasurer of the Company from 2014 to 2017, and held various other senior leadership positions within the Company since joining Callon in 2012.
Prior to joining the Company, Mr. Gatto served as Head of Structuring and Execution with Merrill Lynch Commodities from 2010 to 2011, as the founder of MarchWire Capital, LLC, a financial advisory and strategic consulting firm in 2009, and as a Managing Director in the energy investment banking groups of Merrill Lynch & Co. and Barclays Capital from 1997 to 2009.
Mr. Gatto graduated from Cornell University with a B.S. degree and The Wharton School of the University of Pennsylvania with an M.B.A.
SKILLS AND QUALIFICATIONS:
Mr. Gatto’s extensive experience in investment banking and the oil and gas industry make him a valuable addition to the Board. Additionally, Mr. Gatto's knowledge of the Company and strong background in capital markets, transactions, strategic planning, and investor relations provide the Board with essential insight and guidance.
Age 49
Director Since 2018
 
biophoto_ssecasa.jpg
 
Frances Aldrich Sevilla-Sacasa
 
Former Chief Executive Officer of Banco Itaú International
 
Ms. Aldrich Sevilla-Sacasa is a private investor and was Chief Executive Officer of Banco Itaú International, Miami, Florida, from April 2012 to December 2016. Prior to that time, she served as Executive Advisor to the Dean of the University of Miami School of Business from 2011 to 2012, Interim Dean of the University of Miami School of Business from 2011 to 2011, President of U.S. Trust, Bank of America Private Wealth Management from 2007 to 2008, President and Chief Executive Officer of US Trust Company in 2007, and President of US Trust Company from November 2005 until June 2007. She previously served in a variety of roles with Citigroup’s private banking business, including President of Latin America Private Banking, President of Europe Private Banking, and Head of International Trust Business.
Ms. Aldrich Sevilla-Sacasa holds a Bachelor of Arts Degree from the University of Miami and an M.B.A. from the Thunderbird School of Global Management.
SKILLS AND QUALIFICATIONS:
Ms. Aldrich Sevilla-Sacasa brings to the Board considerable experience in financial services, banking and wealth management. In addition, her experience as a former president and chief executive officer of a trust and wealth management company, and as a director of other corporate and not-for-profit boards has provided her with expertise in the area of corporate governance.
Age 64
Director Since 2019
Callon Committees:
Nominating and Corporate Governance; Strategic Planning and Reserves
Other Current Directorships:
Camden Property Trust
 


18 CALLON PETROLEUM


CORPORATE GOVERNANCE

Current Composition of the Board
The following table provides information with respect to the skills and experience of all current directors and the nominees for Class II terms who have been nominated to stand for election at the Annual Meeting.
Name
Matthew R. Bob
Barbara J. Faulkenberry
Michael L. Finch
L. Richard Flury
(Chairman)
Joseph C. Gatto, Jr.
S.P. Johnson IV
Larry D. McVay
Anthony J. Nocchiero
Frances A. Sevilla-Sacasa
James M. Trimble
Steven A. Webster
Age (as of April 1, 2020)
63
60
64
72
49
64
72
69
64
71
68
Tenure (as of April 1, 2020)
6
2
5
16
2
1
13
9
1
6
1
Gender Diversity
 
 
 
 
 
 
 
 
 
callon2019proxyimage21a.jpg
CEO/President Experience
 
 
 
 
callon2019proxyimage22c.jpg
Senior Executive Leadership
callon2019proxyimage19a.jpg
Outside Public Boards (current)
 
 
 
 
callon2019proxyimage20a.jpg
Outside Public Boards (prior)
 
 
 
 
callon2019proxyimage24a.jpg
E&P Industry Experience
 
 
callon2019proxyimage25a.jpg
Energy (Other than E&P) Industry Experience
 
 
 
 
iconfinexpert.jpg
Financial Expert
 
 
 
 
 
 
 
 
iconfinliteracya01.jpg
Financial Literacy
callon2019proxyimage23a.jpg
Financial Oversight/Accounting
 
 
callon2019proxyimage26a.jpg
Petroleum and Other Engineering
 
 
 
 
 
 
 
callon2019proxyimage27a.jpg
Geologist or Geophysicist
 
 
 
 
 
 
 
 
 
callon2019proxyimage28a.jpg
Government/Public Policy/Regulatory
 
 
 
 
 
 
 
 
 
callon2019proxyimage29a.jpg
HES Experience/Environmental
 
 
 
 
 
 
 
 
callon2019proxyimage32a.jpg
Strategic Advising
 
 
callon2019proxyimage31a.jpg
Investment Banking
 
 
 
 
 
 
 
 
 
callon2019proxyimage33a.jpg
Supply Chain
 
 
 
 
 
 
 
 
 
callon2019proxyimage30a.jpg
Technology/IT/Cybersecurity
 
 
 
 
 
 
 


2020 PROXY STATEMENT      19


CORPORATE GOVERNANCE

Director Compensation
The compensation of our non-employee directors is reviewed by the Compensation Committee and is approved by the Board. We use a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on the Board. In determining director compensation, we consider the responsibilities of our directors, the significant amount of time the directors spend fulfilling their duties, and the competitive market for skilled directors.
Annually the Compensation Committee directly engages Meridian Compensation Partners ("Meridian") to conduct an analysis of director compensation and recommend any adjustments to the total annual compensation of the non-employee directors. Specifically, Meridian evaluates competitive market data, utilizing the same industry peer group ("Peer Group") used for executive compensation market data (see page 42). The Compensation Committee generally targets total compensation near the median of this Peer Group. The Company's director compensation program generally consists of cash retainers and an annual grant of restricted stock units ("RSUs") awarded under the Company’s 2018 Omnibus Incentive Plan (the “2018 Plan”). The RSU grants are awarded to match competitive practices and encourage a long-term alignment with shareholders.
In March 2019, with input from compensation advisor Meridian, the Compensation Committee reviewed the competitiveness of the director compensation package. Upon recommendation from the Compensation Committee, the Board determined to maintain compensation levels established in 2018, maintaining both an annual cash retainer of $80,000 and an annual restricted stock unit grant of $165,000. The average total compensation for Callon directors is at approximately the median of the Peer Group.
For 2019, the Company's non-employee director compensation consisted of the following:
Board member cash retainer
$
80,000

Restricted Stock Unit (RSU) Grant Value
$
165,000

Chairmen Fees
 
Non-Executive Chair
$
120,000

Audit Committee Chair
$
20,000

Compensation Committee Chair
$
15,000

Nominating and Corporative Governance Committee Chair
$
10,000

Strategic Planning and Reserves Committee Chair
$
10,000

Each non-employee director is reimbursed for reasonable out-of-pocket costs incurred to attend Board and Committee meetings. If a member of the Board is an officer or employee of the Company, he or she does not receive compensation for his or her service as a director.
The RSUs granted to directors in 2019 will vest on the first anniversary date following the grant, or on the date of the Company’s Annual Meeting , whichever occurs first.
Directors have the opportunity to make an annual election to defer some or all of their cash retainer or annual stock award pursuant to the terms of a deferred compensation plan for non-employee directors (the "Deferred Compensation Plan") until separation from service as a director. All deferrals under the plan are credited as phantom stock units of Callon stock. Callon's directors are subject to stock ownership guidelines of five times the annual cash retainer of $80,000. For more information on the stock ownership guidelines, see page 49.


20 CALLON PETROLEUM


CORPORATE GOVERNANCE

The table below indicates the total compensation earned during 2019 for each non-employee director:
NON-EMPLOYEE DIRECTOR COMPENSATION FOR 2019
Director
Fees Earned or
Paid in Cash(a)
 
Stock
Awards(b)
 
All Other
Compensation
 
Total
Matthew R. Bob
$
95,000

(c)
$
165,000


$0
 
$
260,000

Barbara J. Faulkenberry
$
80,000

(d)
$
165,000

 
$0
 
$
245,000

Michael L. Finch
$
80,000

(d)
$
165,000

 
$0
 
$
245,000

L. Richard Flury
$
200,000

(e)
$
165,000

 
$0
 
$
365,000

S. P. Johnson IV(i)
$
0

 
$
0

 
$0
 
$
0

Larry D. McVay
$
90,000

(f)
$
165,000

 
$0
 
$
255,000

Anthony J. Nocchiero
$
100,000

(g)
$
165,000

 
$0
 
$
265,000

Frances Aldrich Sevilla-Sacasa(i)
$
0

 
$
0

 
$0
 
$
0

James M. Trimble
$
90,000

(h)
$
165,000

 
$0
 
$
255,000

Steven A. Webster(i)
$
0

 
$
0

 
$0
 
$
0

(a) 
Does not include reimbursement of expenses associated with attending Board and Committee meetings.
(b) 
Amounts calculated utilizing the provisions of FASB ASC Topic 718. These amounts are equal to the grant date fair value of the awards. The aggregate number of stock unit awards outstanding as of December 31, 2019 for each director is as follows: Messrs. Bob, Flinch, Flury, McVay, Nocchiero and Trimble - 24,076; Ms. Faulkenberry - 20,370; Messrs. Johnson and Webster - 0; and Ms. Sevilla-Sacasa - 0.
(c) 
Represents annual retainer of $80,000 and an additional $15,000 for acting as Chairman of the Compensation Committee.
(d) 
Represents annual retainer of $80,000.
(e) 
Represents annual retainer of $80,000 and an additional $120,000 for acting as the non-executive Chairman of the Board. Mr. Flury elected to have his annual retainer and his non-executive Chairman of the Board fees deferred pursuant to the terms of the Deferred Compensation Plan , under which participants may elect to convert cash fees earned to phantom shares and defer the receipt of the proceeds in cash until separation from service as a director.
(f) 
Represents annual retainer of $80,000 and an additional $10,000 for acting as Chairman of the Strategic Planning and Reserves Committee.
(g) 
Represents annual retainer of $80,000 and an additional $20,000 for acting as Chairman of the Audit Committee.
(h) 
Represents annual retainer of $80,000 and an additional $10,000 for acting as Chairman of the Nominating and Corporate Governance Committee.
(i) 
Messrs. Johnson and Webster and Ms. Sevilla-Sacasa were not members of Callon's Board prior to December 20, 2019. Amounts shown for Messrs. Johnson and Webster and Ms. Sevilla-Sacasa represent compensation paid by Callon following the Carrizo Acquisition.
Pursuant to the terms of the Merger Agreement and the Carrizo Change in Control Severance Plan, during 2020 the Company will pay to Mr. Johnson $4,146,000 in severance benefits and a 2019 annual bonus of $670,175. For more information about the 2019 Carrizo annual bonus payout, please see page 46.
Director Independence
To minimize potential conflicts, it is a policy of the Board that a majority of the Board be independent. In accordance with the standards for companies listed on the New York Stock Exchange ("NYSE") and the rules and regulations promulgated by the SEC, as well as our Corporate Governance Guidelines, the Board considers a director to be independent if it has affirmatively determined that the director has no material relationship with the Company that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. The Board revisits the independence of each director on an annual basis and makes independence determinations when a newly appointed director joins the Board between annual meetings. The Board reviewed the independence of its directors and nominees in accordance with the standards described above and affirmatively determined that each of the directors (other than Mr. Gatto) and nominees is independent.


2020 PROXY STATEMENT      21


CORPORATE GOVERNANCE

Board Structure and Responsibilities
Governance Highlights
We are committed to effective and sustainable corporate governance, which we believe strengthens Board and management accountability, promotes the long-term interests of our shareholders, and helps build public trust in our Company. We adhere to our core values and governance principles to ensure that we operate our business responsibly, ethically, and in a manner aligned with the interests of our shareholders. Highlights of our commitment to strong corporate governance include the following:
Ten of our eleven directors are independent. Joseph C. Gatto, Jr., our President and CEO, is the only non‑independent member of the Board.
All Board committees are comprised entirely of independent directors.
An independent, non-executive director serves as the Company’s Chairman of the Board.
The Company encourages a paced refreshment of the Board. Six of the eleven directors have joined within the last five years.
The Board includes a balance of experience, tenure, and qualifications in areas important to our business.
Election of directors by majority of votes cast in an uncontested election
We have an over-boarding policy in place for directors.
The Board conducts regular executive sessions with our independent directors.
We regularly refresh our governance documents.
The Board and its committees conduct annual self-evaluations.
We have adopted stringent insider trading, anti-hedging, and anti-pledging policies.
We engage in active shareholder engagement practices.
The Board oversees environmental, social and governance practices.
The Board oversees succession planning for the CEO and executive officer positions.
We engage an independent executive compensation consultant that reports directly to the Compensation Committee.
The Company adopted Annual Say-On-Pay voting.
The Compensation Committee has implemented significant director and executive officer stock ownership guidelines.
We do not have employment agreements with any executive officers, with the exception of an employment agreement with Gregory F. Conaway that was adopted by the Company as a result of the acquisition of Carrizo (the "Carrizo Acquisition").
We have double-trigger change in control provisions in our severance agreements and equity awards.
We do not have a Poison Pill (Shareholder Rights Plan).
General Information
The Board is responsible for determining the ultimate direction of our business strategy, overseeing our governance policies and culture and promoting the long-term interests of the Company. The Board possesses and exercises oversight authority over our business but, subject to our governing documents and applicable law, delegates day-to-day management of the Company to our CEO and senior management. The Board generally fulfills its responsibilities through regular meetings to review significant developments affecting the Company and to act on matters requiring Board approval. Between regularly scheduled meetings, the Board may also hold special meetings, execute written consents, and participate in telephonic conference calls when an important matter requires Board action. During 2019, the Board met formally 15 times and transacted business on ten occasions during the year by unanimous written consent. All of our directors attended at least 75% of Board and committee meetings either in person or by telephone during the time he or she served on the Board or committees. In addition, to promote open discussion, the non-employee directors meet in executive session without management regularly. L. Richard Flury, the Chairman of the Board, was selected to preside over all executive sessions during 2019. It is the policy of the Company that, to the extent possible, all directors attend the Company’s Annual Meetings of Shareholders. Each then-current member of the Board attended the Company's 2019 Annual Meeting of Shareholders.


22 CALLON PETROLEUM


CORPORATE GOVERNANCE

The Board, in consultation with the Nominating and Corporate Governance Committee, has determined that a classified board structure continues to be appropriate for us, particularly in an industry where a long-term strategic planning outlook is critical for the successful development of oil and natural gas resources through commodity price cycles. Our future success depends in significant part on the in-depth knowledge of our business and operations by our directors. We believe that a classified board promotes stability, continuity and experience among our directors, which is essential to developing and implementing long-term strategies, while resisting the pressure to focus on short-term results at the expense of enhancing long-term value and success.
Board Leadership Structure
One of the Board’s key responsibilities is determining the appropriate leadership structure for the Board, which helps ensure its effective and independent oversight of management on behalf of our shareholders. The Board believes that there is no one generally accepted approach to providing board leadership and given the dynamic and competitive environment in which we operate, the optimal board leadership structure may vary as circumstances warrant. Accordingly, the Board has no policy mandating the separation or combination of the roles of Chairman of the Board and CEO, but periodically discusses and considers the structure as circumstances change. As such, the Board believes that it is in the best position to evaluate the needs of the Company and to determine how best to organize the Company’s leadership structure to meet those needs.
graphic_leadershipstructure.jpg
Currently, the Board has separated the roles of CEO and Chairman and appointed independent director Mr. Flury as Chairman of the Board and Mr. Gatto as CEO.
The Board is currently comprised of eleven directors, of whom ten out of eleven are independent. Mr. Gatto, the Company’s President and CEO, serves as an executive member of the Board. Independent directors and management generally have different perspectives and roles in strategy development. Our independent directors have backgrounds in the oil and gas industry or other relevant experiences which complement the CEO’s comprehensive, company-specific perspective. As the officer having primary responsibility for managing our daily operations and identifying strategic priorities, the CEO is best positioned to lead the Board through reviews of key business and strategy decisions. This dynamic effectively promotes the opportunity for a successful blend of our independent directors’ perspectives and oversight responsibilities and facilitates information flow and communication between senior management and the Board, which are both essential to effective governance.


2020 PROXY STATEMENT      23


CORPORATE GOVERNANCE

Areas of Board Oversight
Board Risk Oversight
As an independent oil and gas company, we face a number of risks. Assessing and managing material risk is the responsibility of our management team, while the Board, as a whole and through its committees, generally oversees risk management and our long-term strategic direction, ensuring that risks undertaken by the Company are consistent with the Board’s risk tolerance. The Board leadership structure and our practice of a high degree of interaction between our directors and members of senior management facilitate this oversight function. Our executive officers regularly attend the Board meetings and are available to address any questions or concerns raised by the Board related to risk management and any other matters. Other members of our management team periodically attend the Board meetings or are otherwise available to confer with the Board to the extent their expertise is required to address risk management matters. The information flow and communication throughout the year between the Board and senior management regarding long-term strategic planning and short-term operational reporting includes matters of material risk inherent in our business of developing oil and natural gas assets. The Board realizes, however, that it is not possible or prudent to eliminate all risk and that appropriate risk-taking is essential in order to achieve our near and longer-term objectives.
While the Board is ultimately responsible for risk oversight, the Board exercises additional risk oversight responsibilities through its committees, which are comprised solely of independent directors. Each such committee has primary risk oversight responsibility with respect to matters within the scope of its duties as contemplated by its charter and as described below.
Standing Committees of the Board of Directors
The Board has four standing committees, each of which is comprised entirely of independent directors. Each committee, discussed below in greater detail, has a written charter that establishes the responsibilities and scope of the committee and its Chairman. Each committee charter was reviewed in November 2019 and revised as deemed necessary by the Board.
 
BOARD OF DIRECTORS
 
 
 
 
 
 
 
 
 
The Audit Committee, among other duties, is charged with overseeing material risk exposures in the areas of financial reporting, internal controls, compliance, hedging and cybersecurity. This Committee also oversees responses to any alleged violations of our Code of Business Conduct.
 
 
The Nominating and Corporate Governance Committee focuses on issues relating to corporate governance and Board committee composition. This Committee also assists the Board in fulfilling its oversight responsibilities with respect to succession planning for our directors and executive officers and ESG matters.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Compensation Committee oversees the Company's compensation programs and reviews the potential risks that may result from our compensation policies to ensure they do not encourage unnecessary or excessive risk taking by management.
 
 
The Strategic Planning and Reserves Committee oversees the development and implementation of our strategic plan and the integrity of our reserve estimation reporting process and related disclosures.
 
 
 
 
 
 
 
 


24 CALLON PETROLEUM


CORPORATE GOVERNANCE

Committees of the Board
 
 
Callon Committees
Name, Age, Independence
Audit
Compensation
Nominating
and Corporate
Governance
Strategic
Planning and
Reserves
Class I Directors (term expires in 2022)
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Michael L. Finch, 64
Independent
 
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S. P. Johnson IV, 64
Independent
 
 
 
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Larry D. McVay, 72
Independent
 
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Steven A. Webster, 68
Independent
 
 
Class II Directors (term expires in 2020)
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Matthew R. Bob, 63
Independent
 
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Anthony J. Nocchiero, 69
Independent
 
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James M. Trimble, 71
Independent
 
Class III Directors (term expires in 2021)
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Barbara J. Faulkenberry, 60
Independent
 
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L. Richard Flury, 72
Independent Chairman of the Board
 
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Joseph C. Gatto, Jr., 49
President and Chief Executive Officer
 
 
 
 
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Frances A. Sevilla-Sacasa, 64
Independent
 
 
Chairman  Member


2020 PROXY STATEMENT      25


CORPORATE GOVERNANCE

 
 
Audit Committee
Anthony J. Nocchiero (Chairman and Financial Expert)
Barbara J. Faulkenberry
Michael L. Finch (Financial Expert)
L. Richard Flury
Larry D. McVay
Steven A. Webster
PURPOSE
The principal function of the Audit Committee is to assist the Board in overseeing the areas of financial reporting, accounting integrity, compliance, and risk management.
MEETINGS IN 2019
Five meetings; all members attended at least 75% of Committee meetings during the time he or she served on the Committee.
 
 
RESPONSIBILITIES
Pursuant to its charter, our Audit Committee functions in an oversight role and has the following purposes:
Overseeing the quality, integrity and reliability of the financial statements and other financial information we provide to any governmental body or the public;
Overseeing our compliance with legal and regulatory requirements;
Selecting and hiring (subject to ratification by our shareholders) the independent public accounting firm;
Overseeing the qualifications, independence and performance of the independent auditor;
Overseeing the effectiveness and performance of our internal audit function;
Overseeing our internal controls regarding finance, accounting, legal compliance and ethics;
Establishing and overseeing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or audit matters, including the confidential, anonymous submission of concerns regarding such matters;
Assessing matters related to risk, risk controls and compliance, including the review and approval of hedging practices and policies;
Overseeing matters related to cybersecurity and the security of information technology systems, including management’s plans, programs and policies designed to mitigate cybersecurity risks and third party reports on the information technology control environment;
Producing the Audit Committee Report for inclusion in our annual proxy statement; and
Performing such other functions the Board may assign to the Audit Committee from time to time.
The Audit Committee oversees our accounting and auditing procedures and financial reporting practices, and is responsible for the engagement of and oversight of all audit work conducted by our independent registered public accounting firm. The Audit Committee meets periodically, at least quarterly, with our executive and financial management teams, internal auditor and our independent registered public accounting firm to review our financial information and systems of internal controls. The independent registered public accounting firm reports directly to the Audit Committee and, if requested, meets with the Audit Committee in executive session without management representatives present. The Audit Committee has the authority to investigate any matters brought to its attention and to retain outside legal, accounting or other consultants if deemed necessary.
The Audit Committee is required to pre-approve all audit, audit-related and non-audit services provided by the independent registered public accounting firm exceeding $25,000. The Audit Committee approved all of the fees described in Proposal 4.
Relationship with Independent Registered Public Accounting Firm
Management is responsible for establishing and maintaining internal controls over financial reporting and for assessing the effectiveness of those controls. The independent registered public accounting firm is responsible for performing independent audits of our consolidated financial statements and internal controls over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”) (United States) and issuing reports thereon. The Audit Committee’s responsibility is to monitor and oversee these processes. Grant Thornton LLP has served as our independent registered public accounting firm since 2016.
INDEPENDENCE
The Board has determined that all members meet the independence requirements of the Securities Exchange Commission ("SEC") and NYSE rules and the financial literacy requirements of the NYSE. Members of the Audit Committee may not simultaneously serve on the audit committee of more than two other public companies.


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CORPORATE GOVERNANCE

 
 
Compensation Committee
Matthew R. Bob (Chairman)
Michael L. Finch
L. Richard Flury
Anthony J. Nocchiero
James M. Trimble
PURPOSE
The purpose of the Compensation Committee is to establish our compensation programs and oversee the alignment of our compensation with our business strategies.
MEETINGS IN 2019
Five meetings; all members attended at least 75% of Committee meetings.
 
 
RESPONSIBILITIES
Pursuant to its charter, the Compensation Committee’s duties include the responsibility to assist the Board in:
Evaluating the performance of and establishing the compensation of the CEO;
Establishing, with input from the CEO, the compensation for our other executive officers;
Establishing and reviewing our overall executive compensation philosophy and approving changes to our compensation program;
Reviewing incentive compensation arrangements to confirm that executive compensation does not encourage unnecessary risk taking;
Administering our long-term incentive plans;
Reviewing and approving the Compensation Discussion and Analysis ("CD&A") for inclusion in the annual proxy statement;
Reviewing and recommending to the Board compensation for non-employee directors;
Retaining and overseeing compensation consultants, including the independence of the consultants;
Reviewing and approving performance criteria and results for bonus and performance-based equity awards for executive officers and approving awards to those officers; and
Performing such other functions as the Board may assign to the Compensation Committee from time to time.
The Committee retained the services of Meridian, an independent compensation consulting firm, to assist in the annual review of market and industry data to assess our competitive position with respect to each element of total compensation and to assist with the attraction and retention of, and appropriate reward to, our CEO and other executive officers. Pursuant to applicable SEC and NYSE rules, the Committee has determined that no conflicts of interest exist related to Meridian’s engagement by the Committee.
INDEPENDENCE
Consistent with the listing requirements of the NYSE, the Compensation Committee is composed entirely of independent members of the Board, as each member meets the independence requirements set by the NYSE and applicable federal securities laws.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
L. Richard Flury, Matthew R. Bob, Michael L. Finch, Anthony J. Nocchiero and James M. Trimble served on the Company’s Compensation Committee during fiscal year 2019. No member of our Compensation Committee is presently or has been an officer or employee of the Company. In addition, during the last fiscal year, no executive officer served as a member of the board or the compensation committee (or other board committee performing similar functions or, in the absence of any such committee, the entire board) of any entity in which a Callon Board member is an executive officer.


2020 PROXY STATEMENT      27


CORPORATE GOVERNANCE

 
 
Nominating and Corporate
Governance Committee
James M. Trimble (Chairman)
Matthew R. Bob
Barbara J. Faulkenberry
Larry D. McVay
Frances A. Sevilla-Sacasa
PURPOSE
The purpose of the Nominating and Corporate Governance Committee is to identify and recommend qualified candidates to the Board for nomination as members of the Board; assess director, Board and committee effectiveness; develop and implement our Corporate Governance Guidelines; oversee succession planning for executive officers; oversee ESG matters; and otherwise take a leadership role in shaping the corporate governance of our Company.
MEETINGS IN 2019
Four meetings; all members attended at least 75% of Committee meetings during the time he or she served on the Committee.
 
 
RESPONSIBILITIES
Pursuant to its charter, the Nominating and Corporate Governance Committee’s duties include the responsibility to assist the Board in:
Evaluating a set of specific criteria for Board membership and identifying individuals qualified to become Board members, recommending nominees for election at the next annual meeting of shareholders, reviewing the suitability for continued service as a director of each Board member, and filling any vacancies;
Assessing the size and composition of the Board and its committees and recommending to the Board the members and chair for each Board committee;
Advising the Board and making recommendations regarding appropriate corporate governance practices and assisting the Board in implementing those practices, including periodically reviewing the adequacy of our Corporate Governance Guidelines, our Code of Business Conduct and Ethics, and the various Board committee charters, and making recommendations for changes thereto to the Board;
Overseeing the annual self-evaluation of the performance of the Board and its committees;
Overseeing and approving plans for management continuity and succession;
Recommending to the Board a successor to the CEO when a vacancy occurs;
Reviewing directorships in other public companies held by or offered to directors or executive officers of the Company;
Overseeing ESG policies, performance and disclosure, and develop recommendations for the Board on emerging issues related to our industry;
Overseeing continuing education for the Board; and
Performing other such functions as the Board may assign to the Nominating and Corporate Governance Committee from time to time.
INDEPENDENCE
Each member of the Committee meets the independence requirements of the NYSE and applicable federal securities laws.


28 CALLON PETROLEUM


CORPORATE GOVERNANCE

 
 
Strategic Planning and
Reserves Committee
Larry D. McVay (Chairman)
Matthew R. Bob
Barbara J. Faulkenberry
Michael L. Finch
L. Richard Flury
S. P. Johnson IV
Anthony J. Nocchiero
Frances A. Sevilla-Sacasa
James M. Trimble
Steven A. Webster
PURPOSE
The purpose of the Strategic Planning and Reserves Committee is to manage and oversee the Board’s participation in the development of the Company’s strategic plan, and oversee the integrity of the determination of our oil and natural gas reserve estimates.
MEETINGS IN 2019
Five meetings; all members attended at least 75% of Committee meetings during the time he or she served on the Committee.
 
 
RESPONSIBILITIES
The Strategic Planning and Reserves Committee was created to oversee the responsibilities of the Board relating to strategic planning, including:
Overseeing the Board’s participation in the development of a strategic plan and the consideration and assessment of strategic decisions;
Monitoring management's implementation of the strategic plan, and advising the Board if additional Board action appears to be needed;
Assuring that management is addressing the personnel requirements for the successful implementation of the strategic plan;
Overseeing our reserve engineering reports and reserve engineering firm, including: (i) the integrity of our reserve reports, (ii) determinations regarding the qualifications and independence of our independent reserve engineering firm, (iii) the performance of our independent reserve engineering firm, and (iv) our compliance with certain legal and regulatory requirements relating to reserve reporting; and
Performing other such functions as the Board may assign to the Strategic Planning and Reserves Committee from time to time.
INDEPENDENCE
Each member of the Committee meets the independence requirements of the NYSE and applicable federal securities laws.


2020 PROXY STATEMENT      29


CORPORATE GOVERNANCE

Corporate Governance Matters
Corporate Governance Principles
The Board believes that sound corporate governance practices and policies provide an important framework to assist in fulfilling its duty to shareholders. The framework for our corporate governance can be found in our governance documents, which include:
Corporate Governance Guidelines;
Code of Business Conduct and Ethics; and
Charters for the Audit, Compensation, Nominating and Corporate Governance, and Strategic Planning and Reserves Committees.
In keeping with sound corporate governance practices, each of these documents is reviewed annually and is available on our website www.callon.com under the “About Callon - Governance” menu. Shareholders may obtain a printed copy, free of charge, by sending a written request to our Corporate Secretary at our principal executive office in Houston, Texas. Any amendments to these documents are promptly posted on our website.
Code of Business Conduct and Ethics
Our Code of Business Conduct and Ethics (the “Code”) sets forth the policies and expectations for Callon’s officers, employees and directors as well as consultants, representatives, agents, and contractors while acting on Callon’s behalf. The Code addresses a number of topics including conflicts of interest, compliance with laws, insider trading, prohibitions on discrimination and harassment, workplace safety and protection of the environment, and fair disclosure. In addition, the Code explicitly prohibits directors, officers and employees from engaging in hedging transactions in Callon stock. It also states that no corporate funds may be used for political contributions.
The Code meets the NYSE’s requirements for a code of business conduct and ethics and also includes a code of ethics applicable to our senior financial officers consistent with the requirements of the SEC. We intend to satisfy the disclosure requirements regarding any amendment to, or any waiver of, a provision of the Code by promptly posting such information on our website. Concerns about potential violations of the Code can be anonymously reported to our ethics hotline by calling 1-844-471-7637 or accessing the following website: callon.ethicspoint.com.
Environmental, Social and Governance
Callon’s mission is to build trust, create value and drive sustainable growth responsibly for our investors, our employees and the communities in which we operate. Consistent with this mission, the Board oversees the Company’s environmental, social and governance programs with a focus on long-term, sustainable investments in our operations, team member development, and protecting the environment in the best interests of all of our stakeholders. The Board regularly addresses the Company’s efforts to continuously improve outcomes regarding workplace safety, environmental impact, team member diversity and workforce development. As described in more detail above beginning on page 9, the Board is also committed to effective and sustainable corporate governance, which we believe strengthens Board and management accountability, promotes the long-term interests of our shareholders, and helps build public trust in our Company.
Communication with Directors
Shareholders or other interested parties who wish to communicate with the full Board, independent directors as a group, or individual directors, may do so by sending a letter in care of the Corporate Secretary to our principal executive office located at 2000 West Sam Houston Parkway South, Suite 2000, Houston, Texas 77042. Our Corporate Secretary has the authority to discard any solicitations, job inquiries, advertisements, surveys or other inappropriate communications, but will forward any other mail to the named director or group of directors. Our Corporate Secretary will forward approved mail addressed to the full Board to the Chairman of the Board who, if appropriate, will share the item with the full Board.


30 CALLON PETROLEUM


CORPORATE GOVERNANCE

Board Evaluations
The Nominating and Corporate Governance Committee, in consultation with the Chairman of the Board, annually leads the performance review of the Board and its committees. The self-evaluation process seeks to obtain each director’s assessment of the effectiveness of the Board, the committees and their leadership, Board and committee composition and Board and management dynamics. In 2019, the Board self-evaluation process included a survey completed by each director about the Board and the committees on which the director served. The results were discussed by the full Board and within each committee.
Director Education
The Company sponsors an ongoing director education program that assists Board members in fulfilling their responsibilities. Training commences with an orientation program when a new director joins the Board. Ongoing education is provided through written materials, presentations in Board meetings, and training outside the boardroom. All Callon directors are members of the National Association of Corporate Directors and are provided an annual training allowance to pursue relevant director education programs.


2020 PROXY STATEMENT      31


EXECUTIVE OFFICERS
Executive Officer Biographies
Joseph C. Gatto, Jr.
President, Chief Executive Officer and Director
Joseph C. Gatto, Jr. has served the Company as Chief Executive Officer since May 2017 and as a Director since May 2018. Mr. Gatto joined the Company in April 2012 as Senior Vice President, Corporate Finance, with responsibility for our capital markets and strategic planning functions, in addition to investor relations activities. Effective March 31, 2014, Mr. Gatto was appointed Chief Financial Officer and Treasurer of the Company and in August 2016 was promoted to President while retaining the roles of Chief Financial Officer and Treasurer. In May 2017 he was promoted to Chief Executive Officer while retaining the role as President. Mr. Gatto was elected as a member of the Board of Directors in May 2018. Prior to joining Callon, Mr. Gatto was a Managing Director in the energy investment banking groups of Merrill Lynch & Co. and Barclays Capital from July 1997 until February 2009, with involvement in all phases of M&A and capital raising transactions for his clients. In February 2009, he founded MarchWire Capital, LLC, a financial advisory and strategic consulting firm, and subsequently served as Head of Structuring and Execution with Merrill Lynch Commodities, Inc. from January 2010 until November 2011. Mr. Gatto graduated from Cornell University with a B.S. degree and The Wharton School of the University of Pennsylvania with an M.B.A.
James P. Ulm, II
Senior Vice President and Chief Financial Officer
James P. Ulm, II is the Senior Vice President and Chief Financial Officer for the Company. Prior to joining Callon in December 2017, Mr. Ulm was Founder and Managing Partner of NewVista Energy Partners, a private E&P company focused on emerging resource plays in the Permian and Anadarko Basins, from 2015–2017. Previously, he served as Senior Vice President and Chief Financial Officer for three private companies from 2008–2015 where he was responsible for financial and accounting management, capital formation, and corporate strategy. Prior to these roles, Mr. Ulm served from 1999–2008 as Senior Vice President and Chief Financial Officer for Pogo Producing Company, a publicly-traded oil and gas company which had meaningful operations in the Permian Basin. From 1995–1999, he was the Treasurer for Newfield Exploration Company. Earlier in his career, he held finance and accounting leadership roles with American Exploration Company and Tenneco Oil Company. Mr. Ulm has more than 30 years of experience in the energy industry with responsibilities including finance, accounting, strategic planning, M&A, business development and risk management. Mr. Ulm holds an M.B.A. and an undergraduate degree in Accounting, both from the University of Texas at Austin.
Jeffrey S. Balmer
Senior Vice President and Chief Operating Officer
Dr. Jeffrey S. Balmer has over 30 years of operations and subsurface leadership experience in the energy industry. Prior to joining Callon in November 2018, his most recent role was Vice President and General Manager, Southern Operating Area, for Encana Corporation with responsibility for all of Encana’s upstream operations in the Permian Basin. After joining Encana in 2008, he held various leadership roles including Vice President and General Manager, Western Operating Area, managing operations in the Eagle Ford, DJ, San Juan, Piceance and Wind River Basins, and Vice President, Emerging Plays. Prior to joining Encana, Dr. Balmer served in a variety of technical and operations leadership roles, including positions with ConocoPhillips, Burlington Resources and ExxonMobil Corporation. He holds B.S. and Ph.D. degrees in Petroleum Engineering, in addition to an M.S. in Environmental and Planning Engineering, from Missouri University of Science and Technology (formerly University of Missouri – Rolla).


32 CALLON PETROLEUM


EXECUTIVE OFFICERS

Michol L. Ecklund
Senior Vice President, General Counsel and Corporate Secretary
Michol L. Ecklund is the Senior Vice President, General Counsel and Corporate Secretary for the Company. Prior to joining Callon in November 2017, Ms. Ecklund was Deputy General Counsel for Operations & Commercial Law at Marathon Oil Company where she oversaw the legal team for global operations and acquisitions and divestitures as well as corporate communications. During her 15 years at Marathon Oil, Ms. Ecklund served in progressive positions within and outside the Law Organization including compliance, litigation, human resources, investor relations, corporate communications and tax. Prior to Marathon Oil, she practiced law at Baker Botts LLP in Houston. Ms. Ecklund received a B.A. degree from Rice University and J.D. from Harvard Law School.
Gregory F. Conaway
Vice President and Chief Accounting Officer
Gregory F. Conaway is the Vice President and Chief Accounting Officer for the Company and joined Callon in December 2019. Prior to joining Callon, Mr. Conaway served as Vice President and Chief Accounting Officer of Carrizo from 2014 to December 2019, when Carrizo merged with the Company, as Controller of Financial Reporting from 2012 to 2014 and Assistant Controller from 2011 to 2012. Prior to that, Mr. Conaway worked for Ernst & Young, holding positions of increasing responsibility, including senior manager. Mr. Conaway began his career with Arthur Andersen in 1998. Mr. Conaway is a CPA and holds an M.B.A. and a B.B.A. in Accounting from Angelo State University.


2020 PROXY STATEMENT      33


 
 
 
Proposal 2
Approve, on an Advisory Basis,
the Compensation
of the Company’s NEOs
callon2019proxyimage11a.jpg
The Board of Directors recommends a vote FOR the compensation paid to the Company’s named executive officers, as disclosed in this Proxy Statement.
    Provides performance-based and market-aligned pay opportunities that are intended to foster alignment, engagement, and retention of key talent to drive Company performance and long-term shareholder value.
 
 
 
In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the related rules of the SEC, we are including in this Proxy Statement a separate proposal, which gives our shareholders the opportunity to approve the compensation of our NEOs by voting “FOR” or “AGAINST” the resolution below (commonly referred to as “Say-on-Pay”) on an annual basis. While the Board and Compensation Committee intend to carefully consider the shareholder vote resulting from the proposal, the final vote will not be binding on us and is advisory in nature.
The Board recognizes that executive compensation is an important matter for our shareholders. The Compensation Committee is tasked with the implementation of our executive compensation philosophy and, as described in detail in the CD&A below, the design of our executive compensation programs. Our executive compensation program is designed to attract, motivate and retain a qualified executive management team and to appropriately reward our executive officers for their contributions to the achievement of our short-term and long-term business goals and the creation and enhancement of shareholder value.
As described in the CD&A, we believe our compensation program is effective, appropriate and aligned with the long-term interests of our shareholders and that the total compensation package provided to the NEOs is reasonable and not excessive. As you consider this Proposal 2, we urge you to read the CD&A for additional details on executive compensation. Further, in determining whether to approve this proposal, we believe that shareholders should also consider the following:
Performance-based compensation. Our executive compensation program seeks to align executive compensation with shareholder value on an annual and long-term basis through a combination of base pay, annual incentives and long-term incentives. By design, a significant portion of our NEO compensation is performance-based, with variable pay comprising 86 percent of compensation opportunity for our CEO and 71 percent for NEOs in 2019. Please review the CD&A for more information on how our 2019 compensation was linked to Company performance.
Pay practices reflect individual and market factors. The Compensation Committee considers the skills, experience and performance of each of our NEOs as well as competitive market data in setting annual compensation opportunities, and directs our independent compensation consultant to provide benchmarking data which serves as one of the considerations of compensation decisions.
“Double trigger” severance agreements with fixed term. Change in control severance agreements with our executive officers require an actual or constructive termination of employment before benefits are paid following any change in control.
Stock ownership guidelines. Each of the NEOs has been granted equity to provide the officer a stake in our long-term success. The purpose of the ownership requirement is to further our goal of increasing shareholder value by aligning the interests of our NEOs with those of our long-term shareholders.
Clawback Policy. The Compensation Committee has adopted a clawback policy that establishes conditions under which the Committee may recoup previously-paid compensation in event of error, misconduct, or certain other circumstances.
Hedging policy. Our directors and executive officers are prohibited from entering into transactions in puts, calls and other derivative securities with respect to our securities and from engaging in short sales of our securities. We believe these activities are often perceived as involving insider trading and may focus the holder’s attention on our short-term performance rather than our long-term objectives.


34 CALLON PETROLEUM


PROPOSAL 2

In light of the above and as more fully described in the CD&A, we believe that the compensation of our NEOs for 2019 was appropriate and reasonable and that our compensation programs and practices are sound and in the best interests of the Company and our shareholders. We therefore respectfully request that shareholders vote on the following resolution:
“RESOLVED, that the compensation paid to Callon’s NEOs, as disclosed in Callon’s 2020 Proxy Statement (including the Compensation Discussion and Analysis, the compensation tables and related footnotes and narrative disclosures) is hereby approved.”
The vote on this resolution is not intended to address any specific element of compensation, but rather the overall compensation of our NEOs and our compensation-related policies and practices as described in this Proxy Statement. As noted above, the vote solicited by this proposal is advisory in nature and its outcome will not be binding on the Company, the Board or the Compensation Committee, nor will the outcome of the vote require the Board or the Compensation Committee to take any action. The outcome of the vote will not be construed as overruling any decision of the Board or the Compensation Committee or creating or implying any additional fiduciary duty of the Board or the Compensation Committee. However, the Board and the Compensation Committee will carefully consider the outcome of the vote when considering future executive compensation arrangements. For a review of the results of the previous year's vote, which reflects overwhelming validation from our shareholders of our pay philosophy and approach, please see the “Role of Shareholder Say-on-Pay Advisory Vote” on page 40.
Notwithstanding the advisory nature of this vote, the foregoing resolution will be deemed approved with the affirmative vote of the majority of the votes present and entitled to vote on the proposal at the Annual Meeting. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions will have the effect as a vote cast against the proposal. Broker non-votes will not be counted as shares present and entitled to vote, and so will have no effect upon the outcome of the vote.
 
The Board recommends a vote FOR the compensation paid to the Company’s named executives.
 


2020 PROXY STATEMENT      35


EXECUTIVE COMPENSATION
Recent Market Disruption and Callon’s Response
Consistent with regulatory requirements, the below CD&A highlights our historic performance and executive compensation decisions for 2019. In light of the precipitous decline in commodity prices in recent weeks due to substantial demand destruction from the global outbreak of the COVID-19 virus and concurrent supply-related decisions by OPEC+ producers, Callon’s Board and management team are taking proactive steps to reduce costs and revise our plans to realign with the macroeconomic outlook. On April 16, 2020, Callon announced certain cost-saving measures including the following voluntary compensation reductions:
Board members agreed to reduce their total compensation by 35%;
Chief Executive Officer agreed to reduce his salary by 20% and his total target cash compensation by 35%; and
All other officers agreed to reduce their total target cash compensation by at least 25%, including salary reductions of 15% and 10% by senior vice presidents and vice presidents, respectively.
The Board and management will continue to evaluate the Company’s executive compensation and incentive programs in light of the volatility and uncertainty in financial and commodity markets, and next year’s CD&A will discuss and describe the eventual realized compensation from the performance periods that conclude at the end of 2020.

Compensation Discussion and Analysis
The Company’s executive compensation program is designed to reward the management team for delivering results consistent with our long-term strategic objectives. The Compensation Committee (referred to in this section as the “Committee”) strives to evolve Callon’s compensation program each year to reflect shifts in shareholder priorities, most recently the focus on returns on capital and free cash flow over production growth, and governance best practices. The following CD&A describes the actions taken by the Committee in 2019 related to our executive compensation programs.
Key Committee Actions for 2019
    Instituted a formulaic approach for the Company’s annual incentive compensation program with a 60/40 weighting of quantitative/qualitative factors that included shareholder priorities of corporate-level returns, capital efficiency, cash flow, balance sheet strength and ESG performance
    Revised our peer group, used as the basis for evaluating the competitiveness of compensation opportunities and relative long-term TSR performance, in light of the Company’s growth and industry consolidation
    Assessed the annual salaries and incentive compensation opportunities of the CEO and other NEOs based on their experience, performance and growth in their roles, as well as competitive market data
    Talented workforce with growing technical expertise identifies with a culture of responsibility and adaptability in a cyclical commodity business
    Conducted a review of long-term incentive program design, resulting in the addition of an absolute TSR modifier to the PSUs granted in January 2020 to further align long-term incentives with absolute shareholder returns
    Developed the framework for a peer-leading Clawback Policy (adopted in January 2020), which allows the Committee to recoup previously-paid compensation in event of error, fraud, misconduct, or certain other circumstances


36 CALLON PETROLEUM


EXECUTIVE COMPENSATION

Our NEOs include the Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers who were serving in such capacity at the end of 2019. The list also includes our former Vice President and Chief Accounting Officer, Mitzi P. Conn, who transitioned from the role effective December 20, 2019, and would have been among our most highly compensated executive officers if she had been serving in such capacity at the end of 2019. Our NEOs for 2019 were:
NEO
Age
Title
Joseph C. Gatto, Jr.
49
President, Chief Executive Officer and Director
James P. Ulm, II
57
Senior Vice President and Chief Financial Officer
Jeffrey S. Balmer
55
Senior Vice President and Chief Operating Officer
Michol L. Ecklund
45
Senior Vice President, General Counsel and Corporate Secretary
Gregory F. Conaway
44
Vice President and Chief Accounting Officer
Mitzi P. Conn
51
Former Vice President and Chief Accounting Officer
Gregory F. Conaway became the Company's Vice President and Chief Accounting Officer upon the effective time of the Carrizo Acquisition on December 20, 2019, and Ms. Conn transitioned to her new role. For Mr. Conaway's biography, please see "Executive Officer Biographies" on page 32. During 2019, two previous NEOs departed the Company. Jerry A. Weant, who was formerly Vice President, Land, retired from the Company effective March 31, 2019. Correne S. Loeffler, who was formerly Vice President - Finance and Treasurer, resigned from the Company, effective July 31, 2019.
2019 Performance Highlights
2019 was a transformational year for Callon. The Company continued its long-term value creation focus with the execution of multiple strategic initiatives across operations, finance, environmental, social and governance. The Company’s development program successfully transitioned to larger projects featuring multi-zone co-development, leading to improved capital efficiency, lower costs and the preservation of industry-leading margins. The year culminated with the successful closing of the Carrizo Acquisition, which more than doubled the Company’s production, reserves, acreage, and cash flow. The combined company features a diversified asset base that supports our scaled development model and provides significant optionality to support cash generation amid commodity price volatility. While Callon’s share price was negatively impacted, along with its industry peers, by commodity price volatility and a shift in sector-wide investor sentiment, the Company maintained its commitment to long-term value creation in 2019 as reflected by the achievement of multiple key operational, financial and ESG highlights as described below. Additional information about our 2019 performance relative to the pre-established performance metrics for the annual cash incentive bonus can be found on page 45.
 
    With the closing of the Carrizo Acquisition, more than doubled our acreage position to nearly 200,000 net acres in Texas's producer-friendly Permian Basin and Eagle Ford Shale.
    Generated over $500 million in Adjusted EBITDA(i).
    Completed over $300 million of non-core asset monetizations.
    Redeemed approximately $270 million of preferred securities resulting in prospective dividend savings of nearly $25 million annually.
    Generated $58.2 million in free cash flow(ii) during the fourth quarter of 2019 (on a pro forma basis).
    Maintained an industry leading EBITDA margin of $33.28 per Boe for 2019.(i)
    Achieved record production (top of guidance) with operational capital spending below the bottom of full year guidance range
    Initiated full-field co-development across all asset areas, lowering target development costs and improving capital efficiency.
    Grew total proved reserves to 540 MMBoe with a PV-10(i) value of $5.4 billion as of December 31, 2019.
    Achieved record safety performance metrics, including a Total Recordable Incident Rate that was 50% lower than the prior year
    Increased recycled water volumes by 80% from 2018, further reducing environmental impact of operations.
    Reduced flaring by more than 40% year over year and was in the lowest third of all Texas producers in flaring intensity per the most recent TX RRC report.(iii)
(i) 
See Appendix A for a reconciliation of Non-GAAP financial measures
(ii) 
Free cash flow is defined as Adjusted EBITDA minus the sum of operational capital, capitalized interest, capitalized G&A, and interest expense. Adjusted EBITDA is a Non-GAAP financial measure; please refer to Appendix A for a reconciliation


2020 PROXY STATEMENT      37


EXECUTIVE COMPENSATION

(ii) 
TX RRC defines flare intensity as gross daily flare volumes divided by gross daily oil production
Compensation Program Governance Highlights
Our Compensation Committee, composed entirely of independent directors, operates in accordance with its charter, which sets forth the Committee’s authority and responsibilities, is assessed annually, and can be found at www.callon.com/about-callon/governance. We believe our compensation program incorporates many sound practices, including the following:
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What We Do
 
iconcrossmark.jpg
What We Don’t Do
 
 
 
    Substantial focus on performance-based pay
    Strong alignment with shareholder returns through significant weighting on long-term incentives
    Review of peer group benchmarks when establishing compensation
    Robust stock ownership guidelines for our NEOs and directors
    Clawback policy applies in the event of error, fraud or misconduct
    Double-trigger change in control severance for both cash severance and equity vesting
 
    NO hedging or pledging of our stock
    NO employment agreements*
    NO excessive benefits or perquisites
    NO single trigger change in control benefits
*
Callon assumed an employment agreement with Mr. Conaway as a result of the Carrizo Acquisition. See “Employment Agreements, Termination of Employment and Change in Control Arrangements” on page 57.
Executive Compensation Components and Philosophy
The Committee designs our compensation program to reward our CEO and other NEOs for delivering results consistent with the Company’s long-term strategic objectives and to align their interests with those of our shareholders. To do so, the Committee has designed a compensation program that is heavily weighted to “at risk” compensation delivered through annual cash incentives and long-term equity-based incentive awards. The Committee believes that this approach compensates our NEOs in a manner that provides incentives for the enhancement of shareholder value, the successful implementation of our business plan, and continuous improvement in corporate and individual performance.
Overall, our executive compensation program is designed to achieve the following objectives:
Reward the management team for delivering results against its strategic objectives, thereby creating value for the shareholders;
Emphasize pay for performance, in which Company and individual performance against preset goals are inherently linked to the amount realized by an NEO;
Attract and retain a qualified and motivated management team by offering industry competitive opportunities;
Incentivize NEOs and appropriately reward them for their contributions to the achievement of our key short-term and long-term strategic objectives through the use of variable compensation; and
Align the compensation of our NEOs with the interests of our long-term shareholders by weighting the programs toward at-risk, performance-based compensation, consisting of an objective-driven annual incentive program, TSR-contingent incentive awards, and retention stock grants with three-year vesting.


38 CALLON PETROLEUM


EXECUTIVE COMPENSATION

The charts below illustrate the design and impact of our pay-for-performance philosophy on our CEO’s 2019 target compensation. To illustrate the alignment of pay and performance, the second chart compares Mr. Gatto’s target 2019 compensation to its estimated realizable value as of December 31, 2019, and March 31, 2020, reflecting the actual payout of the 2019 annual bonus as well as the impact of our absolute and relative stock price performance on his long-term equity compensation as of those dates.
2019 CEO COMPENSATION MIX
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2019 CEO COMPENSATION – TARGET vs. REALIZABLE
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Elements of Compensation Program
The primary elements of our executive compensation program, and the purpose and philosophy of each, are described in detail below:
BASE SALARY
 
Purpose
Philosophy
    Pay for expertise and experience;
    Attract and retain talented executives;
    Provide compensation stability; and
    Compete with comparable companies.
    Fixed component of compensation reflective of individual skills, experience and expertise necessary to execute our business strategy; and
    Competitive with similarly sized peers.


2020 PROXY STATEMENT      39


EXECUTIVE COMPENSATION

ANNUAL CASH BONUS INCENTIVE
 
Purpose
Philosophy
    Motivate our NEOs to achieve our short-term business objectives that drive long-term performance;
    Reward achievement of financial, operating, and strategic goals for which NEOs are held accountable; and
    Promote and encourage pay-for-performance.
    At-risk component of compensation, with modest or no reward for performance below expectations and potential for increased reward for exceptional performance;
    Goals aligned with our annual business plan and performance targets;
    Provide balance in compensation programs and avoid encouraging undue risk-taking; and
    Competitive with similarly-sized peers.
LONG-TERM INCENTIVE (LTI) AWARDS
Purpose
Philosophy
    Motivate and reward long-term achievement of business objectives, aligning the interests of our NEOs with those of long-term shareholders;
    Provide competitive pay to attract and retain NEOs; and
    Provide a mix of LTI awards that focuses NEOs on creating long-term value while avoiding undue risk-taking.
    Ensures that realized value to NEOs aligns with value delivered to shareholders;
    Recognizes and rewards share price performance relative to industry peers;
    At-risk component of compensation that aligns with sustained long-term value creation; and
    Allows NEOs to acquire a meaningful and sustained ownership stake in the Company.
OTHER (RETIREMENT; HEALTH BENEFITS; CHANGE IN CONTROL SEVERANCE)
Purpose
Philosophy
    Provide financial security for the NEOs and their families;
    Provide competitive benefits to attract and retain NEOs; and
    Ensure NEOs consider all possible transactions to increase shareholder value related to changes in control of the Company.
    Attracts and retains NEOs with a comprehensive benefits package;
    Provides financial security and maximizes the efficiency of tax-advantaged compensation vehicles; and
    Ensures NEOs act in the best interests of the shareholders in a change in control.
Role of Shareholder and the Annual Say-on-Pay Advisory Vote
At Callon, we are committed to high ethical standards and effective and sustainable corporate governance. We believe this commitment promotes the interests of our long-term shareholders, helps build public trust in our Company and strengthens Board and management accountability. We continually assess our governance principles to ensure that we are operating our business responsibly, ethically and in a manner aligned with the interests of our long-term shareholders.
piesayonpay.jpg
Approximately 97% of the votes were cast in favor of our 2018 executive compensation programs
We have historically received strong support from our shareholders for our executive compensation practices. In the advisory vote held at the Company's 2019 Annual Meeting of Shareholders, approximately 97% of the votes cast were in favor of our 2018 executive compensation programs. The Committee acknowledged the support received from our shareholders and viewed the results as an affirmation of our existing executive compensation policies and programs.
Based on feedback received during our on-going shareholder engagement efforts, the Committee modified its incentive programs in both 2019 and in 2020 as follows:
In 2019, the Committee established that 60% of each NEO's annual cash bonus incentive would be based on a formulaic assessment of quantitative results and 40% would be based a subjective assessment of quantitative and qualitative factors. The 60% formulaic results were heavily weighted towards investor priorities of corporate-level returns, capital efficiency, cash flow, and balance sheet strength; and


40 CALLON PETROLEUM


EXECUTIVE COMPENSATION

For 2020, the Committee added an absolute TSR modifier to the 2020 PSU grants, which creates a further tie to absolute shareholder returns.
The Committee will continue to review shareholder votes and feedback on our executive compensation programs to ensure alignment with shareholder interests.
Role of Independent Compensation Consultant
For 2019, the Committee continued its engagement of Meridian as its independent compensation consultant to provide information and objective advice regarding executive officer and director compensation. The Committee retained Meridian because of its extensive familiarity with executive compensation programs in our industry. Importantly, the Committee makes all of the decisions with respect to our executive compensation, and in setting compensation for our NEOs, considers Meridian's advice as only one factor among many other factors discussed within this CD&A. Other factors include our overall performance; individual NEO performance, experience, skills and tenure with the Company; and industry trends.
Meridian reports solely to the Committee, and the Committee determines the scope of Meridian’s engagement. In an effort to ensure that our NEO compensation programs are competitive and consistent with our compensation philosophy, Meridian assisted the Committee as follows:
Regularly attending meetings of the Compensation Committee and meeting privately in executive session with the Compensation Committee to discuss its recommendations;
Providing recommendations on executive compensation matters to align the Committee’s actions with shareholder interests, our business strategy and pay philosophy, prevailing market practices and relevant legal and regulatory requirements;
Periodically evaluating the Peer Group and providing peer company data for the Committee to use in its decision-making process, including assessment of pay and performance relative to peers;
Providing competitive market data to consider in evaluating the competitiveness of the executive base salaries and short and long-term incentive plans and awards;
Reviewing data in connection with the Committee’s determination of annual cash incentive performance objectives and performance-based incentive vesting levels for completed performance periods;
Advising on the Company’s compensation arrangements for its non-employee directors, including providing Peer Group data;
Reviewing and providing feedback on our SEC filings relating to executive compensation disclosures, including our CD&A disclosures; and
Informing the Committee about compensation trends in the industry, best practices and other general trends and developments affecting executive compensation.
The Committee did not direct Meridian to perform its services in any particular manner or under any particular method. The Committee has the final authority to hire and terminate Meridian, and the Committee evaluates Meridian annually. Pursuant to applicable SEC and NYSE rules, the Committee has determined that no conflicts of interest exist related to Meridian’s engagement by the Committee. The Committee has retained Meridian as its consultant on NEO and director compensation for 2020.
From time to time, Meridian contacts our NEOs for information needed to fulfill the objectives established by the Committee. However, the Committee established procedures that it considers adequate to ensure that Meridian’s advice to the Committee remains objective and is not influenced by our NEOs or other management.
Role of Management
The Committee considers input from our CEO in making determinations regarding our executive compensation program and the individual compensation of each of his direct reports and other select officers of Callon. The officer team makes recommendations to the Committee regarding potential objectives for the annual cash bonus incentive program and provides information to the Committee regarding the performance of the Company for the Committee’s determination of annual cash bonuses. The Committee makes the final determination of all elements of NEO compensation. Our CEO makes no recommendations regarding, and does not participate in discussions about, his own compensation.


2020 PROXY STATEMENT      41


EXECUTIVE COMPENSATION

Role of Market Data
The Compensation Committee strives to ensure that our executives are compensated in a manner that is fair, equitable, performance-based and guided by the interests of long-term investors. In order to attract, motivate and retain talented executive officers, the Committee must also ensure that our executive compensation program remains competitive with the types and ranges of compensation paid by our peer companies who compete for the same executive talent. On an annual basis, the Committee reviews and discusses compensation data for our CEO and other executive officers as compared with compensation data for similarly situated executive officers at peer companies recommended by Meridian and approved by the Committee.
The Committee engages Meridian to conduct annual assessments of our Peer Group in order to ensure each peer remains appropriate year-over-year. The Peer Group is selected based on multiple factors, such as:
Size, including enterprise value and market capitalization;
Similar geographic footprint and operational focus;
Comparability of asset portfolio; and
Availability of compensation data.
The Committee believes this Peer Group provides a reasonable point of reference for comparing the compensation of our executive officers to others holding similar positions and having similar responsibilities. The Committee considers Peer Group data relevant to, but not determinative of, the Committee’s consideration of overall executive compensation matters.
In light of industry volatility and consolidation as well as the Company’s growth, in late 2018 the Committee updated the Peer Group to ensure that it included a sufficient number of similarly-situated peers to provide a reasonable range of market-based compensation comparisons. The Peer Group used by the Committee in evaluating the competitiveness of executive compensation and making 2019 compensation decisions consisted of the companies set forth in the following table. The Committee also reviewed data from proprietary E&P benchmarking surveys provided by Meridian for additional market perspective and to validate the Peer Group data.
The Committee understands the inherent limitations in using any peer group or data set including fluctuations in survey participation and competition for executive talent by companies potentially much larger than Callon. Accordingly, the Committee does not consider data collected from any of these sources to be prescriptive. Rather, the Committee relies upon this and similar data as reference points around which to make informed decisions about the appropriate level and form of compensation for each NEO.
 
 
 
 
 
2019 Peer Group
 
•    Carrizo Oil & Gas, Inc.
•    Centennial Resource Development, Inc. (PSUs only)
•    Energen Corporation (compensation only)
•    HighPoint Resources Corporation
•    Jagged Peak Energy, Inc.
•    Laredo Petroleum, Inc.
•    Matador Resources, Inc.
•    Oasis Petroleum Inc.
•    Parsley Energy, Inc.
•    PDC Energy, Inc.
•    QEP Resources, Inc.
    SM Energy Company
    SRC Energy, Inc.
 
 
 
 
 
 
In addition, the Committee adopts a Peer Group when granting performance stock units ("PSUs") to the NEOs each year for the purpose of aligning executive compensation with the Company’s total shareholder return (“TSR”) relative to peers over a pre-defined performance period. For the January 2019 PSU grant, the Committee used the Peer Group listed in the table above but replaced Energen Corporation, which had been acquired, with Centennial Resource Development, Inc., to provide an additional similarly-sized Permian Basin peer.
In the event a member of the Peer Group selected for an annual PSU grant is involved in a merger or acquisition during the first half of the performance period, the Committee has discretion to replace that company within the Peer Group. If a peer company is involved in a merger or acquisition during the second half of the performance period, the performance of that peer will be “locked in” as of the date of the transaction announcement. Since the January 2019 grant date of the 2019 PSU awards, the Committee has replaced Carrizo Oil & Gas, Inc., Jagged Peak Energy, Inc., and SRC Energy, Inc. with Cimarex Energy Co., Whiting Petroleum Corporation and WPX Energy, Inc., to reflect Callon’s larger size and broader geographic footprint following the Carrizo Acquisition.


42 CALLON PETROLEUM


EXECUTIVE COMPENSATION

In late 2019, the Committee revised the Peer Group in light of the pending Carrizo Acquisition to better reflect the size and geographic footprint of the combined company. The Committee adopted the following changes to the Peer Group to be used for evaluating the competitiveness of the 2020 executive compensation program to ensure that our executive compensation program remains competitive with the companies with whom we are compared by the market and compete for executive talent.
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 Peer Group - Compensation
 
peergrouparrow.jpg
 
 
 
 
peergrouparrow.jpg
 
2020 Peer Group - Compensation
 
 
•    Carrizo Oil & Gas, Inc.
•    Energen Corporation
•    HighPoint Resources Corporation
•    Jagged Peak Energy, Inc.
•    Laredo Petroleum, Inc.
•    Matador Resources, Inc.
•    Oasis Petroleum Inc.
•    Parsley Energy, Inc.
•    PDC Energy, Inc.
•    QEP Resources, Inc.
    SM Energy Company
    SRC Energy, Inc.
 
 
 
 
 
 
•    Centennial Resource Development, Inc.
•    Cimarex Energy Co.
    Jagged Peak Energy, Inc.
•    EP Energy Corporation
•    Matador Resources, Inc.
    Oasis Petroleum Inc.
    Parsley Energy, Inc.
    PDC Energy, Inc.
•    QEP Resources, Inc.
    SM Energy Company
    Whiting Petroleum Corp.
    WPX Energy, Inc.
 
 
 
 
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ADDED
 
 
 
 
 
 
•    Centennial Resource Development, Inc..
•    Cimarex Energy Co.
•    Whiting Petroleum Corp.
    WPX Energy, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
peergroupminus.jpg
REMOVED
 
 
 
 
 
 
    Carrizo Oil & Gas, Inc.
    Energen Corporation
    Highpoint Resources Corp.
    Laredo Petroleum, Inc.
    SRC Energy, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk Assessment Related to Our Compensation Structure
The Committee believes our compensation plans and policies are appropriately structured to encourage and reward prudent business judgment and avoid excessive risk-taking. The Committee, with the assistance of Meridian, reviewed the compensation programs maintained by the Company during 2019 to determine whether they encouraged excessive risk taking. Upon evaluation of the assessment, the Committee concluded that our compensation policies and practices for our employees do not present risks that are reasonably likely to have a material adverse effect on the Company. The Committee’s risk review identified the following risk mitigating features of our compensation programs:
A balance of short-term and long-term programs to focus management on both elements of Callon’s performance;
Annual grants of long-term incentives designed to be the largest component of each NEO’s compensation package, with typical vesting periods of three years that are based on the value of our common stock and not on any particular metric that could encourage excessive risk-taking;
Performance criteria and targets for our annual bonus program designed to encourage performance, but not excessive risk taking, and discretion to decrease payouts if it is believed management exercised excessive risk taking;
Performance targets measured at the corporate level, rather than at the individual or business unit level;
Clawback policy that provides the Committee authority to recoup compensation due to error, fraud or other misconduct;
Reasonable change in control severance protections; and
Significant executive stock ownership requirements.
Determination of Each Element of Compensation
Base Salaries
We provide all of our employees, including the NEOs, with an annual base salary to compensate them for their services throughout the year. Our Committee recognizes that substantial competition exists in the oil and gas industry for attracting and retaining qualified management teams. Accordingly, the Committee evaluates our NEOs’ salaries together with other components of their compensation to ensure that the NEOs’ total compensation is competitive relative to market practices in our Peer Group and our industry in general and is consistent with the Committee’s compensation philosophy.


2020 PROXY STATEMENT      43


EXECUTIVE COMPENSATION

Annually, generally in the first quarter of each year, the Committee reviews the base salaries of our NEOs. Individual salary amounts reflect the Committee’s subjective analysis of a number of factors, including:
Individual officer’s experience, skills, contributions and tenure with Callon;
Changes to the individual’s position within Callon;
Competitive market data within our Peer Group and industry; and
The NEO’s roles, responsibilities and expected future contributions to Callon’s success.
In addition, the Committee also considers the input and recommendations of Meridian regarding base salaries, as well as the input of the CEO, when evaluating base salaries for the other NEOs.
After considering the market analysis and advice of Meridian, at its January 2019 meeting, the Committee increased Mr. Gatto’s salary from $700,000 to $825,000 to reflect the performance of the Company and his continued development after almost two years in the CEO role. This increase brought Mr. Gatto's salary closer to a competitive level relative to peers. The Committee also increased Ms. Ecklund’s salary from $350,000 to $400,000 to reflect her expanded responsibilities upon promotion to Senior Vice President and increased Ms. Conn’s salary from $245,000 to $260,000 to reflect market analysis.
Performance-Based Annual Cash Bonus Incentive
A core component of our NEO compensation philosophy is to emphasize pay-for-performance by structuring a significant portion of total annual compensation as “at risk.” Each year, the Compensation Committee establishes an annual performance bonus program, which is designed to promote the achievement of annual financial, operating and strategic goals that are aligned with the creation of shareholder value. For 2019, the Committee formalized a formulaic approach for the Company’s annual incentive compensation program with 60% of each NEO's annual incentive based on an assessment against quantitative metrics and 40% based on the assessment of certain preset qualitative goals as well as overall performance. As a result, the NEOs’ annual cash bonus for 2019 is now reported as Non-Equity Incentive Plan Compensation in the Summary Compensation Table on page 57. As described in more detail below, the 2019 performance factors were heavily weighted towards investor priorities of corporate-level returns, capital efficiency, cash flow, balance sheet strength and ESG performance.
To align NEO compensation with the annual business plan and strategic priorities, the Committee set 2019 annual bonus target award opportunities for each NEO as a percentage of the NEO’s annual base salary as follows:
NEO
2018 Target Bonus Opportunity
(% of Base Salary)
2019 Target Bonus Opportunity
(% of Base Salary)
Joseph C. Gatto, Jr.
100%
110%
James P. Ulm, II
90%
90%
Jeffrey S. Balmer
85%
85%
Michol L. Ecklund
70%
80%
Gregory F. Conaway(i)
70%
Mitzi C. Conn
70%
70%
(i) 
Mr. Conaway’s 2019 target annual bonus opportunity of 70% was established by Carrizo. See page 46 for more information about the 2019 Carrizo annual incentive bonus program.
In early 2019, the Committee increased Mr. Gatto’s target bonus opportunity after considering competitive market analysis, his tenure and performance as CEO, and the advice of Meridian. The Committee increased Ms. Ecklund’s target bonus opportunity for 2019 to reflect her expanded responsibilities. Actual awards can range from 0 - 200% of target based on the achievement of pre-established performance metrics as described below.
2019 Performance Goals
For purposes of evaluating performance, the Committee, in collaboration with management and Meridian, oversees a rigorous process to set quantitative and qualitative performance objectives for the annual bonus program that are derived from the annual business plan and reflect key shareholder and strategic priorities for the upcoming year.


44 CALLON PETROLEUM


EXECUTIVE COMPENSATION

In early 2019, the Committee established the formulaic, quantitative objectives for 2019 and their respective weightings as set forth below:
Quantitative Objective
Description
Weighting
Net Debt/Adjusted EBITDA(i)
Measure of our ability to cover our debt, which is impacted by cash flow, and ensures focus on a strong balance sheet
15%
Cash Return on Cash Invested(ii)
Measure of total corporate returns on capital
12.5%
(LOE + Cash G&A)/BOE
Measure of critical cash margin components that are controlled by management
12.5%
Oil Production
Key component in our ability to deliver cash flow and returns on capital investment
10%
Proved Developed F&D/BOE(iii)
Measure of capital efficiency for annual proved developed reserve base additions
10%
TOTAL
 
60%
(i) 
Net Debt to Adjusted EBITDA is calculated as the sum of total long-term debt less unrestricted cash and cash equivalents, divided by the Company’s Adjusted EBITDA inclusive of annualized pro forma results from its acquisitions and divestitures completed over the last twelve month period. See Appendix A for a reconciliation of Non-GAAP financial measures.
(ii) 
Cash Return on Invested Capital is defined as (GAAP cash flow from operations + after tax interest expense) / (average total debt + average stockholders’ equity). 2019 CROCI based on Callon standalone.
(iii) 
Proved Developed F&D/BOE reflects all operational capital including facilities costs (development costs + exploratory costs) / (total proved extensions, discoveries, and other additions except those related to PUD reserves + PUD reserves converted to proved developed reserves during the period).
For the remaining 40% of the annual bonus framework, the Committee evaluates factors of Company performance related to short- and long-term strategic goals that are not otherwise captured by the formulaic metrics. To guide their discretionary assessment of performance and align expectations with management, the Committee established qualitative strategic objectives and corresponding preset goals in early 2019 related to the following:
Health, safety and environmental performance
Organizational and talent development
Other strategic initiatives, including selective divestitures of non-core assets and advancement of "life of field" development plans
2019 Performance Results
After the close of the 2019 calendar year, the Committee assessed the Company’s and the NEOs’ annual performance overall and relative to the framework established for the annual incentive compensation program. The results relative to the quantitative ’performance metrics were as set forth below. Because the Carrizo Acquisition closed near the end of the year on December 20, 2019, the Committee determined that it was appropriate to assess performance of the preset metrics relative to standalone Callon results without including Carrizo contributions for the 11-day post-close period.
Quantitative Objective
Weighting
Threshold
(50%)
Target
(100%)
Max
(200%)
 
Actuals(i)
Weighted
Contribution
Net Debt/Adjusted EBITDA
15%
2.8x
2.6x
2.3x
 
2.5x
20%
Cash Return on Cash Invested
12.5%
11.00%
12.25%
14.00%
 
12.96%
17.6%
(LOE + Cash G&A)/BOE
12.5%
$8.85
$8.30
$7.60
 
$8.10
16.1%
Oil Production
10%
29,600
31,000
32,400
 
30,787
9.2%
Proved Developed F&D/BOE
10%
$15.25
$14.00
$12.50
 
below threshold
0%
Quantitative Total
60%
 
 
 
 
 
63%
(i) 
Reflects actual results for standalone Callon 2019 performance, pro forma for the sale of the Southern Midland Basin assets that was announced in April 2019.


2020 PROXY STATEMENT      45


EXECUTIVE COMPENSATION

With respect to the qualitative performance component, the Committee considered the Company’s and management’s overall performance for 2019, as well as progress made on the strategic objectives established in early 2019, including the factors described below:
Qualitative Factors
2019 Achievements
Health, Safety, and Environmental
•    Achieved the Company’s best safety performance on record, reducing the total recordable incident rate by 50%
•    Reduced environmental impact by increasing recycled water volumes by 80% and reducing flaring intensity by more than 40%.
    Published inaugural Sustainability web site to enhance communication of the Company’s ESG initiatives
Organizational and Talent Development
•    Named a “Best Place to Work” by the Houston Chronicle for third year in a row
•    Enhanced leadership development with new training and goal-setting initiatives
    Advanced succession planning and critical talent initiatives for key leadership roles across the organization
Strategic Initiatives
•    Successfully closed the Carrizo Acquisition to advance returns, cash flow, capital efficiency and development plan flexibility
•    Completed over $300 million of non-core asset monetizations
•    Advanced large-scale, multi-zone development in the Midland and Delaware Basins
•    Achieved free cash flow generation in 4Q on a stand-alone and pro forma basis
Overall, the Committee determined that the management team achieved strong operational and financial performance in the base business in 2019-exceeding the quantitative and qualitative performance objectives for the year-while also executing the complex, transformative Carrizo Acquisition. The Committee also took into consideration Callon’s negative stock price performance during 2019. After accounting for all factors, the Committee awarded an overall 2019 annual incentive bonus payout for the Callon NEOs of 115%, which aligned with the annual bonus payout for all other eligible Callon employees.

2019 Annual Incentive Compensation Payouts
Based on the Committee’s assessment of 2019 performance relative to the pre-established annual bonus programs as described above, the Committee awarded 2019 annual incentive compensation payouts for the NEOs as follows:
NEO
2019 Annual Bonus
Joseph C. Gatto, Jr.
$
1,043,625

James P. Ulm, II
$
481,275

Jeffrey S. Balmer
$
439,875

Michol L. Ecklund
$
368,000

Gregory F. Conaway(a)
$
197,400

Mitzi P. Conn
$
209,300

(a) 
Mr. Conaway's bonus was determined under Carrizo’s 2019 annual bonus program and in accordance with the Merger Agreement as described below.
Carrizo 2019 Bonus Program
As part of the Merger Agreement between Callon and Carrizo dated July 14, 2019, Callon agreed to assume the Carrizo annual bonus program for 2019 if the Carrizo Acquisition closed prior to the end of the year. Callon further agreed such 2019 Carrizo bonuses would be paid out at not less than 100% of each employee’s target bonus opportunity.
In early 2019, the Compensation Committee of the Carrizo Board of Directors had established the 2019 target bonus opportunities and annual performance metrics for the Carrizo executive officers. Mr. Johnson’s and Mr. Conaway’s target bonus opportunities were set at 100% and 70% of salary, respectively. The executive officers’ bonuses were based on the achievement of pre-established quantitative performance metrics for Oil Production, Lease Operating Expense, G&A Costs, and Drill-Bit F&D


46 CALLON PETROLEUM


EXECUTIVE COMPENSATION

Costs. Following the close of 2019, the Callon Compensation Committee evaluated Carrizo’s stand-alone 2019 results relative to the pre-established quantitative bonus metrics and determined that the payout percentage for Carrizo executive officers for 2019 was below 100%. Accordingly, pursuant to the terms of the Merger Agreement, the Carrizo executive officers including Mr. Johnson and Mr. Conaway received a 2019 annual bonus equal to 100% of their target bonus opportunity, which aligned with the 2019 annual bonus payout for all other legacy Carrizo employees who were eligible for a 2019 bonus.
Annual Award of Long-Term Incentives
Our executive compensation program is heavily weighted to long-term incentives, which reward our NEOs for delivering results consistent with the Company’s long-term strategic objectives and align their interests with those of our shareholders. We believe that a long-term incentive program that includes awards of both RSUs and PSUs provides an appropriate balance of retention and performance-based incentives that captures absolute performance of our common stock as well as comparative returns relative to other oil and gas companies. The Committee believes that granting LTI awards is an effective means to provide substantial forward-looking incentives to our executive officers that emphasize:
Long-term value creation by linking compensation with long-term operational success;
Alignment of the interests of our executive officers with those of our long-term shareholders by directly linking rewards to shareholder return;
Retention incentives for our executive officers; and
Meaningful equity participation by our executive officers that further aligns their interests with shareholders.
For the grant of LTI compensation to executive officers, the Committee considers market analysis and the advice of Meridian in determining the program design and award amounts. In 2019, the Committee adjusted target long-term incentive values for the NEOs to reflect market competitiveness, a continued shift in the mix of total compensation towards long-term awards, appropriate retention incentives especially for shorter-tenured executives, and personal and Company performance.
For the 2019 LTI grants, the Committee approved a 60%/40% mix for our executive officers of performance-based awards tied to relative 3-year TSR and time-based RSUs, respectively. The performance awards are granted as PSUs that settle 50% in cash and 50% in stock. The following table sets forth the number of RSUs and PSUs awarded to the executive officers in January 2019:
NEO
Total Value
$
(a)
RSUs Payable in
Common Stock
PSUs Payable in
50% Stock and 50% cash
(b)
Joseph C. Gatto, Jr.
$
4,299,996

211,301
(c) 
316,954
James P. Ulm, II
$
1,743,995

85,700
(c) 
128,550
Jeffrey S. Balmer
$
1,629,097

90,000
(d) 
128,378
Michol L. Ecklund
$
999,999

49,140
(c) 
73,710
Gregory F. Conaway
$
0

0
 
0
Mitzi P. Conn
$
363,996

17,885
(c) 
26,832
(a) 
Represents the intended target value of the awards based on the trading price of Callon stock on the grant date, which is different from the grant date fair value computed in accordance with FASB ASC Topic 718 as reported in the Summary Compensation Table.
(b) 
Amounts represent PSUs that are scheduled to vest on December 31, 2021 at a variable rate between 0% and 200% based on our TSR when compared to pre-determined peer companies and will be settled in 50% Company common stock and 50% cash.
(c) 
Amounts represent RSUs that are subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche vested on April 1, 2020; the second on April 1, 2021; and the third on April 1, 2022; and each tranche will settle in Company common stock on the vesting date.
(d) 
Amounts represent RSUs granted to Dr. Balmer upon joining the Company that are subject to three-year ratable vesting with one-third vesting each year subsequent to the award year. The first tranche vested on January 1, 2020; the second will vest on January 1, 2021; and the third will vest on January 1, 2022; and each tranche will settle in Company common stock on the vesting date.
PSU program
In January 2019, the Committee awarded PSUs to the NEOs (with the exception of Mr. Conaway) that will vest at the end of the 36-month performance period (January 1, 2019 to December 31, 2021) based on the Company’s TSR ranking relative to the “2019 Peer Group” listed on page 42 as revised per the description on page 42. TSR is the change in the common stock price, plus any dividends paid, over the defined performance period using a 20-day average at the beginning and end of the performance period. The Committee believes relative TSR is an appropriate long-term performance metric because it provides a


2020 PROXY STATEMENT      47


EXECUTIVE COMPENSATION

measure of long-term performance relative to peers as well as strong alignment of the interests of management and the Company’s long-term shareholders. PSUs are eligible for vesting if the employee continues to be employed until the vesting date on December 31, 2021. The vested PSUs will pay out 50% in cash and 50% in shares of the Company's common stock. PSUs will vest at the percentage set forth below based on the Company’s relative TSR ranking for the performance period, with vesting capped at 100% of target if the Company’s TSR is negative. Vesting will be interpolated for percentile ranks between the percentiles described:
Callon’s TSR Percentile Rank Among the Peer Companies
PSUs Vesting as a Percentage of Target

>=90th Percentile
200
%
70th Percentile
150
%
50th Percentile
100
%
30th Percentile
50
%
<30th Percentile
0
%
RSU program
In January 2019, the Committee awarded NEOs (with the exception of Mr. Conaway) with time-based RSUs that will vest in one-third increments annually beginning April 1, 2020, provided the executive officer continues to be employed on the vesting dates, and will be paid in shares of the Company’s common stock.
2020 Long-Term Incentive Program
For the 2020 PSU awards granted in January 2020, the Committee added an absolute TSR modifier to further link NEO compensation to absolute shareholder returns and reflect investor feedback regarding recent energy industry compensation trends. The new absolute TSR modifier was added as a second factor, in addition to the relative TSR multiplier, to determine the vesting percentage for the PSUs at the end of the performance period in December 2022.
graphic_incentiveformula.jpg
The absolute TSR modifier further incentivizes NEOs to create positive shareholder value during the three-year performance period and reduces outcomes if TSR is less than 5% over that period. The absolute TSR modifier is calculated on an annualized basis and is structured as follows:
Callon’s annualized absolute TSR during the performance period
Modifier

>15%
150
%
10 - 15%
125
%
5 - 10%
100
%
0 - 5%
75
%
<0%
50
%
Vesting of 2017-2019 Performance Awards
In May 2017, our Compensation Committee granted PSUs to the then-executive officers covering the performance period from May 2017 to December 2019. The Company’s relative TSR for the performance period ranked seventh relative to the 13 peer companies defined by the Compensation Committee, resulting in vesting of 100% of the target PSUs awarded. Vested PSUs were paid 50% in cash and 50% in Company common stock.


48 CALLON PETROLEUM


EXECUTIVE COMPENSATION

The table below summarizes the PSUs earned by the executive officers for the 2017-2019 performance period:
NEO
Target Number
of PSUs
Percent of Target
PSUs Earned
Actual Vested PSUs
(Settled 50% Cash and 50% Shares)
Joseph C. Gatto, Jr.
64,304
100%
64,304
James P. Ulm, II(a)
Jeffrey S. Balmer(a)
Michol L. Ecklund(a)
Gregory F. Conaway(a)
Mitzi P. Conn
16,324
100%
16,324
(a) 
Executive was not employed by the Company in May 2017 when award was granted.
Other Compensation
Perquisites and Other Benefits
Benefits represent a relatively small part of our overall compensation package; however, these benefits help attract and retain senior level executives. We review these benefits annually to ensure that they are competitive with industry norms. We provide benefits commonly offered in the E&P industry to all of our employees. These benefits consist of:
Group medical and dental insurance program for employees and their qualified dependents;
Group life insurance for employees and their spouses;
Accidental death and dismemberment coverage for employees;
Long-term disability coverage;
Callon's sponsored cafeteria plan; and
401(k) employee savings and protection plan (the "401(k) plan").
We pay the full costs of these benefits, including the 401(k) plan administration, for all employees. Employee life insurance amounts that surpass the U.S. Internal Revenue Service (the "IRS") maximum are treated as additional compensation to all employees.
Under our 401(k) plan, all eligible employees may elect to defer a portion of their compensation up to the statutorily prescribed limit. In 2019, the Company provided a non-elective contribution of 5%, and a matching contribution of up to 5%, of the employee’s IRS eligible salary for qualified employees, including NEOs.
We have also provided Dr. Balmer with reimbursement for certain reasonable relocation expenses which included transportation expenses, home sale and purchase assistance, shipment of additional household goods, and tax gross-ups on these payments. These benefits are consistent with those provided to all similarly-situated employees upon relocation.
Our NEOs are entitled to certain benefits, or perquisites, that are not otherwise available to all of our employees. We provide our executive officers with use of a Company automobile. We purchase the automobile and pay for all maintenance, repairs, insurance and fuel. The employee is required to recognize taxable income using the IRS’s annual lease value method for personal use of the vehicle. The costs associated with these benefits for the NEOs are reported as “Other Compensation” in the Summary Compensation Table. The Committee believes these perquisites are modest, yet competitive with the perquisites provided to similarly situated oil and gas industry executives.
Change in Control Severance Protection
We have no employment agreements with our executive officers, with the exception Mr. Conaway, but we do provide change in control severance compensation agreements (“SCAs”) with each of our executive officers that provide for certain protections upon a change in control. The Committee believes that SCAs serve shareholders’ best interests by helping ensure retention of management and by diminishing potential distractions for our executive officers in the event of a change in control transaction. However, the Committee believes that executives should not be unduly enriched, and all benefits under the SCAs require a “double trigger.” Mr. Conaway and the Company (as successor-in-interests to Carrizo as a result of the Carrizo Merger) are parties to an employment agreement. For a more detailed explanation of the SCAs and Mr. Conaway’s employment agreement, please see “Employment Agreements, Termination of Employment and Change in Control Arrangements” on page 57.


2020 PROXY STATEMENT      49


EXECUTIVE COMPENSATION

Stock Ownership Guidelines
Consistent with its goal of driving long-term value creation for our shareholders, the Company's stock ownership guidelines require significant stock ownership by the executive officers and directors. The Committee believes that requiring meaningful stock ownership by our executive officers and directors is an important way to further align their interests with the interests of our long-term shareholders and discourage undue risk taking. Accordingly, the Committee has adopted a stock ownership policy which applies to the CEO, the other executive officers and outside directors as described below. The guidelines require the executive officers and directors to hold the following amounts of our stock:
Executive Officers/Directors
Required Common Stock Ownership as a Multiple of Annual Base Salary / Annual Retainer
CEO
6x
Directors
5x
Other Executive Officers
2x
The Committee evaluates compliance with these guidelines on an annual basis. For purposes of the guidelines, shares owned indirectly, shares in the executive officer's 401(k) plan and any unvested time-based RSUs are included. The value of unvested PSUs is excluded. Pursuant to the policy, shares granted to the executive under the Company’s incentive compensation plans are valued at the greater of the then-current trading price or the value on the date of grant.
Each executive officer has a transition period of five years from the date the individual becomes subject to the guidelines to attain the required investment position. If an executive officer becomes subject to a greater ownership requirement due to a promotion or an increase in salary, the executive officer will be expected to attain the higher level within three years of the change.
Each outside director is required to achieve the ownership requirement within five years following their election as a director.
As of December 31, 2019, all participants were in compliance with the stock ownership policy, either through meeting the ownership requirement or by being within the transition period.
Internal Revenue Service Limitations
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Tax Code") places a limit of $1.0 million on the amount of compensation that we may deduct in any one year with respect to compensation paid to each covered employee. For years prior to 2018, an exception to the deduction limit for compensation qualified as “performance-based.” The enactment of the Tax Cuts and Jobs Act on December 22, 2017 repealed the "performance-based" exemption from Section 162(m)‘s deduction limit. In addition, the limitation on deductibility was expanded to include any individual who is an NEO in 2017 or any later calendar year. As a result, compensation paid to our NEOs in excess of $1.0 million will not be deductible for years subsequent to 2017, subject to limited transition relief for arrangements in place as of November 2, 2017. Despite the change in law, the Committee intends to continue to consider the deductibility of compensation and to implement compensation programs that it believes are competitive and in the best interests of the Company and its shareholders.
Insider Trading Policy
The Company’s Board has adopted a comprehensive Insider Trading Policy for employees and directors to promote compliance with federal and state securities laws. The policy prohibits certain persons who are aware of material non-public information about a company from: (i) trading in securities of that company; or (ii) providing material non-public information to other persons who may trade on the basis of that information. When material non-public information about us may exist and may have an influence on the marketplace, a trading blackout period is placed in effect by management. In addition, this Insider Trading Policy also applies to family members, other members of a person’s household, and entities controlled by a person covered by this Insider Trading Policy. Officers, directors, and designated employees, as well as the family members and controlled entities of such persons, may not engage in any transaction in Company securities without first obtaining pre-clearance of the transaction from our General Counsel.
Under the Insider Trading Policy, directors, executive officers and other employees are prohibited from entering into any hedging or monetization transactions relating to Callon's securities or otherwise trading in any instrument relating to the future securities' price. This Insider Trading Policy also prevents directors and executive officers from pledging Callon common stock as collateral for loans or holding Callon securities in a margin account. The Insider Trading Policy is published as Addendum A to our Code of Business Conduct and is available at www.callon.com/about-callon/governance.


50 CALLON PETROLEUM


EXECUTIVE COMPENSATION

Clawback Policy
In January 2020, the Committee adopted a comprehensive clawback policy. The clawback policy provides the Committee the authority to recoup previously-paid compensation under the following circumstances:
If there is a correction to previously approved performance metrics (not necessarily limited to a financial restatement), the Committee may clawback from executive officers any annual or long-term incentive compensation paid in error during the prior three years.
If an executive officer engages in fraud or misconduct, or was grossly negligent in a supervisory role, where such action caused or could reasonably lead to material financial or reputational harm to Callon, the Committee may clawback annual and long-term incentive compensation from the past year from the executive officer
The Committee believes this clawback policy helps protect the Company and its shareholders in the unlikely event of a restatement or potential fraud or misconduct by an executive officer.
The clawback rights described above are in addition to those required under Sarbanes-Oxley legislation.
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the CD&A required by Item 402(b) of Regulation S-K promulgated under the Exchange Act, and based on such review and discussions, the Committee has recommended to the Board that the CD&A be included in this Proxy Statement relating to the 2020 Annual Meeting of Shareholders.
Respectfully submitted by the Compensation Committee of the Board of Directors,
Matthew R. Bob, Chairman
Michael L. Finch
L. Richard Flury
Anthony J. Nocchiero
James M. Trimble


2020 PROXY STATEMENT      51


EXECUTIVE COMPENSATION

Executive Compensation Tables
The compensation paid to the Company’s executive officers generally consists of base salaries, annual cash incentive payments, awards under the 2011 Omnibus Incentive Plan (the "2011 Plan") and the 2018 Plan, contributions to the Company’s 401(k) plan and miscellaneous perquisites. The table below sets forth information regarding fiscal years 2019, 2018 and 2017 compensation awarded to, earned by or paid to the Company’s NEOs, in each case for the years in which these individuals constituted "named executive officers" under SEC rules. This includes all individuals who served as the Company's CEO or CFO during 2019, the three other most highly compensated executive officers serving at the end of the fiscal year, and our former Chief Accounting Officer who would have been in the top three but transitioned from her role prior to year-end. Mr. Conaway was appointed as an executive officer of the Company as of the closing of the Carrizo Acquisition on December 20, 2019. The below tables reflect compensation paid to Mr. Conaway by the Company on or after that date.
Summary Compensation Table
Name and Principal Position
Year
Salary
Bonus(a)
Stock
Awards
(b)
Non-Equity Incentive Plan Compensation (c)
All Other Compensation (d)
Total
Joseph C. Gatto, Jr.(e)(f)
President & CEO
2019
$
796,153

$
0

$
5,136,754

$
1,043,625

$
33,055

$
7,009,587

2018
$
666,346

$
980,000

$
4,313,125

$
0

$
31,430

$
5,990,901

2017
$
494,568

$
690,000

$
2,852,712

$
0

$
41,816

$
4,079,096

James P. Ulm, II(g)
Senior Vice President & CFO
2019
$
465,000

$
0

$
2,083,367

$
481,275

$
42,352

$
3,071,994

2018
$
465,000

$
585,900

$
1,249,500

$
0

$
39,245

$
2,339,645

2017
$
17,885

$
52,000

$
989,100

$
0

$
0

$
1,058,985

Jeffrey S. Balmer(h)
Senior Vice President & Chief Operating Officer
2019
$
450,000

$
0

$
1,968,015

$
439,875

$
57,350

$
2,915,240

Michol L. Ecklund(i)(j)
Senior Vice President, General Counsel & Corporate Secretary
2019
$
388,462

$
0

$
1,194,593

$
368,000

$
38,953

$
1,990,008

2018
$
340,577

$
343,000

$
774,155

$
0

$
38,131

$
1,495,863

Gregory F. Conaway(k)(l)
Vice President & Chief Accounting Officer
2019
$
8,677

$
0

$
0

$
197,400

$
174

$
206,251

Mitzi P. Conn(m)
Former Vice President &
Chief Accounting Officer
2019
$
256,538

$
0

$
434,833

$
209,300

$
35,744

$
936,415

2018
$
239,615

$
240,100

$
366,055

$
0

$
30,987

$
876,757

2017
$
225,000

$
189,000

$
394,150

$
0

$
30,118

$
838,268

(a) 
Cash bonus awarded in first quarter of following year in recognition of previous year's performance.
(b) 
The amounts reported in the “Stock Awards” column represent the aggregate grant date fair value of RSUs and PSUs computed in accordance with FASB ASC Topic 718, disregarding any estimates of forfeiture. The performance unit awards granted in 2019, 2018 and 2017 are subject to market conditions and have been valued based on the probable outcome of the market conditions as of the grant date of the awards. The assumptions utilized in the calculation of these amounts for 2019 are set forth in footnotes 9 and 10 to our consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2019.
(c) 
The amounts reported in the “Non-Equity Incentive Plan Compensation” column represent payouts under the 2019 annual performance bonus program. See “Performance-Based Annual Cash Incentive” in the CD&A above for further information.
(d) 
See the "Table of All Other Compensation” below and related footnotes for reconciliation.
(e) 
Mr. Gatto was promoted to Chief Executive Officer in May 2017.
(f) 
Mr. Gatto’s salary was increased from $700,000 to $825,000 effective March 2019.
(g) 
Mr. Ulm began serving as our Chief Financial Officer in December 2017.
(h) 
Dr. Balmer was not an NEO prior to 2019.
(i) 
Ms. Ecklund was not an NEO prior to 2018.
(j) 
Ms. Ecklund's salary was increased from $350,000 to $400,000 effective March 2019.
(k) 
Mr. Conaway was appointed to an executive officer role with the Company as of the closing of the Carrizo Acquisition on December 20, 2019.


52 CALLON PETROLEUM


EXECUTIVE COMPENSATION

(l) 
The amount in Non-Equity Incentive Plan Compensation represents the amount paid to Mr. Conaway by the Company as a 2019 annual performance bonus in accordance with the terms of Carrizo’s 2019 annual bonus program and the Merger Agreement. See “Performance-Based Annual Cash Incentive” in the CD&A above for further information.
(m) 
Ms. Conn's salary was increased from $245,000 to $260,000 effective March 2019.
Table of All Other Compensation
NEO
Year
Company
Contributions to 401(k)
(a)
Company
Provided
Auto
(b)
Additional Perquisites
Total
Joseph C. Gatto, Jr.
2019
$
26,250

$
6,805

$
0

 
$
33,055

 
2018
$
25,000

$
6,430

$
0

 
$
31,430