SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION
STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
BRIGHAM EXPLORATION
COMPANY
(Name of Subject
Company)
BRIGHAM EXPLORATION
COMPANY
(Names of Person Filing
Statement)
Common Stock, par value $0.01 per share
(Title of Class of
Securities)
109178103
(CUSIP
Number of Class of Securities)
Kari A. Potts
General Counsel and Corporate Secretary
Brigham Exploration Company
6300 Bridge Point Parkway, Building 2, Suite 500
Austin, Texas 78730
(512) 427-3300
(Name, Address and Telephone
Number of Person Authorized to Receive
Notice and Communications on
Behalf of the Person Filing Statement)
With copies to:
Joe Dannenmaier
Amy Curtis
Kenn Webb
Thompson & Knight LLP
One Arts Plaza
1722 Routh Street, Suite 1500
Dallas, TX
75201-2533
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Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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Item 1.
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Subject
Company Information
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Name and
Address
The name of the subject company is Brigham Exploration Company,
a Delaware corporation (
Brigham
or the
Company
). Unless the context indicates
otherwise, we use the terms
us
,
we
, and
our
to refer to the Company. The address of the Companys
principal executive office is 6300 Bridge Point Parkway,
Building 2, Suite 500, Austin, Texas 78730. The telephone
number of the Companys principal executive office is
(512) 427-3300.
Securities
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on
Schedule 14D-9
(this
Schedule 14D-9
)
relates is the Companys common stock, par value $0.01 per
share (the
Common Stock
). As of the
close of business on October 14, 2011, there were
117,314,532 shares of Common Stock issued and outstanding.
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Item 2.
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Identity
and Background of Filing Person
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Name and
Address
The Company is the subject company and the person filing this
Schedule 14D-9.
The Companys name, address and business telephone number
are set forth in Item 1 under the heading Name and
Address. The Companys website address is
http://www.bexp3d.com
.
The Companys website and the information on or connected
to the Companys website are not a part of this
Schedule 14D-9,
are not incorporated by reference herein and should not be
considered a part of this
Schedule 14D-9.
Tender
Offer
This
Schedule 14D-9
relates to the cash tender offer by Fargo Acquisition Inc., a
Delaware corporation (
Purchaser
),
which is an indirect wholly owned subsidiary of Statoil ASA, a
public limited liability company organized under the laws of the
Kingdom of Norway (
Parent
), to
purchase all of the shares of Common Stock (the
Shares
) that are issued and
outstanding, at a price of $36.50 per Share, net to the
stockholder in cash (the
Offer Price
),
without interest, less any applicable withholding taxes, upon
the terms and subject to the conditions set forth in the offer
to purchase, dated October 28, 2011 (the
Offer
to Purchase
), and the related letter of
transmittal (the
Letter of
Transmittal
) which, together with the Offer to
Purchase, as each may be amended or supplemented from time to
time, collectively constitute the
Offer.
The Offer is described in a
Tender Offer Statement on Schedule TO (as amended or
supplemented from time to time, the
Schedule TO
), filed by Parent and
Purchaser with the Securities and Exchange Commission (the
SEC
) on October 28, 2011. The
Offer to Purchase and Letter of Transmittal are filed as
Exhibits (a)(1)(A) and (a)(1)(B), respectively, to this
Schedule 14D-9
and are incorporated by reference herein.
The Offer is being made pursuant to the Agreement and Plan of
Merger, dated as of October 17, 2011, by and among Parent,
Purchaser and the Company (as such agreement may be amended or
supplemented from time to time, the
Merger
Agreement
). The Merger Agreement also provides,
among other things, that following the consummation of the Offer
and satisfaction or waiver of the remaining applicable
conditions set forth in the Merger Agreement, Purchaser will
merge with and into the Company (the
Merger
), with the Company surviving as
a wholly owned subsidiary of Parent (the
Surviving
Corporation
). At the effective time of the Merger
(the
Effective Time
), each Share
issued and outstanding immediately prior to the Effective Time
(other than Shares then owned by Parent, Purchaser, the Company
or any of their respective direct or indirect wholly owned
subsidiaries, and Shares that are held by any stockholders of
the Company who properly demand appraisal in connection with the
Merger under the General Corporation Law of the State of
Delaware (the
DGCL
)) will cease to be
issued and outstanding, will be cancelled and will be converted
into the right to receive the Merger consideration (the
Merger Consideration
), which is equal
to the Offer Price, without interest, less any applicable
withholding taxes. Under no circumstances will interest be paid
on the Offer Price, regardless of any extension of the Offer or
delay in making payment for Shares.
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The initial expiration date of the Offer is 12:00 midnight, New
York City time, at the end of November, 30, 2011, subject to
extension in certain circumstances as required or permitted by
the Merger Agreement, SEC rules or applicable law (such date, or
the latest time and date at which the Offer, as so extended,
will expire, the
Expiration Date
).
The foregoing summary of the Offer is qualified in its entirety
by the more detailed description and explanation contained in
the Offer to Purchase and accompanying Letter of Transmittal,
copies of which have been filed as Exhibits (a)(1)(A) and
(a)(1)(B) hereto, respectively.
Parent has formed Purchaser solely for the purpose of engaging
in the transactions contemplated by the Merger Agreement,
including the Offer and the Merger. To date, Purchaser has not
carried on any activities other than those related to its
formation, the Merger Agreement, the Offer and the Merger. The
Offer to Purchase states that the principal executive offices of
Parent and Purchaser are Forusbeen 50, N-4035, Stavanger,
Norway, and the business telephone number for Parent and
Purchaser is
011-47-5199-0000.
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Item 3.
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Past
Contacts, Transactions, Negotiations and
Agreements
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Except as set forth in this
Schedule 14D-9,
including the Information Statement (the
Information
Statement
) attached as Exhibit (a)(1)(K) and
Annex A to this
Schedule 14D-9
and incorporated by reference herein, as of the date of this
Schedule 14D-9,
to the knowledge of the Company, there are no present or
proposed material agreements, arrangements or understandings or
relationships or any actual or potential conflicts of interest
between the Company or its affiliates, on the one hand, and
(i) its executive officers, directors or affiliates or
(ii) Parent, Purchaser or their respective executive
officers, directors or affiliates, on the other hand. The
Information Statement is being furnished to the Companys
stockholders pursuant to Section 14(f) of the Securities
Exchange Act of 1934, as amended (the
Exchange
Act
), and
Rule 14f-1
promulgated under the Exchange Act, in connection with
Purchasers right to designate persons to serve on the
Companys board of directors (the
Board
or the
Board of
Directors
) representing at least a majority of the
Board after Purchaser acquires pursuant to the Offer a number of
Shares that, together with any Shares already owned by Parent
and Purchaser, represents a majority of the Shares on a fully
diluted basis.
Arrangements
between the Company and Parent and Purchaser
Merger
Agreement
The summary of the Merger Agreement and the description of the
terms and conditions of the Offer and related procedures and
withdrawal rights contained in the Offer to Purchase are
incorporated in this
Schedule 14D-9
by reference. Such summary and description do not purport to be
complete and are qualified in their entirety by reference to the
Merger Agreement, which has been included as Exhibit (e)(1) to
this
Schedule 14D-9.
The Merger Agreement governs the contractual rights among the
Company, Parent and Purchaser in relation to the Offer and the
Merger. The Merger Agreement has been included as an exhibit to
this
Schedule 14D-9
to provide the Companys stockholders with information
regarding the terms of the Merger Agreement. Factual disclosures
about the Company, Parent and Purchaser, or any of their
respective affiliates contained in this
Schedule 14D-9
or any of their respective public reports filed with the SEC, as
applicable, may supplement, update or modify the factual
disclosure about the Company, Parent and Purchaser or any of
their respective affiliates contained in the Merger Agreement.
The representations, warranties and covenants made in the Merger
Agreement by Parent, Purchaser and the Company were qualified
and subject to important limitations agreed to by Parent,
Purchaser and the Company in connection with negotiating the
terms of the Merger Agreement. In particular, the
representations and warranties contained in the Merger Agreement
were negotiated with the principal purposes of establishing the
circumstances in which a party to the Merger Agreement may have
the right not to consummate the Offer or the Merger if the
representations and warranties of the other party prove to be
untrue due to a change in circumstance or otherwise, and
allocating risk between the parties to the Merger Agreement,
rather than establishing matters of fact. The representations
and warranties set forth in the Merger Agreement may also be
subject to a contractual standard of materiality different from
that generally applicable to stockholders and reports and
documents filed with the SEC and in
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some cases were qualified by disclosures that were made by each
party to the other, which disclosures were not reflected in the
Merger Agreement. Moreover, information concerning the subject
matter of these representations and warranties, which do not
purport to be accurate as of the date of this
Schedule 14D-9,
may have changed since the date of the Merger Agreement and
subsequent developments or new information qualifying a
representation or warranty may have been included in this
Schedule 14D-9.
Representation
on the Board
The Merger Agreement provides that, if there has been validly
tendered and not withdrawn prior to the Expiration Date a number
of Shares that, together with any Shares owned by Parent and
Purchaser, represents at least a majority of the outstanding
Shares on a fully diluted basis as of the Expiration Date (the
Minimum Condition
) and Purchaser
accepts for payment and pays for the Shares tendered into the
Offer, Parent will be entitled to elect or designate a number of
directors, rounded up to the next whole number, to the Board
that is equal to the total number of directors on the Board
(giving effect to the increase described in this sentence)
multiplied by the percentage that the number of Shares
beneficially owned by Parent and its affiliates (including any
such Shares as are accepted for payment and paid for pursuant to
the Offer) bears to the total number of Shares issued and
outstanding, and the Company will cause the directors designated
by Parent to be elected or appointed to the Board, including by
increasing the number of directors and seeking and accepting
resignations from incumbent directors and taking any other
necessary actions.
The foregoing summary concerning representation on the Board
does not purport to be complete and is qualified in its entirety
by reference to the Merger Agreement, which has been included as
Exhibit (e)(1) to this
Schedule 14D-9
and is incorporated herein by reference.
Confidentiality
Agreement
The Company and Statoil Texas Onshore Properties, LLC, a wholly
owned subsidiary of Parent, entered into a confidentiality
agreement, dated as of December 29, 2010 (the
Confidentiality Agreement
). Under the
Confidentiality Agreement, Parent agreed, among other things, to
keep non-public information concerning the Company confidential,
subject to certain exceptions. The Confidentiality Agreement
also contains a standstill provision pursuant to
which Parent agreed, among other things, not to acquire or agree
to acquire, offer, seek or propose to acquire (or request
permission to do so or make any proposal in such regards),
directly or indirectly, ownership of the Company or any of its
assets, or propose any business combination with the Company,
unless requested to do so by the Company or following the
execution by the Company of a final acquisition agreement with a
third party that would result in a change of control of the
Company, until the earlier of one year or the date on which a
transaction involving a change of control of the Company is
consummated.
The foregoing description of the Confidentiality Agreement does
not purport to be complete and is qualified in its entirety by
reference to the Confidentiality Agreement, which has been
included as Exhibit (e)(2) to this
Schedule 14D-9
and is incorporated herein by reference.
Non-Solicitation
Agreement
Parent and the Company entered into a Non-Solicitation
Agreement, dated June 17, 2011 (the
Non-Solicitation
Agreement
), which sets forth the terms on which
Parent and the Company would agree to engage in discussions
regarding the potential acquisition of the Company. The Company
agreed that, among other things and until the earlier to occur
of (i) 5:00 p.m., Central Daylight Time on July 15, 2011, unless
extended by mutual agreement of the parties, (ii) 5:00 p.m.,
Central Daylight Time on the business day after the Company
receives written notice from Parent that it is terminating
negotiations of the possible acquisition of the Company by
Parent (the
Proposed Transaction
) or
(iii) the date of execution of a definitive agreement with
respect to the Proposed Transaction or any other transaction
between Parent and the Company, the Company would not, and would
use its reasonable best efforts to cause its representatives not
to, initiate or solicit or knowingly encourage any inquiry,
proposal or offer with any party (other than Parent) regarding,
among other things, (i) a merger, reorganization, share
exchange, consolidation, business combination,
3
recapitalization or similar transaction involving the Company or
its subsidiaries, (ii) any purchase or sale of 20% or more of
the consolidated assets (including stock of the Companys
subsidiaries) of the Company and the Companys subsidiaries
taken as a whole (based on fair market values), or (iii) an
acquisition or sale of, or tender or exchange offer for,
beneficial ownership of securities representing 20% or more of
the total voting power of any class of the Companys equity
securities (collectively, an
Alternative
Transaction
). The Company further agreed to, and
to instruct its representatives to, immediately cease and
terminate any existing solicitation, encouragement, discussion
or negotiation with any third parties (other than Parent) with
respect to any possible Alternative Transaction. However, if the
Company received an unsolicited bona fide proposal for an
Alternative Transaction from a third party that the
Companys Board determined, in good faith and after
consultation with its financial advisor and outside counsel,
could reasonably lead to a superior proposal, subject to certain
restrictions, the Companys Board could engage in
negotiations or discussions with such third party. The
Non-Solicitation Agreement terminated as of 5:00 p.m., Central
Daylight Time on July 15, 2011.
This foregoing description of the Non-Solicitation Agreement is
qualified in its entirety by reference to the Non-Solicitation
Agreement itself, which is incorporated herein by reference and
a copy of which has been filed with the SEC as an exhibit to the
Schedule TO.
Arrangements
between the Company and its Executive Officers, Directors and
Affiliates
Overview
In considering the recommendation of the Board set forth in
Item 4 below under the heading Recommendation of the
Board, the Companys stockholders should be aware
that certain executive officers and directors of the Company may
be considered to have interests in the transactions contemplated
by the Merger Agreement (including the Offer and the Merger)
that may be different from, or in addition to, those of the
Companys stockholders generally. The Board was aware of
these interests and considered them, along with other matters,
in evaluating and approving the Merger Agreement and the
transactions contemplated thereby and recommending that the
Companys stockholders accept the Offer, tender their
Shares in the Offer and, to the extent required by applicable
law, adopt the Merger Agreement. The Companys current
executive officers are Ben M. (Bud) Brigham, Chief Executive
Officer, President and Chairman of the Board; Eugene B.
Shepherd, Jr., Executive Vice President and Chief Financial
Officer; David T. Brigham, Executive Vice President
Land and Administration; Jeffery E. Larson, Executive Vice
President Exploration; and A. Lance Langford,
Executive Vice President Operations.
Consideration
for Shares Tendered Pursuant to the Offer
If the Companys directors and executive officers were to
tender any Shares they beneficially own pursuant to the Offer,
they would receive the same cash consideration per Share on the
same terms and conditions as the other stockholders of the
Company. As of October 17, 2011, the directors and
executive officers of the Company beneficially owned, in the
aggregate, 3,003,649 Shares (excluding for this purpose
shares of Common Stock underlying Options but including
Restricted Shares (each as defined below), which are set forth
in the tables below). If the directors and executive officers
were to tender all 3,003,649 Shares for purchase pursuant
to the Offer and those Shares were accepted for purchase and
purchased by Purchaser, then such directors and executive
officers would receive an aggregate of approximately
$109,633,188.50 in cash, without interest and less any
withholding required by applicable tax laws. As indicated below,
all of the Companys directors and executive officers have
entered into a Tender and Voting Agreement pursuant to which
they have agreed to tender their Shares in the Offer and, if
necessary, to vote their Shares to approve the Merger Agreement.
Effect
of the Offer and the Merger Agreement on Equity
Awards
Consideration for Options.
The Merger
Agreement provides that each option to purchase Shares
(Option)
granted under the
Companys 1997 Incentive Plan, 1997 Director Stock
Option Plan, and certain non-plan options (collectively, the
Company Stock Plans
), whether vested
or unvested, that is outstanding
4
immediately prior to the time at which Purchaser accepts for
payment all Shares validly tendered and not properly withdrawn
prior to the Expiration Date (the
Acceptance
Time
) and that remains outstanding will be
cancelled immediately prior to the Effective Time in exchange
for the right to receive an amount in cash equal to the product
of (x) the total number of Shares subject to such Option
and (y) the excess, if any, of the Offer Price over the
exercise price per Share subject to such Option (the aggregate
amount of such cash payable to holders of all Options, the
Option Consideration
), less any amount
required to be withheld or deducted under any provision of
U.S. federal, state or local or
non-U.S. tax
law. Pursuant to the Merger Agreement, the Surviving Corporation
will pay the holders of Options the Option Consideration at or
promptly after the Effective Time. Pursuant to action taken by
the Compensation Committee of the Board of Directors of the
Company (the
Compensation Committee
)
on September 13, 2011, each employee who is employed by the
Company or an affiliate immediately prior to a Change in Control
(which term is defined in a manner such that a Change of Control
will occur at the Acceptance Time) shall, immediately prior to
such Change in Control, become fully vested in all outstanding
options to acquire Company common stock that were granted or
issued to such employee under the Companys 1997 Incentive
Plan. This action by the Compensation Committee applies to all
of the stock options held by the Companys executive
officers. Options that will vest in this manner may be exercised
immediately prior to the Acceptance Time and the Shares issued
upon such exercise may be tendered pursuant to the Offer.
The table below sets forth the number of outstanding vested and
unvested Options held by the Companys executive officers
and directors as of October 27, 2011 and the estimated
consideration that each of them would receive after the
Effective Time in connection with the cancellation of, and
payment for, such Options pursuant to the Merger Agreement as
described above. The below table assumes continued employment
through the Acceptance Time and that the Options are not
exercised prior to the Effective Time.
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Unvested Options to
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be Accelerated and
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Vested Options to
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Converted
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be Converted to the
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to the Option
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Option Consideration
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Consideration
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Weighted
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Weighted
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Average
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Average
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Total
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Exercise
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Exercise
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Estimated
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Number
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Price
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Number
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Price
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Option
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Name
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of Shares
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Per Share
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of Shares
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Per Share
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Consideration
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Directors
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Ben M. Brigham
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220,000
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$
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6.37
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360,000
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$
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8.22
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$
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16,810,300
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David T. Brigham
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172,000
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$
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6.58
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294,000
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$
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8.72
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$
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13,311,890
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Harold D. Carter
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56,000
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$
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6.89
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54,000
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$
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9.23
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$
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3,130,600
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Stephen C. Hurley
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56,000
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$
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6.89
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54,000
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$
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9.23
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$
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3,130,600
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Stephen P. Reynolds
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46,000
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$
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6.45
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54,000
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$
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9.23
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$
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2,854,900
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Hobart A. Smith
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56,000
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$
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6.89
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54,000
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$
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9.23
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$
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3,130,600
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Scott W. Tinker
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26,000
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$
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4.44
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60,000
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$
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9.10
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$
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2,477,300
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Executive Officers (other than Ben M. Brigham and
David T. Brigham)
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Eugene B. Shepherd, Jr.
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262,000
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$
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6.36
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318,000
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$
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8.51
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$
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16,797,000
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Jeffery E. Larson
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94,275
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$
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7.90
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252,825
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$
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9.17
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$
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9,604,610
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A. Lance Langford
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114,000
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$
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7.51
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287,000
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$
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8.84
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$
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11,104,880
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All Executive Officers and Directors as a group (10 persons)
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1,102,275
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$
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6.69
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1,782,825
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$
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8.74
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$
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82,352,680
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Consideration for Restricted Shares.
The
Merger Agreement provides that each award of restricted Shares
(
Restricted Shares
) that vests at or
before the Acceptance Time will be treated as outstanding and
unrestricted Shares for all purposes of the Merger Agreement and
may be tendered to Purchaser pursuant to the Offer. Immediately
prior to the Effective Time, each award of Restricted Shares
that has not vested prior to the Effective Time will vest and
all restrictions will be removed from such Restricted Shares
immediately
5
prior to the Effective Time, and such Shares will be treated as
outstanding and unrestricted Shares for all purposes of the
Merger Agreement. Holders of such Shares will be entitled to
receive the Merger Consideration upon consummation of the
Merger. Pursuant to action taken by the Compensation Committee
of the Board of Directors of the Company on September 13,
2011, each employee who is employed by the Company or an
affiliate immediately prior to a Change in Control (which term
is defined in a manner such that a Change of Control will occur
at the Acceptance Time) shall, immediately prior to such Change
in Control, become fully vested in all shares of the
Companys common stock that are subject to outstanding
transfer, vesting or other restrictions that were granted or
issued to such employee under the Companys 1997 Incentive
Plan. This action by the Compensation Committee applies to all
of the Restricted Shares held by the Companys executive
officers.
The table below sets forth the number of outstanding unvested
Restricted Shares held by the Companys executive officers
and directors as of October 27, 2011 and the sum of
(a) the aggregate cash consideration each of them would
receive for any of such Restricted Shares that vest at or before
the Acceptance Time and are tendered for purchase pursuant to
the Offer, if such Shares are accepted for purchase and
purchased by Purchaser, and (b) the aggregate Merger
Consideration that each of them would receive for any of such
Restricted Shares that are not tendered in the Offer and are
exchanged for the Merger Consideration in connection with the
Merger. The table below assumes continued employment through the
Acceptance Time.
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Estimated
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Consideration
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Payable in
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Number of
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Respect of
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Unvested
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Unvested
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Name
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Restricted Shares
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Restricted Shares
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Directors
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Ben M. Brigham
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54,714
|
|
|
$
|
1,997,061
|
|
David T. Brigham
|
|
|
41,571
|
|
|
$
|
1,517,342
|
|
Harold D. Carter
|
|
|
|
|
|
|
|
|
Stephen C. Hurley
|
|
|
|
|
|
|
|
|
Stephen P. Reynolds
|
|
|
|
|
|
|
|
|
Hobart A. Smith
|
|
|
|
|
|
|
|
|
Scott W. Tinker
|
|
|
|
|
|
|
|
|
Executive Officers (other than Ben M. Brigham
and David T. Brigham)
|
|
|
|
|
|
|
|
|
Eugene B. Shepherd, Jr.
|
|
|
43,571
|
|
|
$
|
1,590,342
|
|
Jeffery E. Larson
|
|
|
40,714
|
|
|
$
|
1,486,061
|
|
A. Lance Langford
|
|
|
41,286
|
|
|
$
|
1,506,939
|
|
All Executive Officers and Directors as a group (10 persons)
|
|
|
221,856
|
|
|
$
|
8,077,744
|
|
Employment
and Consulting Agreements
The Company entered into Employment and Consulting Agreements
(each, a
Consulting Agreement
) with
each of Ben M. Brigham
(Bud Brigham)
,
Eugene B. Shepherd, Jr., and David T. Brigham
contemporaneously with the execution of the Merger Agreement.
The Consulting Agreements are to be effective at the Acceptance
Time.
Under Bud Brighams Consulting Agreement, from the
Acceptance Time until the earlier of (i) 60 days after
the Acceptance Time, (ii) such date that the Company
notifies Bud Brigham in writing that his employment is
terminated, or (iii) Bud Brighams death (the earlier
of (i), (ii) and (iii) being referred to as the
B. Brigham Employment Termination
Date
), Bud Brigham is entitled to receive
(a) base salary at a rate no less than the rate in effect
as of immediately prior to the Acceptance Time and (b) a
2011 bonus equivalent to 80% of Bud Brighams base annual
salary in effect as of immediately before the Acceptance Time,
prorated through the B. Brigham Employment Termination Date if
such date occurs before December 31, 2011, which bonus is
in lieu of any 2011 annual bonus Bud Brigham would otherwise be
eligible to receive under his
6
existing Employment Agreement with the Company effective as of
May 14, 1997, as amended (his existing
Employment Agreement
). Provided that
Bud Brigham has not voluntarily terminated his employment before
the B. Brigham Employment Termination Date, he will also be
entitled to receive a retention bonus of $650,000, less legally
required withholdings, in a cash lump sum payable within three
business days after the B. Brigham Employment Termination Date.
This retention bonus is in addition to amounts Bud Brigham may
be entitled to receive under his existing Employment Agreement.
The severance benefits to which Bud Brigham is entitled under
his existing Employment Agreement are described in the
Information Statement attached as Exhibit (a)(1)(K) and Annex A
to this Schedule 14D-9 and incorporated by reference herein. Bud
Brighams existing Employment Agreement will terminate on
the B. Brigham Employment Termination Date, except that the
Companys obligation to pay severance benefits to Bud
Brigham, and Bud Brighams confidentiality covenants
thereunder, will continue notwithstanding the termination of the
agreement.
Bud Brighams Consulting Agreement also provides that for
the
90-day
period beginning on the B. Brigham Employment Termination Date
(which period may be extended at the option of the Company for
an additional 90 days), Bud Brigham will provide transition
and consulting services to the Company. The Company and Bud
Brigham anticipate that Bud Brigham will devote no more than the
equivalent of eight hours per week to the provision of
consulting services. Bud Brigham will be entitled to receive a
consulting fee equal to $90,000 payable in three equal monthly
installments for his services under the Consulting Agreement,
and if the Company elects to extend the Consulting Agreement
with Bud Brigham, an additional consulting fee equal to $90,000
payable in three equal monthly installments. The Company can
terminate the Consulting Agreement with or without cause, and
Bud Brigham can terminate the Consulting Agreement upon a
material breach by the Company. Except in the case of a
termination by the Company for cause, the Company must pay Bud
Brigham the full amount of any unpaid portion of the applicable
consulting fee within 10 days after the date of
termination. Bud Brighams Consulting Agreement also
contains confidentiality requirements as well as a covenant that
Bud Brigham will not engage in certain activities in competition
with the Company within certain areas for one year following the
B. Brigham Employment Termination Date. This non-competition
covenant supersedes the non-competition covenant in Bud
Brighams existing Employment Agreement.
Under the Consulting Agreements entered into with
Mr. Shepherd and David Brigham (each a
Consultant
), from the Acceptance Time
until the earlier of (i) 60 days after the Acceptance
Time, (ii) such date that the Company notifies the
Consultant in writing that his employment is terminated, or
(iii) the Consultants death (the earlier of (i),
(ii) and (iii) being referred to as the
Consultant Employment Termination
Date
), the Consultant is entitled to receive
(a) base salary at a rate no less than the rate in effect
immediately prior to the Acceptance Time and (b) a 2011
bonus equivalent to 80% of the Consultants gross
salary (as that term is defined in the Companys 2011
Performance Bonus Plan) in effect immediately before the
Acceptance Time, prorated through the Consultant Employment
Termination Date if such date occurs before December 31,
2011 (which bonus is in lieu of the bonus the Consultant would
otherwise be eligible to receive under the Companys 2011
Performance Bonus Plan if he remained employed by the Company at
the time such bonus is paid). Provided that the Consultant has
not voluntarily terminated his employment before the Consultant
Employment Termination Date, he will also be entitled to receive
a retention bonus in the amount of $650,000 for
Mr. Shepherd and $575,000 for David Brigham, payable in a
lump sum cash payment within three business days after the
Consultant Employment Termination Date. This retention bonus is
in addition to amounts each Consultant may be entitled to
receive under his existing Change of Control Agreement with the
Company (each, an existing
Change of Control
Agreement
). The severance benefits to which
Mr. Shepherd and David Brigham are entitled under their
existing Change of Control Agreements are described in the
Information Statement attached as Exhibit (a)(1)(K) and
Annex A to this
Schedule 14D-9
and incorporated by reference herein.
Each Consulting Agreement also provides that for the
90-day
period beginning on the Consultant Employment Termination Date
(which period may be extended at the option of the Company for
an additional 90 days), the Consultant will provide
transition and consulting services to the Company. The Company
and the Consultant anticipate that the Consultant will devote no
more than the equivalent of eight hours per week to the
provision of consulting services. The Consultant will be
entitled to receive a consulting fee equal to
7
$90,000 payable in three equal installments for his services
under the Consulting Agreement, and if the Company elects to
extend the Consulting Agreement with the Consultant, an
additional consulting fee equal to $90,000 payable in three
equal monthly installments. The Company can terminate the
Consulting Agreement with or without cause, and the Consultant
can terminate the Consulting Agreement upon a material breach by
the Company. Except in the case of a termination by the Company
for cause, the Company must pay the Consultant the full amount
of any unpaid portion of the applicable consulting fee within
10 days after the date of termination. Each
Consultants Consulting Agreement also contains
confidentiality requirements as well as a covenant that the
Consultant will not engage in certain activities in competition
with the Company within certain areas for one year following the
Consultant Employment Termination Date. This non-competition
covenant supersedes the non-competition covenant in each
Consultants existing Confidentiality and Non-Competition
Agreement, which agreements, except as modified by the
Consulting Agreements, continue in full force and effect and
will survive the termination of the Consulting Agreements
regardless of the reason for such termination.
See Arrangements between Parent and Purchaser and the
Companys Executive Officers and Directors
Terms and Conditions of Continued Employment for A. Lance
Langford and Jeffery E. Larson below for a description of
employment arrangements between Statoil Gulf Services LLC, an
indirect wholly owned subsidiary of Parent, and two of the
Companys executive officers, A. Lance Langford and Jeffery
E. Larson.
The foregoing descriptions of each of the Consulting Agreements
do not purport to be complete and are qualified in their
entirety by reference to the full text of each such agreement,
copies of which have been filed with the SEC as exhibits to this
Schedule 14D-9.
Directors
and Officers Indemnification, Exculpation and
Insurance
Section 145 of the DGCL provides that a Delaware
corporation has the power to indemnify a director, officer,
employee or agent of the corporation and certain other persons
serving at the request of the corporation in related capacities
with other entities against amounts paid and expenses incurred
in connection with an action or proceeding to which he is or is
threatened to be made a party by reason of such position, if
such person shall have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding,
if such person had no reasonable cause to believe his conduct
was unlawful. The Companys bylaws provide for the
indemnification of the Companys directors, officers,
employees and agents to the fullest extent permitted by
applicable law.
Section 102(b)(7) of the DGCL allows a corporation to
eliminate in its certificate of incorporation the personal
liability of its directors to the corporation or its
stockholders for monetary damages for a breach of fiduciary duty
as a director, except where the director breached his duty of
loyalty, failed to act in good faith, engaged in intentional
misconduct or knowingly violated a law, authorized the payment
of a dividend or approved a stock repurchase in violation of
Delaware law or for any transaction from which the director
derived an improper personal benefit. Article Seventh of
the Companys certificate of incorporation provides for
such limitation of liability to the fullest extent permitted by
the DGCL.
In addition, to complement the indemnification protection
afforded under applicable law, the Companys certificate of
incorporation and bylaws and any policies of insurance which may
be maintained by the Company, the Company has entered into
separate indemnification agreements with each of the
Companys directors and senior executives, which provide
for the indemnification of the directors and executives party
thereto under certain circumstances.
Pursuant to the Merger Agreement, Parent and the Surviving
Corporation agreed that they will indemnify and hold harmless
and advance expenses to all current and former directors and
officers of the Company or any of its subsidiaries to the
fullest extent that the Company would have been permitted under
applicable law, the Company certificate of incorporation and
bylaws. In addition, the Merger Agreement provides that
provisions regarding elimination of liability of directors, and
indemnification of and advancement of expenses to directors and
officers of the Company, as contained in the Companys
certificate of incorporation and bylaws as in effect as of the
date of the Merger Agreement will be assumed by the Surviving
Corporation at the Effective Time and will survive the Merger
and remain in full force and effect in accordance with their
8
terms. The indemnification agreements and other similar
agreements with the Companys directors and executive
officers will also survive the Merger and will continue in full
force and effect in accordance with their terms.
The Merger Agreement further provides that, prior to the
Effective Time, the Company will, in consultation with Parent,
and if the Company is unable to, Parent will, or will cause the
Surviving Corporation to, obtain directors and
officers liability insurance with a claims period of at
least six years, and with terms, conditions and levels of
coverage that are not less advantageous to the officers and
directors of the Company and its subsidiaries than the
Companys existing directors and officers
liability insurance, with respect to claims relating to events
occurring at or before the Effective Time. However, in no event
will the Surviving Corporation be required, or the Company be
permitted, to spend an annual premium amount in excess of 300%
of the current annual premium paid by the Company for such
insurance.
Arrangements
between Parent and Purchaser and the Companys Executive
Officers and Directors
Tender
and Voting Agreement
In connection with the parties entry into the Merger
Agreement, all of the directors and executive officers of the
Company (the
Tendering Stockholders
)
entered into a Tender and Voting Agreement (the
Tender and Voting Agreement
) with
Parent and Purchaser. Pursuant to the Tender and Voting
Agreement, the Tendering Stockholders have agreed, among other
things, to (i) tender and not withdraw all Shares
beneficially owned as of the date of the Tender and Voting
Agreement or acquired after such date (collectively, the
Owned Shares
; provided, however, that
Company Options beneficially owned by such Tendering
Stockholders shall not be considered Owned Shares prior to their
exercise, but upon their exercise shall be considered Owned
Shares) to Purchaser pursuant to the Offer and (ii) vote
all Owned Shares and shares of other Company voting securities
(whether acquired prior to or after the date of the Tender and
Voting Agreement) that are beneficially owned by such Tendering
Stockholders or over which such Tendering Stockholders have,
directly or indirectly, the right to vote (collectively, the
Voting Shares
) in favor of the Merger.
Based on information provided by the Tendering Stockholders as
of October 17, 2011, an aggregate of 3,003,649 Shares,
representing approximately 2.6% of the outstanding Shares, will
be tendered by the Tendering Stockholders into the Offer.
Pursuant to the Tender and Voting Agreement, each Tendering
Stockholder has agreed to tender and not withdraw all of the
Owned Shares owned by such Tendering Stockholder to Purchaser
pursuant to the Offer as promptly as practicable and in any
event no later than the 10th business day following the
commencement of the Offer (or, with respect to any Owned Shares
acquired after the 10th business day following the commencement
of the Offer, the earlier of the Expiration Date and the third
business day after acquisition of the Owned Shares). Each
Tendering Stockholder has also agreed that during the term of
the Tender and Voting Agreement, at any meeting of the
Companys stockholders, however called, such Tendering
Stockholder will vote (or cause to be voted) all of their Voting
Shares (a) in favor of adoption and approval of
(i) the Merger Agreement and all the transactions
contemplated thereby, including the Merger, and (ii) any
other matter that is required to facilitate the consummation of
the transactions contemplated by the Merger Agreement and in
connection with the Merger Agreement, including the execution of
any documents that are necessary or appropriate in order to
effectuate the foregoing; and (b) against (i) any
acquisition proposal from a third party and any agreement or
arrangement related to any such acquisition proposal,
(ii) any change in the present capitalization of the
Company or any amendment of the Companys certificate of
incorporation or bylaws, or (iii) any other action,
transaction or proposal involving the Company or any of its
subsidiaries that would result in any of the conditions to the
Offer not being fulfilled or satisfied. The Tender and Voting
Agreement also restricts the transfer of the Tendering
Stockholders Voting Shares. The Tender and Voting
Agreement terminates upon the earliest to occur of (a) the
termination of the Merger Agreement in accordance with its
terms, (b) the Effective Time, (c) any reduction of
the Offer Price or (d) the termination or expiration of the
Offer, without the tendered and not withdrawn Shares being
accepted for payment under the Merger Agreement.
9
The foregoing description of the Tender and Voting Agreement
does not purport to be complete and is qualified in its entirety
by reference to the Tender and Voting Agreement, which has been
filed with the SEC as Exhibit (e)(3) to this
Schedule 14D-9.
Employment
Agreements
Terms
and Conditions of Continued Employment for A. Lance Langford and
Jeffery E. Larson
In connection with the execution of the Merger Agreement,
Statoil Gulf Services LLC, an indirect wholly owned subsidiary
of Statoil (
SGS
), entered into
agreements with each of A. Lance Langford and Jeffery E. Larson
(each, an
Executive
and, collectively,
the
Executives
), who will serve as
SGSs Vice President, Bakken and Vice President,
Operations, respectively, regarding the terms and conditions of
their continued employment (the
Terms and
Conditions
). The following is a summary of the
material provisions of the Terms and Conditions. Other than the
differences in their respective titles, the Executives
Terms and Conditions are identical. Each Executives Terms
and Conditions are to become effective only as of the Effective
Time and will continue in effect until the Executives
employment is terminated. The Terms and Conditions require the
Executives and SGS to provide six months advance written
notice to the other party prior to termination of the
Executives employment for any reason other than death,
unless such advance notice is waived in the sole and exclusive
discretion of SGS.
Under the Terms and Conditions, the Executives will each receive
an annualized base salary of $400,000 through December 31,
2012, after which time changes in the Executives base
salaries will be determined at such times and in such manner as
is consistent with SGSs practices respecting similarly
situated executives. In addition, for calendar year 2012, the
Executives will each be eligible to participate in SGSs
annual variable pay plan (the
AVP
) in
accordance with the terms and conditions then in effect, with a
target bonus of 50% of the Executives annualized base
salary and a maximum bonus of 100% of the Executives
annualized base salary if the applicable performance measures
are achieved. The Executives will also each be eligible to
participate in SGSs Long-Term Incentive Plan
(
LTIP
) for calendar year 2012 in
accordance with the terms and conditions then in effect, with
target awards of 100% of their annualized base salaries and with
maximum awards of 200% of their annualized base salaries, if
applicable performance measures for SGS are achieved. Until the
Executives become eligible to participate in SGSs benefit
plans, they will continue to participate in the benefit plans,
programs and policies of Brigham in effect immediately prior to
its combination with Statoil. Commencing in 2012, the Executives
will be eligible to participate in each of the then-existing SGS
benefit plans, programs and policies that may be provided to
similarly situated executives in accordance with the provisions
of such plans, programs and policies. For purposes of
determining benefit eligibility, vesting and benefit entitlement
under such plans and programs, the Executives will be entitled
to service credit for years of service with Brigham and its
affiliates, subject to certain exceptions. The Executives will
also be entitled to reimbursement of reasonable business
expenses and to four weeks of paid time off each calendar year
beginning in 2012 in accordance with SGSs paid time off
policy for executives as may exist from time to time. Regardless
of when the Effective Time occurs, each Executive will be
entitled to receive the $300,000 awarded but not yet paid to him
pursuant to Brighams 2011 Performance Bonus Plan.
The Executives will each be entitled to receive cash retention
bonus payments (each, a
Retention
Payment
) as follows: (1) $833,333 within
30 days of the Effective Time, (2) $833,333 within
30 days of the first anniversary of the Effective Time and
(3) $833,334 within 30 days of the second anniversary
of the Effective Time, for a total retention bonus of
$2,500,000. However, except as described below, the Retention
Payments payable to each Executive within 30 days of the
first and second anniversaries of the Effective Time will be
paid only if the Executive remains continuously employed by SGS
through the applicable anniversary date. Each Executive will
also receive a welcome grant of Statoil restricted
stock units (
RSUs
) awarded under the
Statoil Restricted Stock Unit Plan (the
RSU
Plan
), with a fair market value on the date of
grant equal to $1,000,000. Each Executives RSUs will vest
in full on the third anniversary of the date of grant, provided
that, except as described below, the Executive is still employed
by SGS on such vesting date. To the extent vested, the RSUs will
be settled in cash based on the value of Statoils American
Depositary Shares (at the time of vesting) and the terms and
conditions of the RSU Plan and the applicable award agreements.
10
The Terms and Conditions provide that if either Executives
employment is terminated by the Executive for Good Reason (as
defined in the Terms and Conditions) or by SGS for any reason
other than the Executives death or disability or for Cause
(as defined in the Terms and Conditions), then, subject to the
Executives execution and non-revocation of a general
release within 30 days following such termination, the
Executive will be entitled to receive the following benefits:
(i) a lump sum cash payment in an amount equal to a
prorated portion of any Retention Payments not previously paid
to the Executive, (ii) accelerated vesting of a prorated
portion of the Executives annual variable pay award under
the AVP for the calendar year in which the Executives
termination occurs, (iii) accelerated vesting and payment
(within 60 days of the Executives termination) of a
prorated portion of (A) any outstanding LTIP awards (based
upon target performance) and (B) any outstanding RSUs
(based upon value at vesting), (iv) provided that the
Executive is not eligible to receive a cash severance payment
under his existing Change of Control Agreement with Brigham,
severance payments in an aggregate amount equal to the
applicable severance multiple (as defined below)
multiplied by the Executives annualized base salary at the
time of his termination, paid in 36 equal installments within
30 days of each of the 36 bi-monthly pay periods following
the pay period that is at least 30 days after the
Executives termination, which payments may be reduced if
Executive violates the non-competition covenant contained in the
Terms and Conditions, and (v) provided that the Executive
is not eligible for health continuation coverage under his
Change of Control Agreement with Brigham at the time of his
termination, a lump sum cash payment (the
COBRA
Payment
), payable within 30 days after the
expiration of the
30-day
period following the Executives termination, equal to
(A) 24 times the difference between the applicable monthly
COBRA premium under SGSs employee group health plan for
the Executive, his spouse, and his eligible dependents (as
applicable), and the monthly amount that similarly situated
employees of SGS pay for similar coverage, plus (B) a tax
gross-up
payment in amount sufficient such that the economic benefit is
the same to the Executive as if the COBRA Payment were provided
to the Executive on a non-taxable basis. For purposes of the
severance payments described above, the severance
multiple is equal to 1.5, unless SGS waives the
requirement to provide six months advance written notice
of termination, in which case the severance multiple
is equal to two. The Terms and Conditions provide that if the
Executives employment is terminated for any reason other
than those described above, the Executive will be entitled to
receive any accrued and unpaid base salary as of the date of
termination and any other amounts or benefits that may
thereafter be due or payable to the Executive pursuant to the
terms of SGSs benefit plans, programs, and policies, but
SGS will not be obligated to pay any additional compensation or
benefits as a result of the termination of the Executives
employment.
The Terms and Conditions also contain certain restrictive
covenants, including provisions that prohibit, with certain
limitations, the Executives from competing with SGS and its
affiliates, soliciting any of SGSs or its affiliates
customers, or soliciting or hiring any of SGSs or its
affiliates employees or inducing them to terminate their
employment with SGS and its affiliates. These restrictions will
generally apply during the term of each Executives
employment with SGS and any of its affiliates and for one year
following the termination of such employment. In addition, under
the Terms and Conditions, the Executives will be bound by an
obligation of confidentiality and non-disparagement for an
indefinite duration with respect to SGS and its affiliates.
The foregoing description of the Terms and Conditions does not
purport to be complete and is qualified in its entirety by
reference to the Terms and Conditions, copies of which are filed
with the SEC as exhibits to this
Schedule 14D-9.
|
|
Item 4.
|
The
Solicitation or Recommendation
|
Recommendation
of the Board
After careful consideration by the Board, including a review of
the terms and conditions of the Merger Agreement, including the
Offer and the Merger, in consultation with the Companys
financial and legal advisors, at a meeting of the Board held on
October 16, 2011, the Board has unanimously:
(i) determined that the terms of the Merger Agreement and
the transactions contemplated thereby, including the Offer and
the Merger, are fair to, and in the best interests of, the
Company and its stockholders, (ii) approved the execution,
delivery and performance of the Merger Agreement and the
transactions contemplated by the Merger
11
Agreement, including the Offer and the Merger, and
(iii) recommended that the stockholders of the Company
accept the Offer, tender their Shares to Purchaser pursuant to
the Offer, and if, applicable, approve and adopt the Merger
Agreement and the Merger.
The Board hereby unanimously recommends that the
Companys stockholders accept the Offer, tender their
Shares into the Offer and, to the extent required by applicable
law, adopt the Merger Agreement.
A press release by the Company, dated October 17, 2011,
announcing the Offer and the Merger, is included as Exhibit
(a)(1)(G) to this
Schedule 14D-9
and is incorporated herein by reference.
Background
of the Offer; Reasons for the Boards
Recommendation
Certain of the references to Parent in the following discussion
may be references to Parent, Purchaser or other entities that
are affiliates of the Parent.
Background
of the Offer
In the summer of 2008, when the price of oil peaked at
approximately $145 per barrel and the Companys stock price
reached a then all-time high of $18.29, the Company received an
inquiry regarding a potential acquisition. In consultation with
the investment banking firm Jefferies & Company, Inc.
(Jefferies), the Company engaged in serious
discussions with the inquiring energy company, as well as with
several other potential acquirers. When oil prices fell
precipitously in the autumn of 2008, all discussions with
prospective acquirers were tabled. After discussions with
potential acquirers ended, the Company focused on internally
growing its business and evaluated funding alternatives to do
so. In March 2009, the Companys stock price had declined
to $1.04 per share, which was the lowest point of the year. In a
series of public equity offerings, beginning with a common stock
offering in May 2009 at $2.75 per share, and Rule 144A debt
offerings, the Company successfully raised capital to fund a
growing capital expenditure program.
On December 10, 2010, a little more than two years after
the Companys prior serious attempt to sell the Company in
a high commodity price environment and with the Companys
stock closing at $26.84, representatives of Jefferies attended a
regular meeting of the Board by invitation to discuss
Jefferies working on the Companys behalf to approach
select large domestic and international energy companies to
gauge their level of interest in acquiring the Company. The
Board referred internally to this process as the Lone Star
initiative. Jefferies presented two lists of companies to
potentially approach, a first tier of nine large domestic and
international companies and a second tier of seven large
domestic and international companies. Jefferies explained its
reasons for suggesting each of the companies in the first tier
and its reasons for including the remaining companies in the
second tier. Jefferies explained that the best approach to
maximize value would be for it to contact the suggested first
tier companies in order to qualify their level of interest and
to explain that it would take a significant premium to the
Companys share price to get a transaction done with the
Company. The Board authorized Jefferies to contact ten of the
suggested companies to determine their level of interest, the
ten companies being all of the companies that Jefferies, senior
management and the Board then believed to be reasonably viable
prospective purchasers. The Company engaged Thompson &
Knight LLP, its outside counsel, to work with the Company on the
Lone Star initiative.
During the remainder of December, Jefferies contacted the ten
prospective acquirers, including Parent. Parent indicated an
interest in discussing a possible acquisition of the Company,
and on December 29, 2010, the Company executed a
confidentiality agreement with Parent.
On January 7, 2011, the Board convened a special meeting
and management reported on the Lone Star initiative, informing
the Board that Jefferies had contacted the ten companies by the
end of December and that another company had been added to the
contact list. Management noted that the Company had executed a
confidentiality agreement with Parent and expected to have
executed confidentiality agreements with three other companies
very soon and was in the early stages of negotiating
confidentiality agreements with two more companies. Management
indicated that Jefferies received mixed signals from its
conversations with two additional companies, expected to hear
from another company within a week and had heard nothing from
12
another because of the holidays. In January 2011, Jefferies
contacted one more company in addition to the ten Jefferies had
contacted by the end of December. By the end of the month, the
Company executed confidentiality agreements with seven companies
in addition to the confidentiality agreement that it had entered
into with Parent. In late January, the Company opened a virtual
data room and made an in-person presentation to one of the eight
companies with which it had signed a confidentiality agreement.
On February 18, 2011, the Company requested the companies
to which it had made presentations to deliver indications of
interest by March 10, 2011.
On February 25, 2011, the Board convened a special meeting
and Jefferies reported that seven of the companies that had
executed confidentiality agreements, including Parent, had
visited the virtual data room. Management reported that to date
it had conducted in-person presentations to business development
and technical teams from seven companies, including Parent. The
Board discussed expanding the list to smaller companies and
noted that those companies would have difficulty funding an all
cash transaction. The Board also discussed inviting companies
with primarily natural gas assets that might propose stock
transactions but noted that the Companys stockholders
might be disappointed with such a transaction because they had
acquired the Companys stock as an oil investment.
On March 11, 2011, the Board convened a special meeting. At
that meeting Jefferies reported that a total of seven companies
had visited the virtual data room and that four companies had
all declined to visit. The Board also learned that the Company
had made a presentation to one additional large international
company that was limited in scope because the company had not
executed a confidentiality agreement. Jefferies informed the
Board that, of the seven companies that had visited the virtual
data room, three were unable to make an offer that would include
a premium; one gave no definite feedback; two were distracted
and unable to focus on a transaction because of their specific
circumstances; Parent was interested in pursuing a transaction,
but would need more time and information. Jefferies communicated
that it believed Parent might eventually be willing to offer a
premium for the Company, due not only to the Companys
asset position and the expertise the Company had demonstrated in
the Williston Basin, but also to the fact that Parent wanted to
build an onshore U.S. resource play-focused operating
capability. However, no timeline was established as to how to
proceed further with Parent. It was the consensus of the Board
that the Company should keep open its dialogue with Parent and
the other potentially interested company.
On March 23, 2011, the Board convened a regular meeting and
Mr. Eugene B. Shepherd, Jr., the Companys Chief
Financial Officer, reported that Parent was still evaluating the
transaction and the other potentially interested company had
proposed a joint venture arrangement in which the potentially
interested company and another large public company would
operate the Companys properties. Mr. Shepherd stated
that the Company was expecting to receive Parents response
in the following week.
On April 1, 2011, at the direction of Mr. Bud Brigham,
Chairman of the Board and Chief Executive Officer of the
Company, Jefferies contacted Mr. John Knight, Executive
Vice President Global Strategy and Business Development of
Parent, and a senior member of Parents business
development group, to determine the status of their evaluation
as no word had been received. Parents representative
stated that Parents management needed additional time to
complete their work. On April 14, 2011, a representative of
Parent indicated that Parent was continuing its evaluation,
wanted additional information and asked for the opportunity to
meet in person with Company executives. On April 28, 2011,
Mr. William Maloney, Executive Vice President Development
and Production for North America of Parent, and other
representatives of Parent met with the Companys
executives, including Mr. Bud Brigham, at its offices to discuss
operational and personnel issues, including the importance of
the retention of the Companys employees, given their
operational expertise. Following this meeting, Parent indicated
that it would have a meeting of its senior executives to
determine a plan to potentially advance a transaction.
On May 11, 2011, the Board convened a special meeting at
which Mr. Bud Brigham presented an update regarding the
Lone Star initiative, informing the Board that the process was
continuing to move forward, albeit very slowly and furthermore,
no timeline had been presented to the Company. He stated that
Parent had requested that the Companys management meet
with Parents management in Norway. Mr. Brigham noted
that no discussion of a possible price or premium had taken
place. Mr. Shepherd noted that risks to
13
consummating a transaction with Parent included Parents
government ownership and the overall political and
macro-economic environment. Mr. Shepherd stated that a
lengthy negotiation period might benefit the Company by allowing
it to demonstrate how its platform could help Parent unlock the
value of some of its recent onshore North American investments,
where Parent had the right to take over operations.
Mr. Shepherd said that since there was no certainty of a
transaction and that there was no indication from Parent that
internal approval had been obtained or an offer was forthcoming,
the Company needed to proceed with a high yield notes offering
in order to continue to fund its 2011 and 2012 capital
expenditure budgets. The Board then approved a 144A private
offering of senior notes, which priced on May 16, 2011 with
the issuance of $300 million in principal amount of
6
7
/
8
% senior
notes.
On May 18, 2011, Parent sent the Company a proposed
timeline for a possible transaction as well as a proposed form
of non-solicitation agreement. On May 23, 2011, the Board
convened a special meeting to consider Parents requirement
that the Company enter into a non-solicitation agreement with
Parent. Mr. Shepherd reported to the Board that Parent
would require the agreement before expending significantly more
internal and external resources by continuing work on a
potential transaction. The Board weighed the disadvantage that
the agreement could indicate to Parent that it was the only
seriously interested prospective acquirer against ceasing
negotiations with Parent, and decided to enter into the
non-solicitation agreement. The non-solicitation agreement was
not signed until June 17, 2011 and it terminated, without
being extended, on July 15, 2011. After the
non-solicitation agreement was executed, the Company began
responding to additional due diligence requests from Parent. On
June 13 and 14, 2011, members of management including
Mr. Bud Brigham, Mr. David Brigham, a director and
Executive Vice President Land and Administration of
the Company, and Mr. Shepherd visited with representatives
of Parent in Norway and met with the heads and staffs of many of
Parents departments. The discussions were about operations
and diligence.
On June 20, 2011, in New York City, the Companys
senior management, including Mr. Bud Brigham met with
Mr. Helge Lund, Parents President and CEO,
Mr. John Knight and Mr. Maloney. The discussions were
about the Companys assets and operating capabilities.
There was no discussion of price. On June 21, 2011, Messrs.
Bud Brigham, David Brigham and Shepherd, reported to the Board
regarding the meeting.
On June 28 and 29, 2011, in Austin, Texas, employees from
various departments of the Company met with representatives of
Parent to discuss human resources issues and retention of the
Companys employees.
On July 5, 2011, the Company entered into an engagement
agreement with Jefferies setting forth its arrangements with
that firm to act as financial advisor to the Board. See
Item 5, Persons/Assets Retained, Employed,
Compensated or Used, below.
After the second week of July 2011, and through most of August,
the Company and its representatives did not have any meetings or
significant discussions with Parent or its representatives, but
continued to respond to periodic due diligence requests. On
August 19, 2011, members of the Companys senior
management and Jefferies visited with Mr. Maloney and two
other representatives of Parent in Houston, Texas to discuss
ongoing operations.
In early September 2011, Mr. Jeff Larson, Executive Vice
President Exploration of the Company, and
Mr. Lance Langford, Executive Vice President
Operations, of the Company made a technical presentation
regarding the Companys properties and operations to
Parents representatives in Houston, Texas.
On September 8, 2011, at the Companys offices in
Austin, Mr. Maloney met with Mr. Bud Brigham,
Mr. Langford and Mr. Larson to discuss operations,
diligence and personnel.
On September 13, 2011, the Company distributed a memo from
Thompson & Knight to the Board regarding fiduciary
duties and the Board convened a special meeting. At the meeting,
Mr. Bud Brigham reported on the meeting with
Mr. Maloney and stated that Parents board had
approved its managements request to make a proposal to the
Company, which the Company should receive within approximately
one week. Parent had indicated that it would propose a tender
offer, and Thompson & Knight explained that the short
time involved in a tender offer increased the certainty of
execution, but reduced the period of time during which other
parties could present the Board with alternative proposals.
Mr. Bud Brigham noted that the Companys process with
prospective acquirers and with Parent in particular had been
exhaustive, and that
14
Parents diligence regarding the Company had been lengthy
and exhaustive. He said that he believed that Parent would
attribute significant value to the Companys operating
capability in the United States and had concluded that the
Company was unlikely to receive a more competitive bid from
another party. Mr. Shepherd noted that the Company had not
received any further inquiries from the parties who earlier in
the year had signed confidentiality agreements and conducted
preliminary reviews of the Company. It was also noted that,
through Jefferies, the Company had already approached and
attempted to include in the process all of the most viable
candidates. Out of that process, only Parent indicated a
willingness to pay a significant premium to acquire the Company.
He further noted that given the time Parents process had
required, he believed that any other prospective acquirer that
might begin a diligence process would require similar amounts of
time for diligence. The Board concluded that the greater
certainty of execution with a tender offer structure made such a
structure preferable to a voted merger.
On September 13, 2011, in order to insure retention of its
personnel during negotiation and completion of a transaction,
the Compensation Committee (i) amended all outstanding
Option agreements entered into pursuant to the Companys
1997 Incentive Plan to provide the Compensation Committee with
the right to accelerate the vesting of the right to exercise the
Options granted thereunder in whole or in part on such terms as
the Compensation Committee may deem appropriate,
(ii) adopted change in control and retention plans for the
benefit of employees of the Company other than the executive
officers identified in the Companys SEC filings and
(iii) took action to cause each employee of the Company who
is employed by the Company or one of its affiliates immediately
prior to the Acceptance Time to become fully vested in all
outstanding Options and Restricted Shares that were granted to
such employee under the Companys 1997 Incentive Plan.
Parent had reviewed the amendments and indicated that the
adoption of the change in control and retention plans would not
discourage Parent from proposing a transaction and agreed that
they would be beneficial for retention.
On October 3, 2011, Mr. Lund spoke by phone with
Mr. Bud Brigham to make an offer to acquire the Company for
$34.50 per share by means of an all-cash tender offer.
Mr. Lund indicated that Parent had stretched its valuation
to make the offer and had very little room for movement.
Mr. Lund delivered a nonbinding written offer to
Mr. Bud Brigham later in the day. Later on October 3,
Mr. Lunds office sent Mr. Bud Brigham a initial
proposed draft of the Merger Agreement.
On the morning of October 4, 2011, the Board convened a
special meeting to discuss Parents offer. The Board
discussed valuation and various approaches by which the Company
might seek to elicit an offer with a higher price from Parent.
Jefferies also participated in this discussion. The Board
directed Mr. Bud Brigham to call Mr. Lund to propose a
price of $40 per share. Following the meeting, Mr. Bud
Brigham phoned Mr. Lund and discussed the reasons why the
Board believed that a price per share of $40 was reasonable.
Mr. Lund suggested that perhaps the deal should be tabled.
After further discussion, in which the two executives were
unable to progress on price, they agreed to continue the
discussion on October 5.
On the afternoon of October 4, the Board convened a special
meeting to discuss Mr. Bud Brighams discussion with
Mr. Lund. Mr. Brigham reported that when he broached a
price of $40 per share with Mr. Lund, Mr. Lund suggested
that perhaps the deal should be tabled. Mr. Brigham
reported that he and Mr. Lund ultimately agreed that rather
than tabling the deal, they should think it over and get back in
touch the following day. The Board discussed valuation and
negotiation tactics first with Jefferies participating in the
discussion and then discussed these issues without Jefferies.
The Board concluded that Mr. Brigham should stay firm on a
price of $40 per share the next day, but that, given the
extensive time and effort that Parent had invested in a possible
deal, the interest Parent had shown and current economic and
market conditions, he should try to keep Parent engaged in
discussions.
On the morning of October 5, 2011, the Board convened a
special meeting and noted that a representative of Parent had
suggested that the parties should advance the process by working
through the Merger Agreement and other documentation while the
parties continued to discuss price. The Board discussed that the
communication from Mr. Knight indicated that, despite the
misgivings that Mr. Lund had expressed to Mr. Brigham
regarding the current economic climate, Parent appeared to
remain interested in the transaction. The Board directed
Mr. Brigham to hold firm on price during his next call with
Mr. Lund, but that if Mr. Lund
15
suggested trying to advance documentation, Mr. Brigham
could agree to such a request as a show of good faith in trying
to advance a transaction.
Following the meeting, Mr. Bud Brigham and Mr. Lund
conferred by phone. Mr. Brigham conveyed that the Board
remained convinced that $40 per share was a reasonable price.
Mr. Lund indicated that Parent still believed that $34.50
was its best offer. Given their companies respective
positions, Messrs. Brigham and Lund discussed available
alternatives, including suspending negotiations. However, given,
the investments both companies had made to that point,
Messrs. Brigham and Lund agreed that the companies would
continue to negotiate a potential Merger Agreement, and could
potentially reconvene to discuss price at a later date.
The Company began reviewing and revising the Merger Agreement,
with the assistance of Thompson & Knight. On
October 7, 2011, the Company sent a revised draft of the
Merger Agreement to Parent.
On the evening of October 10, 2011, the Board convened its
regular meeting, which it continued through both the morning and
early afternoon of October 11, 2011. At this meeting,
Thompson & Knight, which had briefed the Board on its
fiduciary duties in transactions in 2008 and had in September
provided the Board with a memo regarding fiduciary duties,
reviewed the memo and orally outlined the Boards fiduciary
duties. Mr. Bud Brigham asked management to present a
bottoms-up
analysis of the Company and its potential to the Board.
Messrs. Larson, Langford and David Brigham provided
detailed reports on the Companys properties, operations,
projects and future potential. Mr. Shepherd reported on
financing alternatives that the Company could employ if it
remained independent.
Late in the evening on October 10, 2011, Vinson &
Elkins L.L.P., Parents outside legal counsel, sent the
Company a draft responding to the Companys revision of the
Merger Agreement. Thompson & Knight reviewed issues
under the agreement with the Board during the meeting on
October 11, including the use of and timing of a tender
offer, the no-solicitation provisions and the termination fee.
The Board continued to discuss the terms of Parents offer,
including the fact that it was an all-cash tender offer and
would not be subject to any financing contingency. The Board
also noted that, based on publicly available information, Parent
appeared to have sufficient cash available to fund the
acquisition.
At various points on both days of the meeting, the Board
discussed the $34.50 price offered by Parent. The Board reviewed
the likelihood of realistic competition against Parent, noted
the number of parties that had already been contacted, noted
that there had been no recent expressions of active interest by
any of those parties and noted that the amount of time required
for any new party to enter the process would be comparable to
the amount of time already required by Parent. The Board asked
Jefferies to reach out to Parent to learn more about price and
report back to the Board.
Having reviewed various negotiating strategies, the Board
approved Mr. Bud Brighams continuing further
negotiations with Parent and authorized him to accept an offer
of $38 or more per share.
In the evening of October 11, 2011, the Board convened a
special meeting. Thompson & Knight updated the Board
on the status of negotiations of the Merger Agreement. Jefferies
reported that it had discussed the offer price with Goldman
Sachs (
Goldman
), Parents
financial advisor. Goldman indicated to Jefferies that Parent
might be prepared to increase its offer from $34.50 per share,
but that a substantial additional increase was unlikely.
Jefferies informed Goldman that Jefferies was not authorized to
negotiate price on behalf of the Company and would deliver
Goldmans message to the Company. Jefferies told the Board
that it believed the best negotiation tactic at this point was
for Mr. Brigham to meet in person with Mr. Lund.
Jefferies also advised that it believed this was the last round
of negotiations in which Mr. Lund would be willing to
participate. The Board authorized Mr. Bud Brigham to
contact Mr. Lund to request an in-person meeting at a
neutral location. Following the meeting, Mr. Brigham made
the request by email and he and Mr. Lund agreed to meet in
London on October 14, 2011.
On October 14, 2011, Mr. Bud Brigham and Mr. Lund
met in London and discussed valuation and price. Mr. Lund
increased Parents offer to $36.50 per share, and indicated
that the price was as high as Parent could reach.
16
Early in the morning, Austin, Texas time, of October 14,
2011, the Board convened a special meeting to discuss the $36.50
per share offer. Mr. Brigham reported to the other
directors that he believed, based on his meetings with
Mr. Lund, that $36.50 per share was the highest price that
Parent was prepared to offer. Following a discussion of the
price, the Board preliminarily approved a price of $36.50 per
share and Mr. Brigham informed Mr. Lund of the
Boards preliminary approval of the price. Mr. Bud
Brigham returned from London to Austin.
On October 15, 2011, Thompson & Knight provided
the Board with memos regarding the terms of the draft Merger
Agreement, including deal protection provisions.
Management and Thompson & Knight continued to
negotiate the terms of the Merger Agreement with Parent and its
counsel.
In the evening of October 15, 2011, the Board convened a
special meeting to discuss the terms of the Merger Agreement.
Thompson & Knight noted that there had been
negotiation of the tender offer period and the termination fee.
As to the tender offer period, counsel noted that the Company
was seeking a 30 business day initial period, but that in a
vast majority of transactions the initial period is rarely
longer than the minimum 20 business days required by the
SECs rules. As to the termination fee, counsel noted that
Parent sought a fee of 4% of equity value and that counsel for
the Company had initially sought a termination fee of 1.5% of
equity value. The Board directed management and counsel to
negotiate for a reduced termination fee.
At that meeting, Jefferies preliminarily indicated that it
expected to be in a position to provide a fairness opinion at a
meeting of the Board the next day. The Board noted that, having
preliminarily approved a price for the transaction, management
should be free to negotiate employment arrangements. The Board
noted that members of senior management other than
Messrs. Bud Brigham, David Brigham and Shepherd had
received employment term sheets from Parent the previous day and
had begun negotiations with Parent and that some members of
senior management intended to complete negotiation by the
following evening. Similarly, Messrs. Bud Brigham,
David Brigham and Shepherd noted that at some point they
would begin negotiation of consulting arrangements with Parent,
with the objective of finalizing the arrangements on the same
time schedule.
During the day on October 16, 2011, management and
Thompson & Knight negotiated the remaining open
provisions in the Merger Agreement, including the termination
fee, which Parent ultimately agreed would be 3.1% of equity
value. The parties agreed that the Offer would expire on the
date that is the later of November 30 or 20 business
days after the Offer is first commenced. Messrs. Larson and
Langford negotiated their terms and conditions of employment
with Parent and concluded those negotiations early in the
morning on October 17, 2011. During the afternoon of
October 16, 2011, Messrs. Bud Brigham, David Brigham
and Shepherd received term sheets from Parent for consulting
arrangements and began negotiation of agreements for those
arrangements. They also concluded their negotiations with Parent
early in the morning on October 17, 2011.
In the evening on October 16, 2011, the Board convened a
special meeting and received reports from management on the
final results of negotiations of the Merger Agreement, a report
from outside counsel on the terms of the Merger Agreement and a
presentation by Jefferies on its financial analysis of the
consideration to be paid to the Companys stockholders in
the Offer and the Merger pursuant to the Merger Agreement.
Jefferies then rendered orally to the Board its fairness
opinion, subsequently confirmed in writing, dated
October 16, 2011, as described under the caption
Opinion of the Companys Financial Advisor,
below. Following these presentations and discussion by the
directors of the transactions provided for in the proposed
Merger Agreement, including the Offer and the Merger, the Board
unanimously determined that the Offer and the Merger, and the
terms of the Merger Agreement, are advisable and fair to, and in
the best interests of, the Company and its stockholders;
approved the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, and authorized the
execution of the Merger Agreement by the Company; and resolved
to recommend that the Companys stockholders accept the
Offer and tender their Shares in the Offer and, if required by
applicable law, adopt the Merger Agreement.
The same evening, the compensation committee of the Board
approved terms and conditions of employment for continuing
executives and consulting arrangements for Messrs. Bud
Brigham, David Brigham and Shepherd.
17
On the morning of October 17, 2011, the Company, Parent and
Purchaser executed the Merger Agreement, and the Company and
Parent each issued a press release announcing the transaction.
Reasons
for the Recommendation
In reaching its unanimous decision to approve the Offer, the
Merger and the Merger Agreement and recommend that the
Companys stockholders accept the Offer and tender their
Shares pursuant to the Offer, the Board consulted with senior
management of the Company regarding, among other things, the
industry, the Companys properties, business and capital
plans, the Companys prospects as an independent company
and operational matters, with its financial advisor regarding
the financial aspects, as well as the fairness of the
transaction from a financial point of view to the stockholders
of the Company, and with its legal counsel regarding the
Boards legal duties, the terms of the Merger Agreement and
related issues. The Board believed that, taken as a whole, the
following factors supported its determination to approve the
Offer, the Merger and the Merger Agreement:
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Premium to Market Price.
The offer price of
$36.50 per Share in cash represented a significant premium over
the market prices at which Brigham Common Stock had previously
traded, including a premium of approximately:
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20% over the closing market price of the Shares on
October 14, 2011, the last full trading day prior to the
date on which the Board met to approve the Offer and the Merger;
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33% over the average closing price of Brigham Common Stock for
the
30-day
period ending on October 14, 2011;
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29% over the average closing price of Brigham Common Stock for
the
60-day
period ending on October 14, 2011; and
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28% over the average closing price of Brigham Common Stock
during the
90-day
period ending on October 14, 2011.
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These premiums were especially attractive in light of the fact
that, as of October 14, 2011, the Companys Common
Stock traded at a premium relative to the trading prices of the
common stock of many of the Companys peer companies, in
terms of trading price as a multiple of historical and projected
EBITDA and average daily production.
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Business and Financial Condition and
Prospects.
The Boards and managements
understanding of the Companys business, financial
condition, earnings and prospects, including the Boards
consideration and evaluation of the execution risks and
uncertainties related to continuing to pursue the Companys
business plan as an independent company, including among other
things risks associated with volatility of, and the potential
for significant declines in, prices of oil and natural gas,
compared to the relative certainty of realizing in cash a
compelling value for the Shares in the Offer and Merger. In
considering these factors, the Board considered the related risk
that, if the Company did not enter into the Merger Agreement,
the price that stockholders of the Company might be able to
receive by selling Shares in the open market could be less, for
a significant period of time, than the consideration to be
received in the Offer and the Merger.
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Attractiveness of Offer Based on Public Company
Benchmarks
. Relative to the public company
benchmarks in Jefferies selected public company analysis for
enterprise value over proved reserves, enterprise value over
daily production, enterprise value over 2011 estimated EBITDA
and enterprise over 2012 estimated EBITDA, the consideration of
$36.50 per share to be paid by Parent is at the top end of, or
exceeds, the ranges of implied values per share.
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Experience with the Lone Star Initiative.
The
duration and thoroughness of the processes undertaken by the
Board and management and the Companys financial adviser in
attempting to elicit attractive offers for the Company. The
Board considered the facts that Jefferies had contacted more
than ten large energy companies on behalf of the Company, that a
majority of those companies had entered into confidentiality
agreements and received in-person presentations, and reviewed
due diligence materials
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provided by the Company, and that, notwithstanding that the Lone
Star initiative extended over a significant period of time as
described under Background of the Offer above,
Parent was the only potential acquirer to express a serious
interest in continuing discussions with the Company and in
making an offer at a significant premium over the market price
of the Common Stock. Based on this process, and on the fact that
the Company believed that Parent attributed value to the
Companys operating capabilities in the United States, the
Board concluded that, at the time it approved Parents
offer, it was unlikely that the Company would receive a more
competitive bid from another party.
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Certainty of Value.
The fact that the
consideration to be received by the Companys stockholders
in the Offer and the Merger will consist entirely of cash, which
will provide liquidity and certainty of value to the
Companys stockholders.
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Likelihood of Completion; Financial Strength of
Parent.
The likelihood of the Offer and Merger
being approved by applicable regulatory authorities and the fact
that Parents and Purchasers obligations under the
Offer are not subject to any financing condition.
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Negotiations with Parent.
The course of
negotiations between the Company and Parent, which resulted in
an increase from $34.50 to $36.50 in the Offer Price and
improvement from the Companys perspective in the deal
protection provisions.
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Opinion of Jefferies & Company,
Inc.
The oral opinion of Jefferies to the Board
on October 16, 2011, which was subsequently confirmed in
writing, that, as of that date and based upon and subject to the
factors and assumptions set forth therein, the $36.50 per Share
cash consideration to be paid to the holders (other than Parent
and its affiliates) of Shares in the Offer and the Merger
pursuant to the Merger Agreement was fair from a financial point
of view to such holders. The full text of Jefferies
written opinion is attached hereto as Annex B. For further
discussion of the opinion, see Opinion of the
Companys Financial Advisor below.
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Tender Offer Structure.
The fact that the
transaction is structured as a tender offer, which can be
completed, and the cash Offer Price can be delivered to the
Companys stockholders, on a prompt basis, reducing the
period of uncertainty during the pendency of the contemplated
transactions, and the fact that the Merger Agreement requires
Purchaser, if it acquires a majority of the fully-diluted
outstanding Shares in the Offer, to consummate a second-step
Merger in which stockholders who do not tender their Shares in
the Offer will receive cash consideration equal to the Offer
Price.
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Extension of Offer.
The fact that, subject to
its limited rights to terminate the Offer, Purchaser is
required, upon the Companys request, to extend the Offer
beyond the initial expiration date of the Offer if the
conditions to the completion of the Offer were not satisfied as
of such date.
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Terms of the Merger Agreement.
The provisions
of the Merger Agreement which give the Board the ability, should
the Company receive an unsolicited proposal which is or is
reasonably likely to lead to a superior proposal, to furnish
information and conduct negotiations with a third party, and to
enter into an agreement for a superior proposal after complying
with certain requirements, including payment of a termination
fee. In addition, the provisions of the Merger Agreement provide
the Board with the ability to withdraw or modify its
recommendation in favor of the Offer and the Merger under
certain circumstances.
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Appraisal rights.
The availability of
statutory appraisal rights under Delaware law in the Merger for
the Companys stockholders who do not tender their Shares
in the Offer and who otherwise comply with all the required
procedures under Delaware law.
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The Board also considered a variety of potentially negative
factors in its deliberations concerning the Offer, the Merger
and the Merger Agreement, including the following:
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No Stockholder Participation in Future Growth or
Earnings.
The nature of the transaction as a cash
transaction would prevent the Companys stockholders from
participating in any future earnings or growth of the Company
and benefiting from any appreciation in the value of the Company.
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Taxable Consideration.
The fact that the
all-cash consideration in the transaction would be generally
taxable to the Companys stockholders.
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Effects of Failure to Complete
Transactions.
The risks and costs to the Company
if the Offer does not close, including the diversion of
management and employee attention, employee attrition and the
effect on the Companys customer relationships, among other
potential negative effects on the Company if the Offer is not
completed.
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Interim Restrictions on Business.
The
operational restrictions imposed on the Company pursuant to the
Merger Agreement between signing and closing (which may delay or
prevent the Company from undertaking business opportunities that
may arise pending the completion of the transaction).
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Potential Conflicts of Interest.
The fact that
the executive officers and directors of the Company will have
interests in the transactions contemplated by the Merger
Agreement that are different from, or in addition to, those of
the Companys stockholders, and could present potential
conflicts of interest for such persons.
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Termination Fee.
The terms and conditions of
the Merger Agreement providing for a termination fee of
approximately $136.6 million that could become payable by
the Company under certain circumstances, including if the
Company terminates the Merger Agreement to accept a superior
proposal.
|
The Board concluded that the risks and other potentially
negative factors associated with the Offer and the Merger were
outweighed by the potential benefits of the Offer and the Merger.
The foregoing discussion of information and factors considered
and given weight by the Board and the reasons for making its
recommendation is not intended to be exhaustive, but is believed
to include all of the material factors considered by the Board
and the material reasons for making its recommendation. In view
of the variety of factors considered in connection with its
evaluation of the Offer and the Merger and the related reasons
for making its recommendation, the Board did not find it
practicable to, and did not, quantify or otherwise assign
relative weights to the specific factors considered in and the
related reasons for reaching its determinations and
recommendations. In addition, individual members of the Board
may have given different weights to different factors and
reasons.
For the reasons described above, the Board unanimously
recommends that the Companys stockholders accept the
Offer, tender their Shares pursuant to the Offer and, if
required by applicable law, adopt the Merger Agreement.
Intent to
Tender
To the knowledge of the Company after making reasonable inquiry,
all of the Companys executive officers, directors and
affiliates currently intend to tender or cause to be tendered
all Shares held of record or beneficially owned by them pursuant
to the Offer. The foregoing does not include any Shares over
which, or with respect to which, any such executive officer,
director or affiliate may act in a fiduciary or representative
capacity or may be subject to the instructions of a third party
with respect to such tender. As described in Item 3 under
the heading Arrangements between Parent and Purchaser and
the Companys Executive Officers and Directors
Tender and Voting Agreement above, all of the directors
and executive officers of the Company have entered into the
Tender and Voting Agreement pursuant to which they have agreed
to tender their Shares into the Offer and, if required by
applicable law, to vote their Shares in favor of adopting the
Merger Agreement.
Opinion
of the Companys Financial Advisor
The Company retained Jefferies to provide it with financial
advisory services in connection with the transactions
contemplated by the Merger Agreement and an opinion as to the
fairness to holders of Shares of the consideration to be
received by such holders in connection with the Offer and the
Merger. At the meeting of the Board on October 16, 2011,
Jefferies rendered its opinion to the Board to the effect that,
as of October 16, 2011, and based upon and subject to the
various assumptions made, procedures followed, matters
20
considered and limitations on the review undertaken as set forth
therein, the consideration of $36.50 per Share received in the
Offer and the Merger by holders of Shares was fair, from a
financial point of view, to such holders.
The full text of the written opinion of Jefferies, dated as
of October 16, 2011, is attached hereto as Annex B.
The opinion sets forth, among other things, the assumptions
made, procedures followed, matters considered and limitations on
the scope of the review undertaken by Jefferies in rendering its
opinion. The Company encourages you to read the opinion
carefully and in its entirety. Jefferies opinion is
directed to the Board and addresses only the fairness from a
financial point of view of the consideration to be received in
the Offer and the Merger by holders of Shares as of the date of
the opinion. It does not address any other aspects of the Offer
or the Merger and does not constitute a recommendation as to
whether any holder of Shares should tender such shares pursuant
to the Offer or how any holder of Shares should vote with
respect to the Merger or any matter relating thereto. The
summary of the opinion of Jefferies set forth below is qualified
in its entirety by reference to the full text of the opinion.
In arriving at its opinion, Jefferies, among other things:
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reviewed a draft dated October 16, 2011 of the Merger
Agreement;
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reviewed certain publicly available financial and other
information about the Company;
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|
reviewed certain information furnished to Jefferies by the
Companys management, including financial forecasts and
analyses relating to the business, operations and prospects of
the Company;
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held discussions with members of senior management of the
Company concerning the matters described in the prior two bullet
points;
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reviewed the share trading price history and valuation multiples
for the Common Stock and compared them with those of certain
publicly traded companies that Jefferies deemed relevant;
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compared the proposed financial terms of the Offer and the
Merger with the financial terms of certain other transactions
that Jefferies deemed relevant;
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performed a discounted cash flow analysis, based on projections
provided by the management of the Company, to analyze the
present value of the future unlevered cash flow streams that the
management of the Company expects to generate;
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reviewed certain proved oil and gas reserve data as of
December 31, 2010 furnished to Jefferies by the Company and
available in the Companys public filings; and
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conducted such other financial studies, analyses and
investigations as Jefferies deemed appropriate.
|
In Jefferies review and analysis and in rendering its
opinion, Jefferies assumed and relied upon, but did not assume
any responsibility to independently investigate or verify, the
accuracy and completeness of all financial and other information
that was supplied or otherwise made available by the Company to
Jefferies or that was publicly available (including, without
limitation, the information described above), or that was
otherwise reviewed by Jefferies. Jefferies relied on assurances
of the management of the Company that management was not aware
of any facts or circumstances that would make such information
inaccurate or misleading. In its review, Jefferies did not
obtain any independent evaluation or appraisal of any of the
assets or liabilities of, nor did Jefferies conduct a physical
inspection of any of the properties or facilities of, the
Company. Jefferies was not furnished with any such evaluations
or appraisals and did not assume any responsibility to obtain
any such evaluations or appraisals.
With respect to the financial forecasts provided to and examined
by Jefferies, Jefferies opinion noted that projecting
future results of any company is inherently subject to
uncertainty. The Company informed Jefferies, however, and
Jefferies assumed, that such financial forecasts were reasonably
prepared on bases reflecting the best currently available
estimates and good faith judgments of the management of the
Company as to the
21
future financial performance of the Company. Jefferies expressed
no opinion as to the Companys financial forecasts provided
to Jefferies by the Company or the assumptions on which they
were made.
Jefferies opinion was based on economic, monetary,
regulatory, market and other conditions that existed and could
be evaluated as of the date of its opinion. Jefferies did not
undertake to reaffirm or revise its opinion or otherwise comment
upon events occurring after the date of its opinion and
expressly disclaimed any undertaking or obligation to advise any
person of any change in any fact or matter affecting
Jefferies opinion of which Jefferies became aware after
the date of its opinion.
Jefferies made no independent investigation of any legal or
accounting matters affecting the Company, and Jefferies assumed
the correctness in all respects material to Jefferies
analysis of all legal and accounting advice given to the Company
and the Board, including, without limitation, advice as to the
legal, accounting and tax consequences of the terms of, and
transactions contemplated by, the Merger Agreement to the
Company and its stockholders. In addition, in preparing its
opinion, Jefferies did not take into account any tax
consequences of the transaction to any holder of Shares. In
rendering its opinion, Jefferies assumed that the final form of
the Merger Agreement would be substantially similar to the last
draft reviewed by Jefferies. Jefferies also assumed that in the
course of obtaining the necessary regulatory or third party
approvals, consents and releases for the Offer and the Merger,
no delay, limitation, restriction or condition would be imposed
that would have an adverse effect on the Company or the
contemplated benefits of the Offer and the Merger.
Jefferies opinion was for the use and benefit of the Board
in its consideration of the Offer and the Merger, and
Jefferies opinion did not address the relative merits of
the transactions contemplated by the Merger Agreement as
compared to any alternative transaction or opportunity that
might be available to the Company, nor did it address the
underlying business decision by the Company to engage in the
Offer and the Merger or the terms of the Merger Agreement or the
documents referred to therein. Jefferies opinion does not
constitute a recommendation as to whether any holder of Shares
should tender such shares pursuant to the Offer or how any
holder of Shares should vote with respect to the Merger or any
matter relating thereto. In addition, Jefferies was not asked to
address, and its opinion did not address, the fairness to, or
any other consideration of, the holders of any class of
securities, creditors or other constituencies of the Company,
other than holders of Shares. Jefferies expressed no opinion as
to the price at which Shares will trade at any time. Jefferies
did not express any view or opinion as to the fairness,
financial or otherwise, of the amount or nature of any
compensation payable or to be received by any of the
Companys officers, directors or employees, or any class of
such persons, in connection with the Offer and the Merger,
whether relative to the consideration to be received by holders
of Shares or otherwise. Jefferies opinion was authorized
by the Fairness Committee of Jefferies & Company, Inc.
In preparing its opinion, Jefferies performed a variety of
financial and comparative analyses. The preparation of a
fairness opinion is a complex process involving various
determinations as to the most appropriate and relevant
quantitative and qualitative methods of financial analysis and
the applications of those methods to the particular
circumstances and, therefore, is not necessarily susceptible to
partial analysis or summary description. Jefferies believes that
its analyses must be considered as a whole. Considering any
portion of Jefferies analyses or the factors considered by
Jefferies, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying
the conclusion expressed in Jefferies opinion. In
addition, Jefferies may have given various analyses more or less
weight than other analyses, and may have deemed various
assumptions more or less probable than other assumptions, so
that the range of valuations resulting from any particular
analysis described below should not be taken to be
Jefferies view of the Companys actual value.
Accordingly, the conclusions reached by Jefferies are based on
all analyses and factors taken as a whole and also on the
application of Jefferies own experience and judgment.
The Board of Directors of the Company did not impose upon
Jefferies any limitations with respect to the investigations
made or procedures followed by it in performing its analyses or
rendering its opinion.
In performing its analyses, Jefferies made numerous assumptions
with respect to industry performance, general business,
economic, monetary, regulatory, market and other conditions and
other matters, many of which are beyond the Companys and
Jefferies control. The analyses performed by Jefferies are
not
22
necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than
suggested by such analyses. In addition, analyses relating to
the per share value of Shares do not purport to be appraisals or
to reflect the prices at which Shares may actually be sold. The
analyses performed were prepared solely as part of
Jefferies analysis of the fairness, from a financial point
of view, of the consideration of $36.50 per share in cash to be
received in the Offer and the Merger by holders of Shares, and
were provided to the Board in connection with the delivery of
Jefferies opinion.
The following is a summary of the material financial and
comparative analyses performed by Jefferies in connection with
Jefferies delivery of its opinion to the Board on
October 16, 2011. The financial analyses summarized below
include information presented in tabular format. In order to
fully understand Jefferies financial analyses, the tables
must be read together with the text of each summary. The tables
alone do not constitute a complete description of the financial
analyses. Considering the data described below without
considering the full narrative descriptions of the financial
analyses, including the methodologies and assumptions underlying
the analyses, could create a misleading or incomplete view of
Jefferies financial analyses.
Transaction
Overview
Jefferies noted that the consideration of $36.50 per Share
implied an equity value of approximately $4.4 billion,
based upon the number of Shares that were outstanding as of
June 30, 2011 on a fully diluted basis (calculated using
the treasury stock method). Adding approximately
$600 million of indebtedness as reported by the Company in
its Quarterly Report on
Form 10-Q
as of June 30, 2011 (the
Brigham
10-Q
)
(
Indebtedness
) and subtracting
$362 million of cash and cash equivalents (including
short-term investments), as reported by the Company in the
Brigham
10-Q
(
Cash
), Jefferies noted that the
consideration implied an enterprise value for the Company of
approximately $4.6 billion. Jefferies also noted that the
consideration of $36.50 per Share is:
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20.2% over $30.36, the closing price per Share on
October 14, 2011, one trading day prior to the date of
Jefferies opinion,
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32.6% over $27.52, the average price per Share for the period
from September 2, 2011 to October 14, 2011, which were
the 30 trading days prior to the date of Jefferies opinion,
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29.1% over $28.28 ,the average price per Share for the period
from July 22, 2011 to October 14, 2011, which were the
60 trading days prior to the date of Jefferies opinion,
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27.8% over $28.56, the average price per Share for the period
from June 9, 2011 to October 14, 2011, which were the
90 trading days prior to the date of Jefferies opinion,
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2.4% below $37.39, the highest closing price per Share during
the 52 weeks prior to the date of Jefferies
opinion, and
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86.1% over $19.61, the lowest closing price per Share during the
52 weeks prior to the date of Jefferies opinion.
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Historical
Trading Analysis
Jefferies reviewed the price trading history of Shares for the
one-year period ended October 14, 2011 on a stand-alone
basis and also in relation to the S&P 500 and to a
composite index consisting of stocks of the following
publicly-traded companies with assets, operating and financial
characteristics and growth prospects similar to the
Companys, including the location of a significant portion
of each companys assets in the Williston Basin. These
companies are referred to as the
Brigham Selected
Public Companies
:
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Continental Resources, Inc.,
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Kodiak Oil & Gas Corp.,
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Northern Oil & Gas, Inc.,
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Oasis Petroleum Inc., and
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23
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Whiting Petroleum Corporation.
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This analysis showed that during the one-year period ended
October 14, 2011, the trading price of the Shares rose 45%,
the S&P 500 rose 4%, and the composite index consisting of
stocks of the Brigham Selected Public Companies rose 13%.
Selected
Public Company Analysis
Using publicly available information and information provided by
the Companys management, Jefferies analyzed the trading
multiples of the Company and the corresponding trading multiples
of the Brigham Selected Public Companies. In its analysis,
Jefferies derived and compared multiples for the Company and the
Brigham Selected Public Companies, calculated and referred to as
follows:
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Enterprise value divided by proved reserves, which is referred
to as
Enterprise Value/Proved Reserve
s;
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Enterprise value divided by average daily production, which is
referred to as
Enterprise Value/Daily
Production
;
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Enterprise value divided by projected EBITDA for calendar year
2011
(2011E EBITDA)
, which is referred
to as
Enterprise Value/2011E
EBITDA
; and
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|
Enterprise value divided by projected EBITDA for calendar year
2012
(2012E EBITDA)
, which is referred
to as
Enterprise Value/2012E EBITDA
.
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This analysis indicated the following:
Brigham
Selected Public Company Multiples
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Benchmark
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High
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Low
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Mean
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Median
|
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Enterprise Value/Proved Reserves ($/Boe)
|
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109.45
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|
19.12
|
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60.24
|
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|
63.51
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|
Enterprise Value/Daily Production ($/Boe/d)
|
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320,110
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90,914
|
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|
222,573
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|
216,502
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Enterprise Value/2011E EBITDA
|
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13.3
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x
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|
4.4
|
x
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9.6
|
x
|
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|
10.2
|
x
|
Enterprise Value/2012E EBITDA
|
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6.8
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x
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|
3.8
|
x
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5.0
|
x
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4.8
|
x
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Using a reference range of $50.00 to $70.00 per Boe, and based
on the Companys December 31, 2010 proved reserves
figure of 66.8 MMBoe (as reported by the Company in its
Annual Report on
Form 10-K
as of December 31, 2010 (the
2010 Annual
Report
)), Jefferies determined an implied
enterprise value for the Company, then subtracted Indebtedness
and added Cash to determine an implied equity value. Based upon
the approximately 120.5 million Shares that were
outstanding as of June 30, 2011 on a fully diluted basis as
reported in the Brigham
10-Q,
including outstanding
in-the-money
stock options calculated using the treasury stock method and
assuming the Companys closing price as of October 14,
2011 (
Fully Diluted Shares
), this
analysis indicated a range of implied values per Share of
approximately $25.77 to $36.87, compared to the consideration of
$36.50 per Share.
Using a reference range of $200,000 to $300,000 per Boe/d, and
based on the Companys average daily production of
12.2 MBoe for the second quarter of 2011 (as publicly
announced by the Company), Jefferies determined an implied
enterprise value for the Company, then subtracted Indebtedness
and added Cash to determine an implied equity value. Based on
the number of Fully Diluted Shares, this analysis indicated a
range of implied values per Share of approximately $18.29 to
$28.42, compared to the consideration of $36.50 per Share.
Using a reference range of 9.0x to 11.0x the Companys
2011E EBITDA and 5.0x to 7.0x the Companys 2012E EBITDA,
and based on a 2011E EBITDA of $319.0 million and a 2012E
EBITDA of $593.7 million for the Company (in each case, as
projected by management), Jefferies determined an implied
enterprise value for the Company, then subtracted Indebtedness
and added Cash to determine an implied equity value. Based on
the number of Fully Diluted Shares, this analysis indicated a
range of implied values per Share of
24
approximately $21.86 to $27.16 using 2011E EBITDA, $22.66 to
$32.52 using the Companys 2012E EBITDA, compared, in each
case, to the consideration of $36.50 per Share.
None of the Brigham Selected Public Companies utilized in the
selected public company analysis is identical to the Company. In
evaluating the selected public companies that would comprise the
Brigham Selected Public Companies, Jefferies made judgments and
assumptions with regard to industry performance, general
business, economic, market and financial conditions and other
matters, many of which are beyond the Companys and
Jefferies control. Mathematical analysis, such as
determining the mean or median, is not in itself a meaningful
method of using comparable company data.
Selected
Transactions Analysis
Using publicly available and other information, Jefferies
examined the following 17 corporate transactions, which
consisted of domestic exploration and production company
transactions announced since January 1, 2005 with a target
company transaction value greater than $1 billion (the
Brigham Selected Transactions). Transactions
involving corporate reorganizations and companies with
significant non-exploration and production activities were
excluded. The following table sets forth the Brigham Selected
Transactions considered and their respective dates of
announcement:
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Announced Date
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Acquirer
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Target
|
July 2011
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BHP Billiton Limited
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Petrohawk Energy Corporation
|
November 2010
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Chevron Corporation
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Atlas Energy, Inc.
|
June 2010
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SandRidge Energy, Inc.
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Arena Resources, Inc.
|
April 2010
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Apache Corporation
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Mariner Energy, Inc.
|
December 2009
|
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Exxon Mobil Corporation
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XTO Energy Inc.
|
November 2009
|
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Denbury Resources Inc.
|
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Encore Acquisition Company
|
April 2008
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Stone Energy Corporation
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Bois dArc Energy, Inc.
|
July 2007
|
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Plains Exploration & Production Company
|
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Pogo Producing Company
|
January 2007
|
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Forest Oil Corporation
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The Houston Exploration Company
|
June 2006
|
|
Anadarko Petroleum Corporation
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Kerr-McGee Corporation
|
April 2006
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Petrohawk Energy Corporation
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KCS Energy, Inc.
|
January 2006
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Helix Energy Solutions Group, Inc.
|
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Remington Oil and Gas Corporation
|
December 2005
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ConocoPhillips
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Burlington Resources Inc.
|
October 2005
|
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Occidental Petroleum Corporation
|
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Vintage Petroleum, Inc.
|
September 2005
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Norsk Hydro ASA
|
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Spinnaker Exploration Company
|
July 2005
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Chevron Corporation
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Unocal Corporation
|
January 2005
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Cimarex Energy Co.
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Magnum Hunter Resources, Inc.
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Using publicly available financial information and other
information for each of these transactions, Jefferies analyzed
the transaction multiples of the Company and the corresponding
transaction multiples of the target companies in the foregoing
Brigham Selected Transactions. In its analysis, Jefferies
derived and compared multiples for the Company and such target
companies, calculated and referred to as follows:
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the transaction value divided by last twelve months, or LTM,
EBITDA immediately preceding announcement of the transaction,
which is referred to as
Transaction
Value / LTM EBITDA
;
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the transaction value divided by proved reserves, which is
referred to as
Transaction Value / Proved
Reserves
; and
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the transaction value divided by daily production, which is
referred to as
Transaction Value / Daily
Production
.
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25
This analysis indicated the following:
Selected
Transactions Multiples
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Benchmark
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High
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Low
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Mean
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Median
|
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Transaction Value/LTM EBITDA
|
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15.9
|
x
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4.7
|
x
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8.2
|
x
|
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7.2
|
x
|
Transaction Value/Proved Reserves ($/Boe)
|
|
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39.70
|
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|
9.06
|
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20.88
|
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|
20.95
|
|
Transaction Value/Daily Production ($/Boe/d)
|
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|
208,335
|
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42,963
|
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|
90,710
|
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|
82,875
|
|
Using a reference range of 10.0x to 13.0x the Companys LTM
EBITDA, and based on the Companys LTM EBITDA of
$215.3 million, Jefferies determined an implied enterprise
value for the Company, then subtracted Indebtedness and added
Cash to determine an implied equity value. Based on the number
of Fully Diluted Shares, this analysis indicated a range of
implied values per Share of approximately $15.90 to
$21.26, compared to the consideration of $36.50 per Share.
Using a reference range of $20.00 to $30.00 per Boe, and based
on the Companys December 31, 2010 proved reserves
figure of 66.8 MMBoe (as reported by the Company in the
2010 Annual Report), Jefferies determined an implied enterprise
value for the Company, then subtracted Indebtedness and added
Cash to determine an implied equity value. Based on the number
of Fully Diluted Shares, this analysis indicated a range of
implied values per Share of approximately $9.12 to $14.67,
compared to the consideration of $36.50 per Share.
Using a reference range of $175,000 to $225,000 per Boe/d, and
based on the Companys average daily production of
12.2 MBoe for the second quarter of 2011 (as publicly
announced by the Company), Jefferies determined an implied
enterprise value for the Company, then subtracted Indebtedness
and added Cash to determine an implied equity value. Based on
the number of Fully Diluted Shares, this analysis indicated a
range of implied values per Share of approximately $15.76 to
$20.82, compared to the consideration of $36.50 per Share.
No Brigham Selected Transaction utilized as a comparison in the
selected transaction analysis is identical to the Offer and the
Merger. In evaluating the Offer and the Merger, Jefferies made
numerous judgments and assumptions with regard to industry
performance, general business, economic, market, and financial
conditions and other matters, many of which are beyond the
Companys and Jefferies control. Mathematical
analysis, such as determining the median, is not in itself a
meaningful method of using selected transaction data.
Discounted
Cash Flow Analysis
Jefferies performed a discounted cash flow analysis to estimate
the present value of the unlevered free cash flows of the
Company through the fiscal year ending December 31, 2016.
In this analysis, unlevered free cash flow, which is the
Companys projected earnings before interest and taxes, or
EBIT, minus cash taxes, minus its projected capital expenditures
(including capitalized general and administrative costs), minus
the projected changes in net working capital and plus
depreciation and amortization, was calculated using the
forecasts provided to Jefferies by the Company. Using financial
projections provided by the Companys management, discount
rates from 11.8% to 12.8% (based on the 12.3% weighted-average
cost of capital of the Company as derived by Jefferies), and,
for the purpose of calculating the terminal value for the
Company at the end of the forecast period, terminal exit
multiples ranging from 6.0x to 8.0x, Jefferies derived a range
of implied enterprise values for the Company. Jefferies then
subtracted Indebtedness and added Cash to the implied enterprise
value for the Company to determine a range of implied equity
values of the Company. Based on the number of Fully Diluted
Shares, this analysis indicated a range of implied values per
Share of approximately $25.52 to $40.10, compared to the
consideration of $36.50 per Share.
Premiums
Paid Analysis
Using publicly available information, Jefferies analyzed the
premiums offered in the Brigham Selected Transactions.
26
For each of the Brigham Selected Transactions, Jefferies
calculated the premium represented by the offer price or merger
consideration over the target companys closing share price
one trading day, 30 trading days and 60 trading days prior to
the transactions announcement. This analysis indicated the
following premiums for those time periods prior to announcement.
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75% Percentile
|
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25% Percentile
|
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|
Time Period Prior to Announcement
|
|
High
|
|
Premium
|
|
Premium
|
|
Low
|
|
1 trading day
|
|
|
65.0
|
%
|
|
|
34.9
|
%
|
|
|
16.8
|
%
|
|
|
(4.3
|
)%
|
30 trading days
|
|
|
68.1
|
%
|
|
|
46.1
|
%
|
|
|
22.0
|
%
|
|
|
(6.4
|
)%
|
60 trading days
|
|
|
91.5
|
%
|
|
|
49.0
|
%
|
|
|
20.5
|
%
|
|
|
(11.2
|
)%
|
Using a reference range of the 25th percentile to the
75th percentile premiums for each time period listed above,
Jefferies performed a premiums paid analysis using the closing
prices per Share one trading day, 30 trading days and 60 trading
days prior to October 14, 2011.
Applying a one trading day prior premium reference
range of 16.8% to 34.9% to the Companys closing price of
$30.36 on October 14, 2011, which was the date that was one
trading day prior to announcement of the Offer and the Merger,
this analysis indicated a range of implied values per Share of
approximately $35.45 to $40.95, compared to the consideration of
$36.50 per Share.
Applying a 30 trading days prior premium reference
range of 22.0% and 46.1% to the Companys closing price of
$27.92 on September 2, 2011, which was the date that was 30
trading days prior to announcement of the Offer and the Merger,
this analysis indicated a range of implied values per Share of
approximately $34.06 to $40.79, compared to the consideration of
$36.50 per Share.
Applying a 60 trading days prior premium reference
range of 20.5% and 49.0% to the Companys closing price of
$33.58 on July 22, 2011, which was the date that was 60
trading days prior to announcement of the Offer and the Merger,
this analysis indicated a range of implied values per Share of
approximately $40.45 to $50.05, compared to the consideration of
$36.50 per Share.
No Brigham Selected Transaction utilized as a comparison in the
selected premiums paid analysis is identical to the Offer and
the Merger.
General
Jefferies opinion was one of many factors taken into
consideration by the Board in making its determination to
approve the Offer and the Merger and should not be considered
determinative of the views of the Board or management with
respect to the Offer, the Merger or the consideration to be paid
to the holders of the Shares in the Offer or the Merger.
Jefferies was selected by the Board based on Jefferies
qualifications, expertise and reputation. Jefferies is an
internationally recognized investment banking and advisory firm.
Jefferies, as part of its investment banking business, is
regularly engaged in the valuation of businesses and securities
in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements, financial
restructurings and other financial services.
Company
Unaudited Prospective Financial Information
The Company does not as a matter of course make public forecasts
as to future performance, earnings or other results due to,
among other reasons, the uncertainty of the underlying
assumptions and estimates. However, the Company is including
this prospective financial information in this
Schedule 14D-9
to provide its stockholders access to certain non-public
unaudited prospective financial information that was made
available to Parent, the Board and the Companys financial
advisors in connection with the transactions contemplated by the
Merger Agreement. The unaudited prospective financial
information was not prepared with a view toward public
disclosure, and the inclusion of this information should not be
regarded as an indication that any of the Company, its financial
advisors or any other recipient of this information considered,
or now considers, it to be necessarily predictive of actual
future results.
27
While presented with numeric specificity, the unaudited
prospective financial information reflects numerous estimates
and assumptions with respect to matters such as industry
performance and competition, general business, economic, market
and financial conditions, commodity prices, demand for natural
gas and oil, production growth, capacity utilization and
additional matters specific to the Companys business, all
of which are difficult to predict and many of which are beyond
the Companys control. The unaudited prospective financial
information was, in general, prepared solely for internal use
and is subjective in many respects. As a result, there can be no
assurance that the prospective results will be realized or that
actual results will not be significantly higher or lower than
estimated. Since the unaudited prospective financial information
covers multiple years, such information by its nature becomes
less predictive with each successive year. The Companys
stockholders are urged to review the Companys most recent
SEC filings for a description of risk factors with respect to
its business. See also Item 8 below under the heading
Forward-Looking Statements. The unaudited
prospective financial information was not prepared with a view
toward complying with GAAP, the published guidelines of the SEC
regarding projections or the guidelines established by the
American Institute of Certified Public Accountants for
preparation and presentation of prospective financial
information. Neither the Companys independent registered
public accounting firm, nor any other independent accountants,
have compiled, examined, or performed any procedures with
respect to the unaudited prospective financial information
contained herein, nor have they expressed any opinion or any
other form of assurance on such information or its
achievability. The report of the Companys independent
registered public accounting firm contained in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2010 relates to the
Companys historical financial information. It does not
extend to the unaudited prospective financial information and
should not be read to do so. Furthermore, the unaudited
prospective financial information does not take into account any
circumstances or events occurring after the date it was prepared.
The following table presents selected unaudited prospective
financial data for the fiscal years ending 2011 through 2016,
with the Company reaching 16 operated rigs in the Williston
Basin by 2012. This is the information that Jefferies used in
the financial analyses for its fairness opinion, except that
Jefferies updated the commodity price assumption to use
October 14, 2011 prices.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ending December 31,
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
Production (MBoe)
|
|
|
5,330
|
|
|
|
9,623
|
|
|
|
15,469
|
|
|
|
17,456
|
|
|
|
19,586
|
|
|
|
21,605
|
|
Benchmark Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas NYMEX ($/Mmbtu)
|
|
$
|
4.08
|
|
|
$
|
4.20
|
|
|
$
|
4.72
|
|
|
$
|
5.02
|
|
|
$
|
5.26
|
|
|
$
|
5.48
|
|
Crude Oil NYMEX ($/Bbl)
|
|
$
|
92.97
|
|
|
$
|
87.62
|
|
|
$
|
88.72
|
|
|
$
|
89.21
|
|
|
$
|
89.90
|
|
|
$
|
90.64
|
|
EBITDA ($ in millions)(1)
|
|
$
|
319.0
|
|
|
$
|
593.7
|
|
|
$
|
1,006.5
|
|
|
$
|
1,144.4
|
|
|
$
|
1,294.1
|
|
|
$
|
1,422.3
|
|
Capital Expenditures ($ in millions)
|
|
|
|
|
|
$
|
1,246.8
|
|
|
$
|
1,223.5
|
|
|
$
|
1,157.7
|
|
|
$
|
1,130.4
|
|
|
$
|
1,130.4
|
|
Unlevered Free Cash Flow
($ in millions)(1)
|
|
|
|
|
|
$
|
(713.7
|
)
|
|
$
|
(338.3
|
)
|
|
$
|
(33.3
|
)
|
|
$
|
111.3
|
|
|
$
|
245.1
|
|
|
|
|
(1)
|
|
EBITDA and Unlevered Free Cash Flow are non-GAAP measures and
are used by the Companys management to measure the
operating performance of the business. The Company defines
EBITDA as earnings before interest expense, income tax expense
(benefit), and depletion, depreciation and amortization. The
Company defines Unlevered Free Cash Flow as EBITDA less changes
in working capital and capital expenditures.
|
28
The following table presents a reconciliation of EBITDA to net
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ending December 31,
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
(In millions)
|
|
|
Net income
|
|
$
|
170.5
|
|
|
|
205.6
|
|
|
$
|
355.9
|
|
|
$
|
397.3
|
|
|
$
|
456.5
|
|
|
$
|
508.8
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depletion of oil and gas properties
|
|
$
|
110.1
|
|
|
$
|
202.1
|
|
|
$
|
324.8
|
|
|
$
|
366.6
|
|
|
$
|
411.3
|
|
|
$
|
453.7
|
|
Depreciation and amortization
|
|
|
5.5
|
|
|
|
6.5
|
|
|
|
6.5
|
|
|
|
6.5
|
|
|
|
6.5
|
|
|
|
6.5
|
|
Asset retirement obligation accretion
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
Interest Expense
|
|
|
25.4
|
|
|
|
48.7
|
|
|
|
78.6
|
|
|
|
90.7
|
|
|
|
94.4
|
|
|
|
90.7
|
|
Interest (Income)
|
|
|
(1.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes, deferred
|
|
|
14.1
|
|
|
|
130.3
|
|
|
|
240.2
|
|
|
|
282.8
|
|
|
|
324.9
|
|
|
|
362.1
|
|
Other Income (Expenses)
|
|
|
(5.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
319.0
|
|
|
$
|
593.7
|
|
|
$
|
1,006.5
|
|
|
$
|
1,144.4
|
|
|
$
|
1,294.1
|
|
|
$
|
1,422.3
|
|
The following table presents a reconciliation of Unlevered Free
Cash Flow to net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ending December 31,
|
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
(In millions)
|
|
|
Net Income
|
|
$
|
205.6
|
|
|
$
|
355.9
|
|
|
$
|
397.3
|
|
|
$
|
456.5
|
|
|
$
|
508.8
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depletion of oil and gas properties
|
|
|
202.1
|
|
|
|
324.8
|
|
|
|
366.6
|
|
|
|
411.3
|
|
|
|
453.7
|
|
Depreciation and amortization
|
|
|
6.5
|
|
|
|
6.5
|
|
|
|
6.5
|
|
|
|
6.5
|
|
|
|
6.5
|
|
Asset retirement obligation accretion
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
Interest Expense
|
|
|
48.7
|
|
|
|
78.6
|
|
|
|
90.7
|
|
|
|
94.4
|
|
|
|
90.7
|
|
Interest (Income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes, deferred
|
|
|
130.3
|
|
|
|
240.2
|
|
|
|
282.8
|
|
|
|
324.9
|
|
|
|
362.1
|
|
Other Income (Expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
593.7
|
|
|
$
|
1,006.5
|
|
|
$
|
1,144.4
|
|
|
$
|
1,294.1
|
|
|
$
|
1,422.3
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Working Capital
|
|
$
|
60.6
|
|
|
$
|
121.4
|
|
|
$
|
20.0
|
|
|
$
|
52.6
|
|
|
$
|
46.9
|
|
Capital Expenditures
|
|
|
1,246.8
|
|
|
|
1,223.5
|
|
|
|
1,157.7
|
|
|
|
1,130.4
|
|
|
|
1,130.4
|
|
Unlevered Free Cash Flow
|
|
$
|
(713.7
|
)
|
|
$
|
(338.3
|
)
|
|
$
|
(33.3
|
)
|
|
$
|
111.3
|
|
|
$
|
245.1
|
|
Readers of this
Schedule 14D-9
are cautioned not to place undue reliance on the unaudited
prospective financial information set forth above. No
representation is made by the Company or any other person to any
stockholder of the Company regarding the ultimate performance of
the Company compared to the information included in the above
unaudited prospective financial information. The inclusion of
unaudited prospective financial information in this
Schedule 14D-9
should not be regarded as an indication that such prospective
financial information will be an accurate prediction of future
events, and they should not be relied on as such.
THE COMPANY DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE
ABOVE PROSPECTIVE FINANCIAL INFORMATION TO REFLECT CIRCUMSTANCES
EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE
OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE
ASSUMPTIONS UNDERLYING SUCH PROSPECTIVE FINANCIAL INFORMATION
ARE NO LONGER APPROPRIATE.
|
|
Item 5.
|
Persons/Assets
Retained, Employed, Compensated or Used
|
Pursuant to an agreement dated July 5, 2011, the Company
has engaged Jefferies to act as financial advisor to the Company
in connection with the transactions contemplated by the Merger
Agreement and has
29
agreed to pay Jefferies an opinion fee of $3 million, which
was earned upon delivery of Jefferies opinion, and a
transaction fee of approximately $21 million for its
services, which will be payable upon the consummation of the
Offer. The Company has agreed to reimburse Jefferies for
expenses incurred. The Company has also agreed to indemnify
Jefferies against liabilities arising out of or in connection
with the services rendered and to be rendered by Jefferies under
such engagement. Jefferies has, in the past, provided financial
advisory and financing services to both the Company and Parent,
including providing financial advisory services and advice to
Parent in connection with dispositions and acquisitions of
assets, and may continue to do so and has received, and may
receive, fees for the rendering of such services. In October
2010, Jefferies provided advice to Parent with respect its sale
of certain assets, and Parent paid Jefferies a fee of
approximately $23.4 million in connection with the closing
of that transaction in April 2011.
Jefferies maintains a market in the securities of the Company
(but not Parent), and in the ordinary course of its business,
Jefferies and its affiliates may trade or hold securities of the
Company or Parent
and/or
their
respective affiliates for Jefferies own account and for
the accounts of its customers and, accordingly, may at any time
hold long or short positions in those securities. In addition,
Jefferies may seek to, in the future, provide financial advisory
and financing services to the Company, Parent or entities that
are affiliated with the Company or Parent, for which Jefferies
would expect to receive compensation.
Neither the Company nor any person acting on its behalf has or
currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the
Company on its behalf with respect to the Offer or the Merger.
|
|
Item 6.
|
Interest
in Securities of the Subject Company
|
Other than transfers of Options without consideration by one of
the persons listed in the table below to certain family trusts,
no transactions with respect to the Shares have been effected
during the past 60 days by the Company or, to the
Companys knowledge, by any of its executive officers,
directors, affiliates or subsidiaries, except for the following
transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of
|
|
Number
|
|
|
Price
|
|
|
Nature of
|
Identity of Person
|
|
Transaction
|
|
of Shares
|
|
|
Per Share
|
|
|
Transaction
|
|
Jeffery E. Larson
|
|
September 10, 2011
|
|
|
1,323
|
|
|
$
|
28.45
|
|
|
Disposition of Shares to satisfy tax withholding obligation upon
vesting of Restricted Shares
|
Eugene B. Shepherd, Jr.
|
|
September 10, 2011
|
|
|
1,323
|
|
|
$
|
28.45
|
|
|
Disposition of Shares to satisfy tax withholding obligation upon
vesting of Restricted Shares
|
|
|
Item 7.
|
Purposes
of the Transaction and Plans or Proposals
|
Except as indicated in this
Schedule 14D-9,
the Company is not undertaking or engaged in any negotiations in
response to the Offer that relate to, or would result in:
(i) a tender offer for, or other acquisition of, the
Companys securities by the Company, any of the
Companys subsidiaries or any other person; (ii) any
extraordinary transaction such as a merger, reorganization or
liquidation, involving the Company or any of the Companys
subsidiaries; (iii) any purchase, sale or transfer of a
material amount of assets of the Company or any of the
Companys subsidiaries; or (iv) any material change in
the present dividend policy, or indebtedness or capitalization
of the Company.
Except as set forth in this
Schedule 14D-9
or as incorporated into this
Schedule 14D-9
by reference, there are no transactions, board resolutions,
agreements in principle or signed contracts that were entered
into in response to the Offer that relate to, or would result
in, one or more of the events referred to in the preceding
paragraph.
30
|
|
Item 8.
|
Additional
Information
|
Information
Regarding Golden Parachute Compensation
Background
In this
Schedule 14D-9,
the Company is required to disclose any agreement or
understanding, whether written or unwritten, between the Named
Executive Officers and the Company or Parent concerning any type
of compensation, whether present, deferred or contingent, that
is based upon or otherwise relates to the Offer. As used in this
Schedule 14D-9,
Named Executive Officers
has the
meaning given to that term in the rules of the SEC that require
the Company to make certain disclosures regarding executive
compensation and other matters in filings it makes with the SEC.
The Companys current Named Executive Officers are Ben M.
(Bud) Brigham, Chief Executive Officer, President and Chairman
of the Board; Eugene B. Shepherd, Jr., Executive Vice
President and Chief Financial Officer; David T. Brigham,
Executive Vice President Land and Administration;
Jeffery E. Larson, Executive Vice President
Exploration; and A. Lance Langford, Executive Vice
President Operations. The Company has entered into
Employment and Consulting Agreements with Messrs. Bud
Brigham, David Brigham and Shepherd, which are described in
Item 3 above under the heading Arrangements between
the Company and its Executive Officers, Directors and
Affiliates Employment and Consulting
Agreements, which information is incorporated by reference
herein.
Aggregate
Amounts of Potential Compensation
To provide meaningful information about the potential payments
and benefits the Named Executive Officers could receive related
to the consummation of the Offer, the table below summarizes
potential payments and benefits that the Named Executive
Officers would be entitled to receive if the Acceptance Time
occurs. Occurrence of the Acceptance Time will constitute a
change of control of the Company for purposes of all of the
agreements and benefits described below. Please note that the
amounts indicated below are estimates based on multiple
assumptions that may or may not actually occur, including
assumptions described herein. Some of these assumptions are
based on information currently available and, as a result, the
actual amounts, if any, to be received by a Named Executive
Officer may differ in material respects from the amounts set
forth below. Furthermore, for purposes of calculating such
amounts, we have assumed an Acceptance Time of December 1,
2011, including with respect to calculating the portion of
equity awards subject to acceleration of vesting (assuming
continued vesting of the equity and assuming that all unvested
Options and unvested Restricted Shares are outstanding on such
date).
Golden
Parachute Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perquisites/
|
|
|
Tax
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
Equity
|
|
|
Pension/
|
|
|
Benefits
|
|
|
Reimbursement
|
|
|
Other
|
|
|
Total
|
|
Name
|
|
($)(1)(2)(3)
|
|
|
($)(4)
|
|
|
NQDC
|
|
|
($)(5)(6)
|
|
|
($)
|
|
|
($)(7)
|
|
|
($)(8)
|
|
|
Ben M. Brigham
|
|
|
3,843,997
|
|
|
|
12,179,521
|
|
|
|
N/A
|
|
|
|
173,824
|
|
|
|
|
|
|
|
266,242
|
|
|
|
16,463,584
|
|
Eugene B. Shepherd, Jr.
|
|
|
2,340,862
|
|
|
|
10,489,912
|
|
|
|
N/A
|
|
|
|
25,964
|
|
|
|
|
|
|
|
233,388
|
|
|
|
13,090,126
|
|
David T. Brigham
|
|
|
2,057,157
|
|
|
|
9,683,832
|
|
|
|
N/A
|
|
|
|
25,964
|
|
|
|
|
|
|
|
227,639
|
|
|
|
11,994,591
|
|
Jeffery E. Larson
|
|
|
1,181,917
|
|
|
|
8,394,861
|
|
|
|
N/A
|
|
|
|
29,182
|
|
|
|
|
|
|
|
|
|
|
|
9,605,960
|
|
A. Lance Langford
|
|
|
1,219,309
|
|
|
|
9,306,889
|
|
|
|
N/A
|
|
|
|
27,896
|
|
|
|
|
|
|
|
|
|
|
|
10,554,093
|
|
|
|
|
(1)
|
|
Under Bud Brighams Consulting Agreement, within three
business days after termination of his employment (which will
occur on the earlier of 60 days after the Acceptance Time,
the date the Company notifies him his employment is terminated,
or his death), the Company will pay him (i) a 2011 bonus
equivalent to 80% of his base annual salary, which bonus is
expected to be $420,000, and (ii) a retention bonus of
$650,000. These payments are double trigger payments and will
not be due until termination of employment; however, as
described above, the Consulting Agreements provide that a
termination of employment will occur no later than 60 days
after the Acceptance Time, which will entitle Bud Brigham to
receive the amounts described in this paragraph. In addition,
under Bud Brighams Employment Agreement, within thirty
days after termination of his employment by him for Good Reason
or by the Company other than
|
31
|
|
|
|
|
upon his death or disability or for Cause (as those capitalized
terms are defined in the Employment Agreement), the Company will
pay him a cash severance payment equal to (A) the amount of
his annual base salary that he would have received during the
remainder of his employment term under the Employment Agreement,
plus (B) an amount equal to the average annual bonus
received by him during the immediately preceding two years,
multiplied by the number of years (with portions of a year
expressed as a fraction) in the remainder of his employment
term. The amount of the cash severance payment is estimated to
be $2,773,997, which was calculated assuming a base salary of
$525,000, average annual bonus of $319,701, and termination of
employment on January 30, 2012, on which date there will be
3.284 years remaining in the employment term under his
Employment Agreement. The cash severance payment under Bud
Brighams Employment Agreement is payable if his employment
is terminated by him for Good Reason or by the Company other
than upon his death or disability or for Cause (as those
capitalized terms are defined in the Employment Agreement),
whether or not a change of control has occurred.
|
|
(2)
|
|
Under each of Mr. Shepherds and David Brighams
Consulting Agreements, within three business days after
termination of his employment (which will occur on the earlier
of 60 days after the Acceptance Time, the date the Company
notifies him his employment is terminated, or his death), the
Company will pay him (i) a 2011 bonus equivalent to 80% of
his base annual salary, which bonus is expected to be $260,000
for Mr. Shepherd and $232,000 for David Brigham, and
(ii) a retention bonus of $650,000 for Mr. Shepherd
and $575,000 for David Brigham. In addition, under each of
Mr. Shepherds and David Brighams existing
Change of Control Agreements, if his employment is terminated by
the Company other than for Cause or by him for Good Reason
within two years after the occurrence of a Change of Control (as
those capitalized terms are defined in the existing Change of
Control Agreements), and provided he executes a general release
in favor of the Company, then on the sixtieth day after
termination of his employment the Company will pay him a cash
severance payment equal to two times the greater of (A) his
annual base salary as of the Change of Control and any bonuses
or special incentive payments received in the
12-month
period prior to the Change of Control and (B) his annual
base salary, as of the date of his termination of employment and
any bonuses or special incentive payments received in the
12-month
period prior to the date of termination. For Mr. Shepherd,
the amount of the cash severance payment is estimated to be
$1,430,862, which was calculated assuming a base salary of
$325,000 and bonus payments of $390,431. For David Brigham, the
amount of the cash severance payment is estimated to be
$1,250,157, which was calculated assuming a base salary of
$290,000 and bonus payments of $335,078. These payments are
double trigger payments and will not be due until termination of
employment; however, as described above, the Consulting
Agreements provide that a termination of employment will occur
no later than 60 days after the Acceptance Time, which will
entitle Mr. Shepherd and David Brigham to receive the
amounts described in this paragraph.
|
|
(3)
|
|
Under each of Mr. Larsons and
Mr. Langfords existing Change of Control Agreements,
if his employment is terminated by the Company other than for
Cause or by him for Good Reason within two years after the
occurrence of a Change of Control (as those capitalized terms
are defined in the existing Change of Control Agreements), and
provided he executes a general release in favor of the Company,
then on the sixtieth day after termination of his employment the
Company will pay him a cash severance payment equal to two times
the greater of (A) his annual base salary as of the Change
of Control and any bonuses or special incentive payments
received in the
12-month
period prior to the Change of Control and (B) his annual
base salary, as of the date of his termination of employment and
any bonuses or special incentive payments received in the
12-month
period prior to the date of termination. For Mr. Larson,
the amount of the cash severance payment is estimated to be
$1,181,917, which was calculated assuming a base salary of
$275,000 and bonus payments of $315,958. For Mr. Langford,
the amount of the cash severance payment is estimated to be
$1,219,309, which was calculated assuming a base salary of
$285,000 and bonus payments of $324,654. These payments are
double trigger payments and will not be due unless his
employment is terminated as described above following the
Acceptance Time. These calculations assume that the employment
of each of Mr. Larson and Mr. Langford will terminate
immediately following the Acceptance Time.
|
|
(4)
|
|
Immediately prior to the Acceptance Time, all of the outstanding
unvested Options and Restricted Shares will become fully vested.
Amounts shown in this column consist of the sum of the amounts
shown in the
|
32
|
|
|
|
|
table below, which represent (i) with respect to unvested
Options, the cash to be received at the Effective Time by the
Named Executive Officers due to the accelerated vesting and
cancellation of unvested Options, based on a share price of
$36.50 and assuming that there is no incremental vesting of any
Options between the date hereof and the Acceptance Time and
assuming the Options are not otherwise exercised prior to the
Effective Time, and (ii) with respect to unvested
Restricted Shares, the cash to be received either at the
Acceptance Time (if the Restricted Shares are tendered in the
Offer) or at the Effective Time by the Named Executive Officers
due to the accelerated vesting and subsequent purchase in the
Offer or cancellation in the Merger of Restricted Shares, based
on a share price of $36.50 and assuming that there is no
incremental vesting of any Restricted Shares between the date
hereof and the Acceptance Time. These payments are single
trigger payments and do not require termination of a Named
Executive Officers employment before payment of these
amounts can occur.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
|
|
Options
|
|
|
Shares
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
Ben M. Brigham
|
|
|
10,182,460
|
|
|
|
1,997,061
|
|
Eugene B. Shepherd, Jr.
|
|
|
8,899,570
|
|
|
|
1,590,342
|
|
David T. Brigham
|
|
|
8,166,490
|
|
|
|
1,517,342
|
|
Jeffery E. Larson
|
|
|
6,908,800
|
|
|
|
1,486,061
|
|
A. Lance Langford
|
|
|
7,799,950
|
|
|
|
1,506,939
|
|
|
|
|
(5)
|
|
For Bud Brigham, the amount shown consists of continuation of
life insurance benefits and health benefits as provided in his
Employment Agreement. Under Bud Brighams Employment
Agreement, if his employment is terminated by him for Good
Reason or by the Company other than upon his death or disability
or for Cause (as those capitalized terms are defined in the
Employment Agreement), and whether or not a change of control
has occurred, the Company must (i) continue to provide him
with life insurance coverage for a period of twenty years
following termination of employment, which benefit is valued at
$145,929, and (ii) permit him to continue his participation
in medical and dental benefit plans maintained by the Company on
the same terms and at the same cost as similarly-situated
current employees, provided that such coverage is either
nontaxable to him or otherwise exempt from Code
Section 409A. The amounts shown were calculated assuming
that Bud Brigham will continue receiving medical and dental
insurance benefits for eighteen months after termination of his
employment.
|
|
(6)
|
|
For the Named Executive Officers other than Bud Brigham, the
amount shown consists of continuation of health benefits as
provided in their respective Change of Control Agreements. Under
each Change of Control Agreement, if the employees
employment is terminated by the Company other than for Cause or
by him for Good Reason within two years after the occurrence of
a Change of Control (as those capitalized terms are defined in
the existing Change of Control Agreements), and provided he
executes a general release in favor of the Company, the Company
must permit him to continue his participation in medical and
dental benefit plans maintained by the Company until he obtains
other employment on the same terms and at the same cost as
similarly-situated current employees, provided that such
coverage is either nontaxable to him or otherwise exempt from
Code Section 409A. The amounts shown were calculated
assuming that each of Mr. Shepherd, David Brigham,
Mr. Larson and Mr. Langford will continue receiving
medical and dental insurance benefits for eighteen months after
termination of employment. The benefits described in this
paragraph are double trigger benefits and will not be due until
termination of employment; however, as described above, the
Consulting Agreements provide that a termination of employment
will occur for Mr. Shepherd and David Brigham no later than
60 days after the Acceptance Time, which will entitle
Mr. Shepherd and David Brigham to receive the benefits
described in this paragraph.
|
|
(7)
|
|
This column shows the potential compensation that could be paid
to Bud Brigham, Mr. Shepherd, and David Brigham under their
respective Consulting Agreements with the Company. Under those
agreements, the Company agreed to continue to pay to each of
them (i) during the period from the Acceptance Time through
termination of employment, which period could be as long as
60 days, base salary at a rate no less than the rate in
effect as of immediately prior to the Acceptance Time,
(ii) a consulting fee of $90,000 for services performed
during the 90 days following termination of employment, and
(iii) an additional
|
33
|
|
|
|
|
$90,000 if the Company elects to extend the term for an
additional
90-day
period. The base salary that could be earned during the
60 days following the Acceptance Time assuming continued
employment was calculated assuming that the Company maintains
the current annual base salary rates of $525,000 for Bud
Brigham, $325,000 for Mr. Shepherd, and $290,000 for David
Brigham. The payments described in clause (i) of this
paragraph are single trigger payments and do not require a
termination of a Named Executive Officers employment
before payment of these amounts can occur. The payments
described in clauses (ii) and (iii) of this paragraph
are double trigger payments and will only be payable if there is
a termination of a Named Executive Officers employment
following the Acceptance Time.
|
|
(8)
|
|
The amounts in this column represent the total of all
compensation described in the other columns. For
Mr. Brigham, $2,947,821 is due upon termination of
employment whether or not a change of control has occurred,
$12,265,763 are single trigger payments that will be due
following a change of control whether or not his employment is
terminated, and $1,250,000 are double trigger payments that will
be due only if his employment is terminated following a change
of control. For the other Named Executive Officers, the single
trigger and double trigger components of the total compensation
amounts are as follows: (i) Mr. Shepherd
$10,543,300 and $2,546,826; (ii) David Brigham
$9,731,470 and $2,263,121;
(iii) Mr. Larson $8,394,861 and
$1,211,099; and (iv) Mr. Langford
$9,306,889 and $1,247,204.
|
Appraisal
Rights
No appraisal rights are available to the holders of Shares in
connection with the Offer. However, if the Merger is
consummated, each holder of Shares (that did not tender such
Shares in the Offer) at the Effective Time who has neither voted
in favor of the Merger nor consented to the Merger in writing,
and who otherwise complies with the applicable statutory
procedures under Section 262 of the DGCL, will be entitled
to receive a judicial determination of the fair value of such
holders Shares (exclusive of any element of value arising
from the accomplishment or expectation of the Merger) and to
receive payment of such judicially determined amount in cash,
together with such rate of interest, if any, as the Delaware
court may determine for Shares held by such holder (which,
unless the court determines otherwise for good cause shown,
shall be compounded quarterly and shall accrue at 5% over the
Federal Reserve discount rate (including any surcharge) as
established from time to time during the period between the
Effective Time and the date of payment of the judgment). Any
such judicial determination of the fair value of any Shares
could be based upon considerations other than, or in addition
to, the Offer Price and the market value of such Shares. The
value so determined could be higher or lower than, or the same
as, the Offer Price or the consideration paid in the Merger
(which is equivalent in amount to the Offer Price). In the event
that any holder of Shares who demands appraisal under
Section 262 of the DGCL fails to perfect, or effectively
withdraws or loses his rights to appraisal as provided in the
DGCL, the Shares of such stockholder will be converted into the
right to receive the merger consideration which is equal to the
Offer Price. Failure to follow the steps required by
Section 262 of the DGCL for perfecting appraisal rights
will result in the loss of such rights.
The foregoing summary of the appraisal rights of stockholders
under the DGCL does not purport to be a statement of the
procedures to be followed by stockholders desiring to exercise
any appraisal rights in accordance with Delaware law. The
preservation and exercise of appraisal rights require strict and
timely adherence to the applicable provisions of Delaware law,
which will be set forth in their entirety in the proxy statement
or information statement disseminated in connection with the
Merger, unless effected as a short-form merger, in
which case they will be set forth in a notice of merger to be
sent to the Companys stockholders. The foregoing
discussion is not a complete statement of law pertaining to
appraisal rights in accordance with Delaware law and is
qualified in its entirety by reference to Delaware law.
Each of Parent, Purchaser and the Company has acknowledged and
agreed in the Merger Agreement that in any appraisal proceeding
under Section 262 of the DGCL with respect to any Shares
for which the holder has demanded such an appraisal, and to the
fullest extent permitted by applicable law, the Surviving
Corporation shall not assert that the
Top-Up
Option (as defined below), the Shares issued pursuant to the
Top-Up
Option (the
Top-Up
Option Shares
) or any cash or promissory note
delivered by Purchaser to the Company as payment for any
Top-Up
Option Shares should be considered in connection with the
determination of the fair value of the Shares in such appraisal
proceeding in accordance with Section 262 of the DGCL.
34
Anti-Takeover
Statute
As a Delaware corporation with a class of voting stock listed on
a national securities exchange, the Company is subject to
Section 203 of the DGCL
(Section 203)
. In general,
Section 203 would prevent an interested
stockholder (generally defined as a person beneficially
owning 15% or more of a corporations voting stock) from
engaging in a business combination (as defined in
Section 203) with a Delaware corporation for three
years following the time such person became an interested
stockholder unless: (i) before such person became an
interested stockholder, the board of directors of the
corporation approved the transaction in which the interested
stockholder became an interested stockholder or approved the
business combination, (ii) upon consummation of the
transaction which resulted in the interested stockholder
becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding for
purposes of determining the number of shares outstanding any
shares held by directors who are also officers and by employee
stock plans that do not allow plan participants to determine
confidentially whether to tender shares), or (iii) at or
subsequent to the time such person became an interested
stockholder, the business combination is (x) approved by
the board of directors of the corporation and
(y) authorized at a meeting of stockholders by the
affirmative vote of the holders of at least 66
2
/3% of
the outstanding voting stock of the corporation not owned by the
interested stockholder. These restrictions will not be
applicable to Purchaser and Parent because the Board has
approved the Merger Agreement, the Offer, the Merger and the
other transactions contemplated thereby, including for the
purposes of Section 203.
Antitrust
Laws
Under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the
HSR Act
), and the rules that have been
promulgated thereunder by the Federal Trade Commission (the
FTC
), certain acquisition transactions
may not be consummated unless each of the Company and Parent
file Notification and Report Forms and certain other information
with the Antitrust Division of the Department of Justice (the
Antitrust Division
) and the FTC and
certain waiting period requirements have been satisfied. The
initial waiting period for a cash tender offer is 15 days,
but this period may be shortened if the reviewing agency grants
early termination of the waiting period, or it may
be lengthened if the parties decide to voluntarily withdraw and
re-file to allow a second
15-day
waiting period, or the reviewing agency issues a formal request
for additional information and documentary material (a
Second Request
). The HSR Act waiting
period would be further extended until 10 days following
compliance by Parent with the Second Request. The purchase of
Shares pursuant to the Offer is subject to such requirements.
The Antitrust Division and the FTC scrutinize the legality under
the antitrust laws of transactions such as the acquisition of
Shares by Purchaser pursuant to the Offer. At any time before or
after the consummation of any such transactions, the Antitrust
Division or the FTC could take such action under the antitrust
laws of the United States as it deems necessary or desirable in
the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking divestiture of the
Shares so acquired or divestiture of substantial assets of
Parent or the Company. Private parties (including the Attorney
General of individual States of the United States) may also
bring legal actions under the antitrust laws of the United
States. The Company does not believe that the consummation of
the Offer will result in a violation of any applicable antitrust
laws. However, there can be no assurance that a challenge to the
Offer on antitrust grounds will not be made, or if such a
challenge is made, what the result would be.
Each of the Company and Parent expect to file on
October 28, 2011 a Premerger Notification and Report Form
with the FTC and the Antitrust Division for review in connection
with the Offer. In the absence of the grant of early
termination of the waiting period or the issuance of a
Second Request, the waiting period would then expire at
11:59 p.m. New York City time, on November 14, 2011.
The Company is not aware of any other filings, approvals or
other actions by or with any governmental authority or
administrative or regulatory agency that would be required for
Parents or Purchasers acquisition or ownership of
the Shares, other than the foregoing filings under the HSR Act.
35
Litigation
On October 17, 2011, a putative class action lawsuit was
filed in the District Court in Travis County, Texas purportedly
on behalf of a class of stockholders of the Company, docketed as
Boytim v. Brigham Exploration Company et al., Case
No. D-1-GN-11-003205
(the
Boytim Complaint
). The Boytim
Complaint names as defendants the Company, members of the
Companys Board of Directors and Parent. The Boytim
Complaint seeks certification of a class of the Companys
stockholders and alleges, inter alia, that the members of the
Companys Board of Directors breached fiduciary duties owed
to the Companys stockholders by failing to engage in an
appropriate sales process in connection with the proposed
transaction with Parent and Purchaser and that Purchaser aided
and abetted the alleged breach of fiduciary duties. The Boytim
Complaint seeks, among other relief, an injunction prohibiting
the transactions contemplated by the Merger Agreement,
rescission in the event such transactions are consummated, and
attorneys fees and costs of the action.
On October 18, 2011, a putative class action lawsuit was
filed in the District Court in Travis County, Texas purportedly
on behalf of a class of stockholders of the Company, docketed as
Duncan v. Brigham Exploration Company et al., Case
No. D-1-GN-11-003215
(the
Duncan Complaint
). The Duncan
Complaint names as defendants the Company, members of the
Companys Board of Directors and Parent. The Duncan
Complaint seeks certification of a class of the Companys
stockholders and alleges, inter alia, that the members of the
Companys Board of Directors breached fiduciary duties owed
to the Companys stockholders by failing to engage in an
appropriate sales process in connection with the proposed
transaction with Parent and Purchaser, that the Companys
Board of Directors inappropriately agreed to certain deal
protection devices in the Merger Agreement and that Purchaser
aided and abetted the alleged breach of fiduciary duties. The
Duncan Complaint seeks, among other relief, an injunction
prohibiting the transactions contemplated by the Merger
Agreement, rescission in the event such transactions are
consummated, and costs and disbursements of the action,
including attorneys fees and experts fees.
On October 19, 2011, a putative class action lawsuit was
filed in the District Court in Travis County, Texas purportedly
on behalf of a class of stockholders of the Company, docketed as
Giske v. Brigham Exploration Company et al., Case
No. D-1-GN-11-003227
(the
Giske Complaint
). The Giske
Complaint names as defendants the Company, members of the
Companys Board of Directors, Parent and Purchaser. The
Giske Complaint seeks certification of a class of the
Companys stockholders and alleges, inter alia, that the
members of the Companys Board of Directors breached
fiduciary duties owed to the Companys stockholders by
failing to engage in an appropriate sales process in connection
with the proposed transaction with Parent and Purchaser, that
the Companys Board of Directors inappropriately agreed to
certain deal protection devices in the Merger Agreement and that
Purchaser and Parent aided and abetted the alleged breach of
fiduciary duties. The Giske Complaint seeks, among other relief,
an injunction prohibiting the transactions contemplated by the
Merger Agreement, rescission in the event such transactions are
consummated, the imposition of a constructive trust in favor of
the plaintiff and the members of the proposed class action upon
any benefits improperly received by defendants as a result of
their alleged wrongful conduct, and costs and disbursements of
the action, including attorneys fees and experts
fees.
On October 20, 2011, and October 21, 2011,
respectively, two putative class action lawsuits were filed in
the Chancery Court in Delaware purportedly on behalf of a class
of stockholders of the Company, the first docketed as
Weisberg v. Brigham Exploration Company et al., Case
No. 6957 (the
Weisberg
Complaint
), and the second docketed as
Fioravanti v. Brigham Exploration Company et al., Case
No. 6962 (the
Delaware Fioravanti
Complaint
). The Weisberg Complaint and the
Delaware Fioravanti Complaint both name as defendants the
Company, members of the Companys Board of Directors and
Parent. Both the Weisberg Complaint and Delaware Fioravanti
Complaint seek certification of a class of the Companys
stockholders and allege, inter alia, that the members of the
Companys Board of Directors breached fiduciary duties owed
to the Companys stockholders by failing to engage in an
appropriate sales process in connection with the proposed
transaction with Parent and Purchaser, that the Companys
Board of Directors inappropriately agreed to certain deal
protection devices in the Merger Agreement and that Purchaser
aided and abetted the alleged breach of fiduciary duties. Both
the Weisberg Complaint and the Delaware Fioravanti Complaint
seek, among other relief, an injunction prohibiting the
transactions contemplated by the Merger Agreement, the
imposition of a
36
constructive trust in favor of the plaintiffs and the members of
the proposed class actions upon any benefits improperly received
by defendants as a result of their alleged wrongful conduct, and
costs and disbursements of the action, including reasonable
attorneys fees and experts fees.
On October 24, 2011, a putative class action lawsuit was
filed in District Court in Travis County, Texas purportedly on
behalf of a class of stockholders of the Company, docketed as
Fioravanti v. Brigham Exploration Company et al., Case
No. D-1-GN-11-003258
(the
Texas Fioravanti Complaint
). The
Texas Fioravanti Complaint names as defendants the Company,
members of the Companys Board of Directors and Parent. The
Texas Fioravanti Complaint seeks certification of a class of the
Companys stockholders and alleges, inter alia, that the
members of the Companys Board of Directors breached
fiduciary duties owed to the Companys stockholders by
failing to engage in an appropriate sales process in connection
with the proposed transaction with Parent and Purchaser, that
the Companys Board of Directors inappropriately agreed to
certain deal protection devices in the Merger Agreement and that
Purchaser aided and abetted the alleged breach of fiduciary
duties. The Texas Fioravanti Complaint seeks, among other
relief, an injunction prohibiting the transactions contemplated
by the Merger Agreement, a reversal of any aspect of the Merger
Agreement that has been performed, and costs and disbursements
of the action, including reasonable attorneys fees and
experts fees.
On October 25, 2011, two putative class action lawsuits
were filed in the Chancery Court in Delaware, purportedly on
behalf of a class of stockholders of the Company, the first
docketed as Teamsters Allied Benefit Funds v. Brigham
Exploration Company et al., Case No. 6975 (the
Teamsters Complaint
), and the second
docketed as The Edward J. Goodman Life Income Trust and The
Edward J. Goodman Generation Skipping Trust v. Brigham
Exploration Company et al., Case No. 6969 (the
Goodman Complaint
). Both the Teamsters
Complaint and the Goodman Complaint name as defendants the
Company, members of the Companys Board of Directors,
Parent and Purchaser. Both the Teamsters Complaint and the
Goodman Complaint seek certification of a class of the
Companys stockholders and allege, inter alia, that the
members of the Companys Board of Directors breached
fiduciary duties owed to the Companys stockholders by
failing to engage in an appropriate sales process in connection
with the proposed transaction with Parent and Purchaser and that
both Parent and Purchaser aided and abetted the alleged breach
of fiduciary duties. The Teamsters Complaint seeks, among other
relief, an injunction prohibiting the transactions contemplated
by the Merger Agreement, the imposition of a constructive trust
in favor of the plaintiffs and the members of the proposed class
action upon any benefits improperly received by defendants as a
result of their alleged wrongful conduct and costs and
disbursements of the action, including reasonable
attorneys fees and experts fees. The Goodman
Complaint seeks, among other relief, damages resulting from the
defendants alleged breach of fiduciary duties and costs
and disbursements of the action, including reasonable
attorneys fees and experts fees.
On October 26, 2011, two putative class action lawsuits
were filed in the Chancery Court in Delaware purportedly on
behalf of a class of stockholders of the Company, the first
docketed as Oklahoma Law Enforcement Retirement System v.
Brigham Exploration Company et al., Case No. 6980 (the
Oklahoma Law Enforcement Complaint
),
and the second docketed as Oklahoma Police Pension &
Retirement System v. Brigham Exploration Company et al.,
Case No. 6982 (the
Oklahoma Police Pension
Complaint
and, together with the Boytim Complaint,
the Duncan Complaint, the Giske Complaint, the Weisberg
Complaint, the Delaware Fioravanti Complaint, the Texas
Fioravanti Complaint, the Teamsters Complaint, the Goodman
Complaint and the Oklahoma Law Enforcement Complaint,
collectively the
Complaints
). Both the
Oklahoma Law Enforcement Complaint and the Oklahoma Police
Pension Complaint name as defendants the Company, members of the
Companys Board of Directors, Parent and Purchaser. Both
the Oklahoma Law Enforcement Complaint and the Oklahoma Police
Pension Complaint seek certification of a class of the
Companys stockholders and allege, inter alia, that the
members of the Companys Board of Directors breached
fiduciary duties owed to the Companys stockholders by
failing to engage in an appropriate sales process in connection
with the proposed transaction with Parent and Purchaser, that
the Companys Board of Directors inappropriately agreed to
certain deal protection devices in the Merger Agreement and that
both Parent and Purchaser aided and abetted the alleged breach
of fiduciary duties. Both the Oklahoma Law Enforcement Complaint
and the Oklahoma Police Pension Complaint seek, among other
relief, an injunction
37
prohibiting the transactions contemplated by the Merger
Agreement, compensatory damages and costs and disbursements of
the action, including reasonable attorneys fees,
accountants fees and experts fees.
The Company believes the Complaints are without merit and that
it has valid defenses to all claims raised by the plaintiffs in
the Complaints. The Company intends to defend itself vigorously
against these actions.
Vote
Required to Approve the Merger; Short-Form Merger
The Board has approved the Offer, the Merger and the Merger
Agreement in accordance with the DGCL. Under Section 253 of
the DGCL, if Purchaser acquires, pursuant to the Offer or
otherwise (including through exercise of the
Top-Up
Option described below), at least 90% of the outstanding Shares
entitled to vote on the adoption of the Merger Agreement (the
Short Form Threshold
), Purchaser
will be able to effect the Merger without the vote of any
stockholder of the Company. If Purchaser acquires, pursuant to
the Offer or otherwise, less than 90% of the outstanding Shares,
the affirmative vote of the holders of a majority of the
outstanding Shares will be required under the DGCL to effect the
Merger under Section 251 of the DGCL.
Top-Up
Option
Subject to the terms of the Merger Agreement and applicable law,
the Company has granted Purchaser an irrevocable option (the
Top-Up
Option
), exercisable after the Acceptance Time, to
purchase at a price per Share equal to the Offer Price,
additional Shares from the Company as necessary so that
Purchaser will own, including Shares already owned by Purchaser
and Parent immediately prior to the time of such exercise,
100 Shares more than the Short Form Threshold;
provided that the
Top-Up
Option cannot be exercised (i) to the extent the
Top-Up
Option Shares would exceed the number of the Companys
authorized and unissued Shares and Shares held in treasury, or
(ii) if the Short Form Threshold would not be
immediately reached after such exercise. If Purchaser does not
attain the Short Form Threshold, the Company will hold a
special stockholders meeting to obtain stockholder
approval of the Merger. Purchaser will vote all Shares it
acquires pursuant to the Offer in favor of the adoption of the
Merger Agreement at the special meeting, thereby assuring its
approval.
Section 14(f)
Information Statement
The Information Statement included as Exhibit (a)(1)(K) and
Annex A to this
Schedule 14D-9
is being furnished in connection with the possible designation
by Parent, pursuant to the Merger Agreement, of certain persons
to be appointed to the Board, other than at a meeting of the
Companys stockholders as described in the Information
Statement, and is incorporated by reference herein.
Forward-Looking
Statements
Except for the historical information contained herein, the
matters discussed or incorporated by reference in this
Schedule 14D-9
are forward-looking statements within the meaning of the federal
securities laws. Important factors that could cause our actual
results to differ materially from those contained in or implied
by the forward-looking statements include early initial
production rates which decline steeply over the early life of
wells, particularly our Williston Basin horizontal wells for
which we estimate the average monthly production rates may
decline by approximately 70% in the first twelve months of
production, our growth strategies, our ability to successfully
and economically explore for and develop oil and gas resources,
anticipated trends in our business, competition, our liquidity
and ability to finance our exploration and development
activities, market conditions in the oil and gas industry,
fluctuations in crude oil and natural gas prices, general
economic conditions, our ability to make and integrate
acquisitions, the impact of governmental regulation and other
risks more fully described in the Companys filings with
the Securities and Exchange Commission from time to time,
including the Companys most recent Annual Report on
Form 10-K
for the year ended December 31, 2010 and Quarterly Reports
on
Form 10-Q.
Forward-looking statements are typically identified by use of
terms such as may, will,
expect, anticipate, estimate
and similar words, although some forward-looking statements may
be expressed differently. Such forward-looking statements are
not guarantees or predictions of future performance, and are
subject to known and unknown risks, uncertainties
38
and other factors, many of which are beyond the Companys
control, that could cause actual results, performance or
achievements of the Company or the Surviving Corporation
following completion of the Merger to differ materially from any
future results, performance or achievements expressed or implied
by such forward-looking statements. Such forward-looking
statements include the ability of the Company, Parent and
Purchaser to complete the transactions contemplated by the
Merger Agreement, including the parties ability to satisfy
the conditions to the consummation of the Offer and the other
conditions set forth in the Merger Agreement and the possibility
of any termination of the Merger Agreement. Actual results may
differ materially from current expectations because of risks
associated with uncertainties as to: the timing of the Offer and
the subsequent Merger; uncertainties as to how many of the
Shares will be tendered in the Offer; the possibility that
competing offers or acquisition proposals will be made; the
possibility that various conditions to the consummation of the
Offer or the Merger may not be satisfied or waived, including
that a governmental entity may prohibit, delay or refuse to
grant approval for the consummation of the Offer or the Merger;
the effects of disruption from the Offer or Merger on the
Companys business; the fact that the announcement and
pendency of the Offer and Merger may make it more difficult to
establish or maintain relationships with employees, suppliers
and other business partners; the risk that shareholder
litigation in connection with the Offer or the Merger may result
in significant costs of defense, indemnification and liability;
and other uncertainties pertaining to the business of the
Company. Many of these risks and uncertainties relate to factors
that are beyond the Companys ability to control or
estimate precisely, and any or all of the Companys
forward-looking statements may turn out to be wrong. The Company
cannot give any assurance that such forward-looking statements
will prove to have been correct. The reader is cautioned not to
unduly rely on these forward-looking statements. Nothing
contained herein shall be deemed to be a forecast, projection or
estimate of the future financial performance of the Company or
the Surviving Corporation following the consummation of the
Merger unless otherwise stated. The Company undertakes no duty
or obligation to update these forward-looking statements,
whether as a result of new information, subsequent events or
developments, changes in expectations or otherwise.
39
|
|
|
Exhibit
|
|
|
No.
|
|
Document
|
|
(a)(1)(A)
|
|
Offer to Purchase, dated October 28, 2011 (incorporated by
reference to Exhibit (a)(1)(A) to the Tender Offer Statement on
Schedule TO filed with the SEC by Parent and Purchaser on
October 28, 2011)
|
(a)(1)(B)
|
|
Letter of Transmittal (including
Form W-9)
(incorporated by reference to Exhibit (a)(1)(B) to the Tender
Offer Statement on Schedule TO filed with the SEC by Parent
and Purchaser on October 28, 2011)
|
(a)(1)(C)
|
|
Notice of Guaranteed Delivery (incorporated by reference to
Exhibit (a)(1)(C) to the Tender Offer Statement on
Schedule TO filed with the SEC by Parent and Purchaser on
October 28, 2011)
|
(a)(1)(D)
|
|
Letters to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees (incorporated by
reference to Exhibit (a)(1)(D) to the Tender Offer Statement on
Schedule TO filed with the SEC by Parent and Purchaser on
October 28, 2011)
|
(a)(1)(E)
|
|
Letter to Clients for Use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees (incorporated by
reference to Exhibit (a)(1)(E) to the Tender Offer Statement on
Schedule TO filed with the SEC by Parent and Purchaser on
October 28, 2011)
|
(a)(1)(F)
|
|
Summary Advertisement as published in the Wall Street Journal on
October 28, 2011 (incorporated by reference to Exhibit
(a)(1)(F) to the Tender Offer Statement on Schedule TO
filed with the SEC by Parent and Purchaser on October 28,
2011)
|
(a)(1)(G)
|
|
Press Release issued by the Company dated October 17, 2011
(incorporated by reference to the Companys
Schedule 14D-9C
filed with the SEC on October 17, 2011)
|
(a)(1)(H)
|
|
Investor Presentation of Parent (incorporated by reference to
Exhibit 99.2 to the
Schedule TO-C
filed by Parent and Purchaser with the SEC on October 17,
2011)
|
(a)(1)(I)
|
|
Transcript of Investor Briefing Teleconference of Parent
(incorporated by reference to Exhibit 99.3 to the
Schedule TO-C
filed with the SEC by Parent and Purchaser on October 17,
2011)
|
(a)(1)(J)
|
|
English Translation of Norwegian Investor Briefing
Teleconference Transcript of Parent (incorporated by reference
to Exhibit 99.4 to the
Schedule TO-C
filed with the SEC by Parent and Purchaser on October 17,
2011)
|
(a)(1)(K)
|
|
Information Statement pursuant to Section 14(f) of the
Exchange Act and
Rule 14f-1
thereunder (included as Annex A to this
Schedule 14D-9)*
|
(a)(1)(L)
|
|
Press Release issued by Parent dated October 28, 2011
(incorporated by reference to Exhibit (a)(1)(G) to the Tender
Offer Statement on Schedule TO filed with the SEC by Parent
and Purchaser on October 28, 2011)
|
(a)(1)(M)
|
|
Press Release issued by Parent dated October 17, 2011
(incorporated by reference to Exhibit 99.1 to the
Schedule TO-C filed with the SEC by Parent and Purchaser on
October 17, 2011)
|
(a)(1)(N)
|
|
Form of letter from Parent to the Companys employees dated
October 20, 2011 (incorporated by reference to
Exhibit 99.1 to the Schedule TO-C filed with the SEC
by Parent and Purchaser on October 20, 2011)
|
(a)(1)(O)
|
|
Investor Presentation of Parent by Chief Executive Officer dated
October 27, 2011 (incorporated by reference to
Exhibit 99.1 to the Schedule TO-C filed with the SEC
by Parent and Purchaser on October 28, 2011)
|
(a)(1)(P)
|
|
Investor Presentation of Parent by Chief Executive Officer dated
October 27, 2011 (incorporated by reference to
Exhibit 99.2 to the Schedule TO-C filed with the SEC
by Parent and Purchaser on October 28, 2011)
|
(a)(1)(Q)
|
|
Transcript of Analyst Teleconference of Parent held on
October 27, 2011 (incorporated by reference to
Exhibit 99.3 to the Schedule TO-C filed with the SEC
by Parent and Purchaser on October 28, 2011)
|
(a)(1)(R)
|
|
English Translation of Transcript of Press Conference of Parent
held by Chief Executive Officer on October 27, 2011
(incorporated by reference to Exhibit 99.4 to the
Schedule TO-C filed with the SEC by Parent and Purchaser on
October 28, 2011)
|
(a)(2)(A)
|
|
Letter, dated October 28, 2011, to the Companys
stockholders*
|
40
|
|
|
Exhibit
|
|
|
No.
|
|
Document
|
|
(a)(2)(B)
|
|
Opinion of Jefferies & Company, Inc., dated
October 16, 2011 (included as Annex B to this
Schedule 14D-9)*
|
(e)(1)
|
|
Agreement and Plan of Merger, dated October 17, 2011, by
and among Parent, Purchaser and the Company (incorporated by
reference to Exhibit 2.1 to the Companys Current
Report on
Form 8-K
filed with the SEC on October 21, 2011)
|
(e)(2)
|
|
Confidentiality Agreement, dated as of December 29, 2010,
between the Company and Parent (incorporated by reference to
Exhibit (d)(6) to the Tender Offer Statement on
Schedule TO filed with the SEC by Parent and Purchaser on
October 28, 2011)
|
(e)(3)
|
|
Tender and Voting Agreement, dated as of October 17, 2011,
by and among Parent, Purchaser and the directors and executive
officers of the Company (incorporated by reference to
Exhibit 2.2 to the Companys Current Report on
Form 8-K
filed with the SEC on October 21, 2011)
|
(e)(4)
|
|
Employment and Consulting Agreement dated as of October 17,
2011 by and between Brigham Exploration Company, Brigham, Inc.
and Ben M. Brigham*
|
(e)(5)
|
|
Employment and Consulting Agreement dated as of October 17,
2011 by and between Brigham Exploration Company, Brigham, Inc.
and David T. Brigham*
|
(e)(6)
|
|
Employment and Consulting Agreement dated as of October 17,
2011 by and between Brigham Exploration Company, Brigham, Inc.
and Eugene B. Shepherd, Jr.*
|
(e)(7)
|
|
Terms and Conditions of Continued Employment dated as of
October 16, 2011 by and between Statoil Gulf
Services LLC and Jeffery E. Larson*
|
(e)(8)
|
|
Terms and Conditions of Continued Employment dated as of
October 16, 2011 by and between Statoil Gulf Services LLC
and A. Lance Langford*
|
(e)(9)
|
|
Letter Agreement amending Agreement and Plan of Merger, dated
October 27, 2011, by and among Parent, Purchaser and the
Company (incorporated by reference to Exhibit (d)(7) to the
Tender Offer Statement on Schedule TO filed with the SEC by
Parent and Purchaser on October 28, 2011)
|
(e)(10)
|
|
Non-Solicitation Agreement, dated June 17, 2011, by and
among Parent and the Company (incorporated by reference to
Exhibit (d)(5) to the Tender Offer Statement on
Schedule TO filed with the SEC by Parent and Purchaser on
October 28, 2011)
|
(g)(1)
|
|
Transcript of oral presentations by certain executive officers
to the Companys employees, on October 17, 2011
(incorporated by reference to the Companys
Schedule 14D-9C
filed with the SEC on October 17, 2011)
|
41
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete, and correct.
BRIGHAM EXPLORATION COMPANY
Date: October 28, 2011
|
|
|
|
By:
|
/s/
Eugene
B. Shepherd, Jr.
|
Name: Eugene B. Shepherd, Jr.
|
|
|
|
Title:
|
Chief Financial Officer and
Executive Vice President
|
42
ANNEX A
BRIGHAM
EXPLORATION COMPANY
6300 Bridge Point Parkway
Building Two, Suite 500
Austin, Texas 78730
INFORMATION
STATEMENT PURSUANT TO SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND
RULE 14f-1
THEREUNDER
This Information Statement (this
Information
Statement
) is being mailed on or about October 28,
2011 to holders of record of common stock, par value $0.01 per
share (the
Common Stock
), of Brigham
Exploration Company, a Delaware corporation
(
Brigham
or the
Company
), as a part of the
Solicitation/Recommendation Statement on
Schedule 14D-9
(the
Schedule 14D-9
)
of the Company with respect to the cash tender offer (the
Offer
) by Fargo Acquisition Inc., a
Delaware corporation
(Purchaser)
,
which is an indirect wholly-owned subsidiary of Statoil ASA, a
public limited liability company organized under the laws of the
Kingdom of Norway
(Parent)
, to
purchase all of the shares of Common Stock (the
Shares
) that are issued and
outstanding. Unless the context indicates otherwise, in this
Information Statement, we use the terms
us
,
we
, and
our
to refer to the Company. You are
receiving this Information Statement in connection with the
possible appointment of persons designated by Purchaser without
a meeting of the Companys stockholders to a majority of
the seats on the Companys Board of Directors (the
Board
or the
Board of
Directors
). Such designation would be made
pursuant to the Agreement and Plan of Merger, dated as of
October 17, 2011, by and among the Parent, Purchaser and
the Company (as such agreement may be amended or supplemented
from time to time in accordance with its terms, the
Merger Agreement
).
Pursuant to the Merger Agreement, Purchaser commenced a cash
tender offer on October 28, 2011 to purchase all of the Shares
that are issued and outstanding, at a price of $36.50 per Share,
net to the stockholders in cash, without interest, less any
applicable withholding taxes, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated October 28,
2011 (the
Offer to Purchase)
, and the
related letter of transmittal (the
Letter of
Transmittal)
which, together with the Offer to
Purchase, as each may be amended or supplemented from time to
time, collectively constitute the
Offer
. Unless extended in accordance
with the terms and conditions of the Merger Agreement, the Offer
is scheduled to expire at 12:00 midnight (New York City
time), on November 30, 2011 (the initial expiration date, or any
subsequent date to which the Offer is extended pursuant to the
Merger Agreement, the
Expiration
Date
), at which time, if all conditions to the
Offer have been satisfied or waived, Purchaser will accept for
payment and will promptly thereafter pay for all Shares validly
tendered and not properly withdrawn pursuant to the Offer.
Copies of the Offer to Purchase and the accompanying Letter of
Transmittal are being mailed to the Companys stockholders
and are filed as exhibits to the Tender Offer Statement on
Schedule TO filed by Parent with the Securities and
Exchange Commission (the
SEC
) on
October 28, 2011.
The Merger Agreement provides that, if there has been validly
tendered and not withdrawn prior to the Expiration Date that
number of Shares that, together with the Shares then owned by
Parent and Purchaser, if any, represents at least a majority of
the outstanding Shares on a fully diluted basis, assuming the
issuance of all Shares that may be issued upon the vesting,
conversion or exercise of all outstanding options, warrants,
convertible or exchangeable securities and similar rights (other
than Parents right to purchase Shares from the Company in
certain circumstances under the
Top-Up
Option, as defined in the Merger Agreement) as of the Expiration
Date (the
Minimum Condition
) and
Purchaser accepts for payment and pays for the Shares tendered
into the Offer and not validly withdrawn (the time of such
initial acceptance for payment being the
Acceptance
Time
), Parent will be entitled to elect or
designate up to such number of directors on the Board equal to
the product (rounded up to the next whole number) obtained by
multiplying (x) the number of directors on the Board
(giving effect to any increase in the number of directors
described in this sentence) and (y) a fraction, the
numerator of which is the number of Shares beneficially owned by
Parent and Purchaser (giving effect to the Shares accepted for
payment pursuant to the Offer), and the denominator of which is
the
A-1
total number of then outstanding Shares, and the Company will
cause the directors designated by Parent to be elected or
appointed to the Board, including by increasing the number of
directors and seeking and accepting resignations from incumbent
directors and taking any other necessary actions. The effect of
Parents exercise of its right under the Merger Agreement
is the ability to designate a majority of the Board.
This Information Statement is required by Section 14(f) of
the Securities Exchange Act of 1934, as amended (the
Exchange Act
) and
Rule 14f-1
promulgated thereunder, in connection with the possible
appointment of Purchasers designees to the Board. This
Information Statement supplements certain information in the
Schedule 14D-9
to which this Information Statement is attached as Annex A.
You are not required to take any action with respect to the
subject matter of this Information Statement.
The information contained in this Information Statement
(including information incorporated by reference herein)
concerning Parent, Purchaser and Parents designees has
been furnished to the Company by Parent, and the Company assumes
no responsibility for the accuracy or completeness of such
information.
PURCHASER
DESIGNEES TO THE BOARD
Information
with respect to the Designees
Parent has informed the Company that it will choose its
designees to the Board from the list of persons set forth below
(the
Potential Designees
).
The Potential Designees have consented to serve as directors of
the Company if so elected or appointed. None of the Potential
Designees currently is a director of, or holds any position
with, the Company. Each of Purchaser and Parent has informed the
Company that, to its knowledge, none of the Potential Designees
beneficially owns any equity securities or rights to acquire any
equity securities of the Company, has a familial relationship
with any director or executive officer of the Company or has
been involved in any transactions with the Company or any of its
directors, executive officers or affiliates that are required to
be disclosed pursuant to the rules of the SEC.
Each of Purchaser and Parent has informed the Company that, to
the best of its knowledge, none of the Potential Designees has,
during the past ten years, (i) been convicted in a criminal
proceeding (excluding traffic violations or misdemeanors) or
(ii) been a party to any judicial or administrative
proceeding (except for matters that were dismissed without
sanction or settlement) that resulted in a judgment, decree or
final order enjoining the person from future violations of, or
prohibiting activities subject to, U.S. federal or state
securities laws, or a finding of any violation of
U.S. federal or state securities laws.
It is expected that Parents designees may assume office at
any time following the purchase by Purchaser of Shares pursuant
to the Offer, which purchase cannot be earlier than
December 1, 2011, and that, upon assuming office,
Purchasers designees will thereafter constitute at least a
majority of the Board.
List of
Potential Designees
The following table sets forth information with respect to the
Potential Designees (including, as of October 28, 2011,
age, current principal occupation or employment and employment
history during the last five years). The business address of
each Potential Designee is Forusbeen 50, N-4035, Stavanger,
Norway.
|
|
|
|
|
|
|
|
|
Current Principal Occupation or Employment;
|
Name; Country of Citizenship
|
|
Age
|
|
Positions Held During the Past Five Years
|
|
Jason Nye; USA
|
|
47
|
|
Director,
Fargo Acquisition Inc.
October 2011 Present
|
A-2
|
|
|
|
|
|
|
|
|
Current Principal Occupation or Employment;
|
Name; Country of Citizenship
|
|
Age
|
|
Positions Held During the Past Five Years
|
|
|
|
|
|
|
|
|
|
|
Vice President, Finance & Control, Development and
Production North America
Statoil ASA
January 2011 Present
|
|
|
|
|
|
|
|
|
|
Vice President, Finance & Control, International
Exploration & Production
Statoil ASA
August 2008 December 2010
|
|
|
|
|
|
|
|
|
|
Head of Liquefied Natural Gas Growth Theme,
Statoil ASA
October 2007 July 2008
|
|
|
|
|
|
|
|
|
|
Senior Strategy Advisor,
Statoil ASA
April 2007 September 2007
|
|
|
|
|
|
|
|
|
|
Head of Group Strategy,
BG Group
Thames Valley Park,
Reading,
Berkshire,
RG6 1PT
United Kingdom
(Integrated Natural Gas Company)
2005 March 2007
|
|
|
|
|
|
Heidi Wolden; Norway
|
|
41
|
|
Finance & Control Vice President,
Statoil North America
October 2011 Present
|
|
|
|
|
|
|
|
|
|
Finance & Control Manager,
Statoil North America
January 2011 October 2011
|
|
|
|
|
|
|
|
|
|
Finance & Control Manager,
Statoil Development and Production International
October 2007 December 2010
|
|
|
|
|
|
|
|
|
|
Finance & Control Manager,
Statoil Development and Production
September 2005 September 2007
|
|
|
|
|
|
Kathy Kanocz; USA
|
|
43
|
|
Director,
Fargo Acquisition Inc.
October 2011 Present
|
|
|
|
|
|
|
|
|
|
Vice President, Health, Safety and Environment, Statoil
Development, Production North America,
Statoil ASA
January 2011 Present
|
A-3
|
|
|
|
|
|
|
|
|
Current Principal Occupation or Employment;
|
Name; Country of Citizenship
|
|
Age
|
|
Positions Held During the Past Five Years
|
|
|
|
|
|
|
|
|
|
|
Board Member,
Statoil USA
2103 CityWest Boulevard
Suite 800
Houston, Texas, 77042
(Oil and Gas Exploration Company)
July 2011 Present
|
|
|
|
|
|
|
|
|
|
Vice President, Health, Safety and Environment,
United States & Mexico,
Statoil ASA
January 2010 December 2010
|
|
|
|
|
|
|
|
|
|
Health, Environment and Safety Team Leader,
Chevron Pipeline Company
4800 Fournace Place Drive
Bellaire, TX 77401
(Transporter of Crude Oil, Refined Petroleum Products, Liquefied
Petroleum Gas, Natural Gas and Chemicals)
March 2006 January 2010
|
|
|
|
|
|
|
|
|
|
Manager, Training and Competency, Gulf of Mexico Operations
BP Global
200 Westlake Boulevard
Houston, TX 77079
(International Oil and Gas Company)
2005 March 2006
|
|
|
|
|
|
Andrew Byron Winkle; USA
|
|
58
|
|
Director,
Fargo Acquisition Inc.
October 2011 Present
|
|
|
|
|
|
|
|
|
|
Vice President, United States Onshore,
Statoil ASA
January 2009 Present
|
|
|
|
|
|
|
|
|
|
Vice President, Business Development North America,
Statoil ASA
October 2007 January 2009
|
|
|
|
|
|
|
|
|
|
Vice President, Business Development Venezuela,
Statoil ASA
July 2005 October 2007
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Paul Owen; USA
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42
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Secretary and Vice President, Legal,
Fargo Acquisition Inc.
October 2011 Present
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A-4
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Current Principal Occupation or Employment;
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Name; Country of Citizenship
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Age
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Positions Held During the Past Five Years
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Managing Counsel, Upstream USA and North America,
Statoil ASA
January 2008 Present
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Senior Legal Counsel,
Chevron USA Inc.
6001 Bollinger Canyon Road
San Ramon, CA 94583
(Explorer, Extractor, and Producer of Crude Oil, Natural Gas,
and Natural Gas Liquids)
June 2005 January 2008
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Irene Rummelhoff; USA
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44
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President,
Fargo Acquisition Inc.
October 2011 Present
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Senior Vice President, Strategy and Business Development North
America,
Statoil ASA
January 2011 Present
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Vice President, Business Development North America,
Statoil ASA
January 2010 January 2011
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Senior Vice President, International Gas
Statoil ASA
October 2004 January 2010
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GENERAL
INFORMATION CONCERNING THE COMPANY
The authorized capital stock of the Company consists of
180 million shares of Common Stock. The Common Stock is the
only class of voting securities of the Company outstanding that
is entitled to vote at a meeting of the stockholders of the
Company. Each Share entitles its record holder to one vote on
all matters submitted to a vote of the Companys
stockholders. As of October 14, 2011, there were
117,314,532 Shares outstanding. As of the date of this
Information Statement, Parent and its affiliates, including
Purchaser, are not the owners of record of any Shares.
CURRENT
BOARD AND MANAGEMENT
Directors
and Executive Officers
The table below sets forth the directors and executive officers
of the Company, their ages, and the positions held by each such
person with the Company on October 26, 2011. Each
directors term expires in 2012.
A-5
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Name
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Age
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Position
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Ben M. Bud Brigham
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52
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Director, Chief Executive Officer, President and Chairman of the
Board
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David T. Brigham
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51
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Director, Executive Vice President Land and
Administration
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Harold D. Carter
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72
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Director
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Stephen C. Hurley
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61
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Director
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Stephen P. Reynolds
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59
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Director
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Hobart A. Smith
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74
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Director
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Scott W. Tinker
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51
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Director
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Eugene B. Shepherd, Jr.
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53
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Executive Vice President and Chief Financial Officer
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A. Lance Langford
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49
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Executive Vice President Operations
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Jeffery E. Larson
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52
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Executive Vice President Exploration
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Board of
Directors and Executive Officers
Ben M. Bud Brigham
has served as our Chief
Executive Officer, President and Chairman of the Board since we
were founded in 1990. From 1984 to 1990, Mr. Brigham served
as an exploration geophysicist with Rosewood Resources, an
independent oil and gas exploration and production company.
Mr. Brigham began his career in Houston as a seismic data
processing geophysicist for Western Geophysical, Inc., a
provider of
3-D
seismic
services, after earning his B.S. in Geophysics from the
University of Texas. Mr. Brigham is a member of the
National Petroleum Council, the Independent Producers
Association of America, the American Association of Petroleum
Geologists, the Society of Exploration Geophysicists and the
Society of Independent Professional Earth Scientists.
Mr. Brigham is the brother of David T. Brigham, Executive
Vice President Land and Administration and a member
of our Board of Directors. Our Board of Directors has determined
that Mr. Brighams past experience as a geophysicist
and serving as our Chief Executive Officer, President and
Chairman of the Board since we were founded qualifies him to
continue to serve on our Board of Directors.
David T. Brigham
joined us in 1992 and has served as a
Director since May 2003 and as Executive Vice
President Land and Administration since June 2002.
Mr. Brigham served as Senior Vice President
Land and Administration from March 2001 to June 2002, Vice
President Land and Administration from February 1998
to March 2001, Vice President Land and Legal from
1994 until February 1998 and as Corporate Secretary from
February 1998 to September 2002 and as interim Corporate
Secretary during April 2007, and otherwise as necessary from
time-to-time.
From 1987 to 1992, Mr. Brigham worked as an attorney in the
energy section with Worsham, Forsythe, Sampels &
Wooldridge. For a brief period of time before attending law
school, Mr. Brigham was a landman for Wagner &
Brown Oil and Gas Producers, an independent oil and gas
exploration and production company. Mr. Brigham holds a
B.B.A. in Petroleum Land Management from the University of Texas
and a J.D., cum laude, from Texas Tech School of Law.
Mr. Brigham is the brother of Ben M. Brigham, Chief
Executive Officer, President and Chairman of the Board of
Directors. Our Board of Directors has determined that
Mr. Brighams past experience as a landman and oil and
gas attorney and serving as one of our executive officers since
1992 qualifies him to continue to serve on our Board of
Directors.
Harold D. Carter
has served as a Director on our Board
since 1992. Mr. Carter served as a consultant to us from
1992 through 2008. Mr. Carter has more than 40 years
of experience in the oil and gas industry and has been an
independent consultant since 1990. Prior to consulting,
Mr. Carter served as Executive Vice President of Pacific
Enterprises Oil Company (USA). Before that, Mr. Carter was
associated for 20 years with Sabine Corporation, ultimately
serving as President and Chief Operating Officer from 1986 to
1989. Mr. Carter is a director of Abraxas Petroleum
Corporation, a publicly traded oil and gas company, and Longview
Production Company, a private company. Mr. Carter is also a
former director of Energy Partners Ltd., a publicly traded oil
and gas company. Mr. Carter is also Vice Chairman of the
Board of Trustees of the Texas Scottish Rite Hospital for
Children. Mr. Carter has a B.B.A. in Petroleum Land
Management from the University of Texas and has completed the
Program for Management Development at the Harvard University
A-6
Business School. Our Board of Directors has determined that
Mr. Carters experience advising companies in the oil
and gas industry, as well as his experience serving as a member
of the board of directors of Abraxas Petroleum Corporation,
qualifies him to continue to serve on our Board of Directors.
Stephen C. Hurley
has served as a Director on our Board
since December 2002. Mr. Hurley is a former President of
Hunt Oil Company and a former member of the Hunt Oil Company
Board of Directors, having been associated with Hunt Oil since
August 2001. Prior to joining Hunt Oil, Mr. Hurley served
as Chief Operating Officer, Executive Vice President and a
member of the Board of Directors for Chieftain International,
Inc. from August 1995 to August 2001. Prior to joining Chieftain
in 1995, Mr. Hurley was Vice President of Exploration and
Production for Murphy Exploration and Production Company. Prior
to that, he was affiliated with Exxon Company USA and Ocean
Drilling and Exploration Company. Mr. Hurley is a director
of Magnum Hunter Resources Corporation, a publicly traded
exploration and production company. Mr. Hurley holds a
Masters of Science degree in Geology from the University of
Arkansas and an advanced degree in business studies from Harvard
University. Our Board of Directors has determined that
Mr. Hurleys experience from his positions at various
oil and gas companies, as well as his education in geology and
business, qualifies his to continue to serve on our Board of
Directors.
Stephen P. Reynolds
has served as a Director on our Board
since 1996. Mr. Reynolds is currently a private investor.
Mr. Reynolds served as a special adviser to General
Atlantic, LLC and was associated with General Atlantic or its
predecessor entities from April 1980 to 2000. From 1975 to 1980,
Mr. Reynolds worked for Peat Marwick Mitchell, an
accounting firm, that later merged to form KPMG LLP. There,
he served as the Supervising Senior Accountant on the auditing
staff where he was responsible for auditing businesses of
various sizes. Mr. Reynolds holds a B.A. in Economics from
Amherst College and a Masters Degree in Accounting from New York
University. Our Board of Directors has determined that
Mr. Reynolds extensive financial and accounting background
brings considerable financial experience to the Board of
Directors and qualifies him to continue to serve on our Board of
Directors.
Hobart A. Smith
has served as a Director on our Board
since December 2002. Mr. Smith is currently a consultant to
Schlumberger, primarily in Customer Relations and Industry
Affairs. Mr. Smith has been associated with Schlumberger
and its affiliates and predecessors, including Smith
International, Inc., a products and services supplier to the oil
and gas and petrochemical industries, in various capacities
since 1965, including Vice President of Customer Relations,
Assistant to the President and Vice President of Marketing.
Mr. Smith is also a director of HKN Corp., and Stallion
Oilfield Services, both publicly traded oil and gas companies.
Mr. Smith has a degree in Business Administration from
Claremont-McKenna College. Our Board of Directors has determined
that Mr. Smiths experiences from his affiliations
with Schlumberger, as well as his experience serving as a
director of HKN Corp. and Stallion Oilfield Services qualifies
him to continue to serve on our Board of Directors.
Scott W. Tinker, Ph.D.
has served as a Director
on our Board since December 2007. Dr. Tinker is the
Director of the Bureau of Economic Geology at The University of
Texas. Dr. Tinker is past President of the American
Association of Petroleum Geologists, a member of the National
Petroleum Council, was appointed by the Governor of Texas to the
Interstate Oil & Gas Compact Commission, and has
completed two Distinguished Lecture tours for the American
Association of Petroleum Geologists and one for the Society of
Petroleum Engineers. Dr. Tinker is the State Geologist of
Texas, past President of the Association of American State
Geologists, and a Professor in The University of Texas
Department of Geological Sciences where he holds the Allday
Endowed Chair. Dr. Tinker is the acting Associate Dean of
Research and a member of the Executive Committee in the Jackson
School of Geosciences, the Director of the Advanced Energy
Consortium, and a member of the Interstate Oil and Gas Compact
Commission. Dr. Tinker is also a member of the BP Technical
Advisory Council. Prior to joining the Bureau of Economic
Geology in January 2000, Dr. Tinker spent 17 years as
a geologist in various capacities in the oil and gas industry.
Much of this time was spent in Marathon Oils Petroleum
Technology Center in Littleton, Colorado, where he built
3-D
models
of large oil and gas fields. Dr. Tinker holds a Ph.D. from
the University of Colorado, a M.S. from the University of
Michigan and a B.S. from Trinity University. Our Board of
Directors has determined that Dr. Tinkers experience
as geologist, both in the oil and gas industry, with governments
and in educational research, qualifies him to continue to serve
on our Board of Directors.
A-7
Eugene B. Shepherd, Jr.
has served as Executive Vice
President and Chief Financial Officer since October 2003, and
previously served as Chief Financial Officer from June 2002 to
October 2003. Mr. Shepherd has approximately 27 years
of financial and operational experience in the energy industry.
Prior to joining us, Mr. Shepherd served as Integrated
Energy Managing Director for the investment banking division of
ABN AMRO Bank, where he executed merger and acquisition
advisory, capital markets and syndicated loan transactions for
energy companies. Prior to joining ABN AMRO, Mr. Shepherd
spent fourteen years as an investment banker for Prudential
Securities Incorporated, Stephens Inc. and Merrill Lynch Capital
Markets. Mr. Shepherd worked as a petroleum engineer for
over four years for both Amoco Production Company and the
Railroad Commission of Texas. He holds a B.S. in Petroleum
Engineering and an MBA, both from the University of Texas at
Austin.
A. Lance Langford
joined us in 1995 as Manager of
Operations, served as Vice President Operations from
January 1997 to March 2001, served as Senior Vice
President Operations from March 2001 to September
2003 and has served as Executive Vice President
Operations since September 2003. From 1987 to 1995,
Mr. Langford served in various engineering capacities with
Meridian Oil Inc., handling a variety of reservoir, production
and drilling responsibilities. Mr. Langford holds a B.S. in
Petroleum Engineering from Texas Tech University.
Jeffery E. Larson
joined us in 1997 and was Vice
President Exploration from August 1999 to March
2001, Senior Vice President Exploration from March
2001 to September 2003 and has served as Executive Vice
President Exploration since September 2003. Prior to
joining us, Mr. Larson was an explorationist in the
Offshore Department of Burlington Resources, a large independent
exploration company, where he was responsible for generating
exploration and development drilling opportunities.
Mr. Larson worked at Burlington from 1990 to 1997 in
various roles of responsibility. Prior to Burlington,
Mr. Larson spent five years at Exxon as a Production
Geologist and Research Scientist. He holds a B.S. in Earth
Science from St. Cloud State University in Minnesota and a
M.S. in Geology from the University of Montana.
There are no material proceedings in which any director or
officer of the Company is a party adverse to the Company or any
of its subsidiaries or has a material interest adverse to the
Company or any of its subsidiaries.
Unless otherwise indicated, to the knowledge of the Company, no
current director or executive officer of the Company has, during
the past ten years, (i) been convicted in a criminal
proceeding (excluding traffic violations or misdemeanors) or
(ii) been a party to any judicial or administrative
proceeding (except for matters that were dismissed without
sanction or settlement) that resulted in a judgment, decree or
final order enjoining the person from future violations of, or
prohibiting activities subject to, U.S. federal or state
securities laws, or a finding of any violation of
U.S. federal or state securities laws.
Except as stated above with respect to Mr. Bud Brigham and
Mr. David Brigham, there are no family relationships among
the directors and executive officers of the Company.
CORPORATE
GOVERNANCE
Corporate
Governance Guidelines
Our Corporate Governance Guidelines assist the Board of
Directors in exercising its responsibilities and provide better
communication of our policies to the public. The Corporate
Governance Guidelines reflect the Board of Directors
commitment to monitor the effectiveness of policy and
decision-making, both at the Board of Directors and management
level, with a view to enhancing long-term stockholder value. A
copy of our Corporate Governance Guidelines may be found on our
website at www.bexp3d.com.
Code of
Business Conduct and Ethics
We adopted our Code of Business Conduct and Ethics that applies
to our directors, officers and employees and sets out our policy
regarding laws and business conduct, contains other policies
relevant to business conduct and sets out a process for
reporting violations thereof. A copy of our Code of Business
Conduct and Ethics may be found on our website at www.bexp3d.com.
A-8
Board
Independence
Our business and affairs are managed by and under the direction
of our Board of Directors, which exercises all corporate powers
and establishes broad corporate policies. In the opinion of the
Board of Directors, and as independent is currently
defined by the NASDAQ Stock Market Rules, a majority of the
members of our Board of Directors are independent of management
and free of any relationship that would interfere with their
exercise of independent judgment.
The Board of Directors has affirmatively determined that Harold
D. Carter, Stephen C. Hurley, Stephen P. Reynolds, Hobart A.
Smith and Dr. Scott W. Tinker are independent.
The Board of Directors has affirmatively determined that all of
the members of the Audit Committee, Nominating and Corporate
Governance Committee and Compensation Committee are independent
as defined under the Exchange Act Rules and the NASDAQ Stock
Market Rules.
Board
Leadership and Risk Oversight
Our Chairman of the Board is also our Chief Executive Officer.
We believe that by having this combined position, our Chief
Executive Officer Chairman serves as a bridge between management
and the Board of Directors, ensuring that both act with a common
purpose. In addition, we believe that the combined position
facilitates our focus on both long- and short- term strategies.
Further, we believe that the advantages of having a Chief
Executive Officer Chairman with extensive knowledge of our
company, as opposed to a relatively less informed independent
chairman, outweigh potential disadvantages. Additionally, of our
seven current Board of Directors members, five have been deemed
to be independent by our Board of Directors. Accordingly, we
believe that our super-majority of independent directors
provides sufficient independent oversight of our management. Our
Compensation Committee annually reviews our corporate goals and
presents our Chief Executive Officers compensation for
Board of Directors approval, and our bylaws also allow special
meetings to be called by a majority of our directors or the
President, rather than solely by the Chairman or the Chief
Executive Officer. We do not have a lead independent director.
Our non-management directors hold executive sessions without
management at regularly scheduled meetings of our Board of
Directors. These sessions take place outside the presence of our
Chief Executive Officer or any of our other employees. These
executive sessions allow our non-management directors the
opportunity to consider separately management performance and
broader matters of strategic significance to us. During 2010,
our non-management directors met three times in executive
sessions of the Board of Directors.
We administer our risk oversight function through our Audit
Committee as well as through our Board of Directors as a whole.
Our Audit Committee is empowered to appoint and oversee our
independent registered public accounting firm, monitor the
integrity of our financial reporting processes and systems of
internal controls and provide an avenue of communication among
our independent auditors, management, our internal auditing
department and our Board of Directors. Additionally, reports are
provided during meetings of our Board of Directors by the
individuals who oversee risk management in liquidity and credit
areas, environmental, safety, litigation and other operational
areas.
Meetings
and Committees of the Board of Directors
In 2010, our Board of Directors held ten meetings, as well as
conducted various other business through unanimous consents.
Each director attended all of the meetings, with the exception
of Mr. Steve Hurley and Mr. Steve Reynolds, each of
whom did not attend one of the meetings.
The Audit Committee held six meetings in 2010. Each member of
the Audit Committee attended all of the meetings.
The Compensation Committee held eight meetings in 2010, as well
as conducted various other business through unanimous consents.
Each member of the Compensation Committee attended all of the
meetings.
A-9
The Nominations and Corporate Governance Committee met in March
2010 and recommended the nominees that were elected to the Board
of Directors at the 2010 Annual Meeting of Stockholders. With
the exception of Mr. Steve Reynolds, all of the members of
the Nominations and Corporate Governance Committee attended this
meeting. The Nominations and Corporate Governance Committee also
met in March 2011 and recommended to the Board of Directors the
nominees that were elected to the Board of Directors at the 2011
Annual Meeting of Stockholders. Each member of the Nominations
and Corporate Governance Committee attended this meeting.
Each director attended, either in person or by telephone
conference, no fewer than 75% of the Board of Directors or
committee meetings held while serving as a director or committee
member in 2010. With the exception of Mr. Steve Hurley, who
had a scheduling conflict, all members of the Board of Directors
attended our 2010 Annual Meeting of Stockholders and the Board
of Directors recommends that each director attend all of our
stockholder meetings. With the exception of Mr. Tinker, all
members of the Board of Directors attended our 2011 Annual
Meeting of Stockholders.
The following table sets forth the members of each committee:
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Committee
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Nominating &
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Name
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Audit
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Compensation
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Corporate Governance
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Ben M. Brigham
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David T. Brigham
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Harold D. Carter
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X
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X
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Stephen C. Hurley
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X
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X
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Stephen P. Reynolds
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X
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X
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Hobart A. Smith
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X
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X
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Scott W. Tinker
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X
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Nominating
and Corporate Governance Committee
Our Nominating and Corporate Governance Committee sets
guidelines for our officers and employees in order to encourage
corporate responsibility and reinforce good business practices
and to monitor our Code of Ethics and other corporate policies,
procedures and processes. The Nominating and Corporate
Governance Committee charter is available on our website at
www.bexp3d.com.
Pursuant to the charter, the Nominating and Corporate Governance
Committee is permitted to pay fees to third parties to identify,
evaluate or assist it in identifying or evaluating potential
director nominees, however, the Nominating and Corporate
Governance Committee has not yet paid any such fees.
The minimum qualifications and specified qualities or skills
that the Nominating and Corporate Governance Committee takes
into account when evaluating director nominees include: director
independence as required by Rule 5605(a)(2) of the NASDAQ
Stock Market Rules, integrity, business acumen, age, experience,
commitment, diligence, lack of conflicts of interest and the
ability to act in the interests of all stockholders. The
Nominating and Corporate Governance Committee does not assign
specific weights to particular criteria. The Nominating and
Corporate Governance Committee believes that the backgrounds and
qualifications of the directors, considered as a group, should
provide a significant composite mix of independence, experience,
knowledge and abilities that will allow the Board of Directors
to fulfill its responsibilities.
The process employed by the Nominating and Corporate Governance
Committee for identifying and evaluating nominees is as follows:
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collect a list of potential nominees from, among others,
management, our Board of Directors and stockholder
recommendations (either in advance of the annual meeting or from
time to time);
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evaluate potential conflicts;
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A-10
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interview a select group of nominees;
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select a nominee most likely to advance the best interests of
stockholders; and
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recommend the nominee for Board of Directors approval.
|
Pursuant to its charter, the Nominating and Corporate Governance
Committee receives and considers all stockholder recommendations
relating to the nomination of a member of the Board of
Directors. The Nominating and Corporate Governance Committee
evaluates nominees recommended by stockholders by following the
same process and applying substantially the same criteria as for
nominees selected by it. The Nominating and Corporate Governance
Committee will consider director nominees of stockholders,
provided that such recommendations are made in writing to the
attention of our Corporate Secretary and received not less than
90 days in advance of our annual stockholder meeting.
All our directors bring to our Board of Directors a variety of
leadership experience derived from their service as executives
and directors of oil and gas companies. The process undertaken
by the Nominating Committee in recommending qualified director
candidates is described below. In considering whether to
recommend any candidate for inclusion in the Board of
Directors slate of recommended director nominees,
including candidates recommended by stockholders, the Nominating
and Corporate Governance Committee will apply the criteria set
forth in our Corporate Governance Guidelines. These criteria
include the candidates integrity, business acumen, age,
experience, commitment, diligence, conflicts of interest and the
ability to act in the interests of all stockholders. Our
Corporate Governance Guidelines specify that the value of
diversity on the Board of Directors should be considered by the
Nominating and Corporate Governance Committee in the director
identification and nomination process. The Committee seeks
nominees with a diversity of experience, professions, skills,
geographic representation and backgrounds. The Committee does
not assign specific weights to particular criteria and no
particular criterion is necessarily applicable to all
prospective nominees. We believe that the backgrounds and
qualifications of the directors, considered as a group, should
provide a significant composite mix of experience, knowledge and
abilities that will allow the Board of Directors to fulfill its
responsibilities. Nominees are not discriminated against on the
basis of sex, race, religion, national origin, sexual
orientation, disability or any other basis proscribed by law.
Audit
Committee
The Audit Committees primary responsibilities are to:
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recommend our independent registered public accounting firm to
our Board of Directors;
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review with our independent registered public accounting firm,
the plan and scope of the independent registered public
accounting firms annual audit, the results thereof and the
independent registered public accounting firms fees;
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review our financial statements; and
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take such other action as it deems appropriate as to the
accuracy and completeness of our financial records and our
financial information gathering, reporting policies and
procedures.
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A copy of the Audit Committees charter is available on our
website at www.bexp3d.com.
The Board of Directors determined that each member of the audit
committee is financially literate and Stephen C. Hurley and
Stephen P. Reynolds are Audit Committee financial experts as
defined by the Securities and Exchange Commission. Stephen P.
Reynolds serves as Chairman of the Audit Committee.
Furthermore, the Board of Directors biannually forms an
assessment team to review the effectiveness of the Audit
Committee in achieving its stated purpose as outlined in its
charter. In 2010, the assessment team reviewed the effectiveness
of the Audit Committee for 2009 and concluded that our Audit
Committee was in full compliance with the requirements of its
charter, the Sarbanes-Oxley Act of 2002, NASDAQ Stock Market
Rules and all other applicable federal laws, government rules
and regulations and the industry best practices. Additionally,
the assessment team did not identify any material deficiencies
in the Audit Committee practices.
A-11
Based on its review, the assessment team did not offer
recommendations to improve the Audit Committees
effectiveness.
Audit
Committee Audit and Non-Audit Services Approval Policy
In accordance with the policies of our Audit Committee and the
requirements of law, all services to be provided by our
independent registered public accounting firm are pre-approved
by the Audit Committee. Pre-approval is required for audit
services, audit-related services, tax services and other
services. Generally, pre-approvals are provided for up to a
year, relate to a specific task or scope of work and are subject
to a specific budget. To avoid certain conflicts of interest,
publicly traded companies are prohibited from obtaining certain
non-audit services from their independent registered public
accounting firm. We obtain these services from other service
providers as needed. Moreover, we have historically restricted
the use and scope of permissible non-audit services obtained
from our independent registered public accounting firm. Prior to
KPMGs engagement as our auditor, we did utilize them for
tax services. Subsequent to KPMGs engagement, we began
utilizing other parties for a majority of these tax services;
however, we continue to utilize KPMG for a limited amount of tax
services, all of which were approved in advance by the Audit
Committee.
Report of
the Audit Committee
To the Stockholders of Brigham Exploration Company:
As members of the Audit Committee of the Board of Directors, we
are responsible for helping to ensure the reliability of the
companys financial statements.
Independence of Audit Committee Members.
All
of the members of the Audit Committee are independent as defined
by Rule 5605(a)(2) of the Nasdaq Stock Market Rules and the
most recent interpretations of those standards.
Review and Discussions.
We have reviewed and
discussed the audited financial statements with management. We
have also discussed with our independent registered public
accounting firm the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards, AU
§ 380) and SAS 90. Additionally, we have
received the written disclosures and the letter from the
independent auditors at KPMG LLP, as required by
Independent Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and have discussed with the
independent auditors their independence.
Recommendation to Include Audited Financial Statements in
Annual Report.
Based on our discussions with
management and our independent registered public accounting
firm, and our review of the representation of management and the
report of our independent registered public accounting firm to
the Audit Committee, we recommended that the Board of Directors
include the audited consolidated financial statements in Brigham
Exploration Companys Annual Report on
Form 10-K
for the year ended December 31, 2010 filed with the
Securities and Exchange Commission.
February 17, 2011
Stephen P. Reynolds, Chairman
Stephen C. Hurley
Dr. Scott W. Tinker
Compensation
Committee
The Compensation Committee exercises the power of the Board of
Directors in connection with all matters relating to
compensation of executive officers and the administration of our
stock option programs. A copy of the Compensation Committee
charter is available on our website at www.bexp3d.com. See
Compensation Discussion and Analysis
Compensation Committee.
A-12
Compensation
Committee Interlocks and Insider Participation
Members of our Compensation Committee are currently Harold D.
Carter, Stephen C. Hurley and Hobart A. Smith. The
Compensation Committee made all determinations concerning
executive officer compensation for the last fiscal year. None of
our executive officers has served on the Board of Directors or
on the compensation committee for any other entity in which any
member of our Board of Directors is an officer. None of our
executive officers has served on the compensation committee for
any other entity where one of the executive officers of such
entity serves (or has served) on our Compensation Committee.
Report of
the Compensation Committee
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis with management and based
on that review and discussion recommended its inclusion in the
Proxy Statement for the 2011 Annual Meeting of Stockholders to
the Board of
Directors.
1
April 21, 2011
Harold D. Carter, Chairman
Stephen C. Hurley
Hobart A. Smith
The foregoing Compensation Committee Report does not constitute
soliciting material and should not be deemed to be filed or
incorporated by reference into any other filing of the Company
under the Securities Act of 1933, as amended, or the Exchange
Act, except to the extent that the Company specifically
incorporates the Report by reference therein.
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
This compensation discussion and analysis describes the material
elements of compensation awarded to, earned by, or paid during
the last completed fiscal year to each of our executive officers
who are listed as named executive officers in our Summary
Compensation Table on page A-21. This compensation
discussion and analysis focuses on the information contained in
the following tables and related footnotes and narrative for
primarily the last completed fiscal year, but we also describe
compensation actions taken before or after the last completed
fiscal year to the extent it enhances the understanding of our
executive compensation disclosure.
Although it varies from year to year, the principal elements of
our executive compensation program generally consist of base
salary, cash bonuses, long-term equity incentives in the form of
stock options and restricted stock, 401(k) matching and
performance contributions, post-termination severance payments
and acceleration of stock option and restricted stock vesting
for named executive officers upon certain terminations of
employment
and/or
a
change of control of our company. Our philosophy is to position
the aggregate of these elements at a level that will adequately
compensate and retain our executive officers and is
proportionate to companies of similar size and sustained
performance.
1
This
refers to our definitive proxy statement on Schedule 14A
filed with the SEC on April 29, 2011.
A-13
Our named executive officers are:
|
|
|
Name
|
|
Title
|
|
Ben M. Brigham
|
|
Chief Executive Officer, President and Chairman of the Board
|
Eugene B. Shepherd, Jr.
|
|
Executive Vice President and Chief Financial Officer
|
Jeffery E. Larson
|
|
Executive Vice President-Exploration
|
David T. Brigham
|
|
Executive Vice President-Land and Administration
|
A. Lance Langford
|
|
Executive Vice President-Operations
|
Compensation
Committee
Our Compensation Committee administers our executive
compensation program. In accordance with its charter and as
required by law and the NASDAQ Stock Market Rules, the
Compensation Committee is composed entirely of independent
directors. The role of the Compensation Committee is to oversee
our executive compensation and benefit plans and policies,
administer our equity incentive plans and review and approve all
compensation decisions relating to the named executive officers.
In early 2010, our Chief Executive Officer, aided by the Manager
of Human Resources and the Executive Vice President of Land and
Administration, conducted an annual benchmark review of our
executive compensation, as well as the mix of elements used to
compensate our named executive officers. The review was
performed utilizing the most recent Mercer Energy Compensation
Survey and the ECI Oil & Gas E&P Compensation
Survey, as well as other executive compensation information
available through filings made with the Securities and Exchange
Commission by other oil and gas exploration companies. The
Mercer Energy Compensation Survey data we utilized involved
three modules that we participated in and purchased. The three
modules were the Upstream/Midstream, the General Benchmark and
the Cross Segment modules, which were submitted by 101, 154 and
153 organizations involved in the oil and gas industry,
respectively. The ECI Oil & Gas E&P Compensation
Survey contains data submitted by 119 oil and gas exploration
and production companies. In addition, we participated in and
received a peer report prepared by ECI that contained additional
compensation data for 19 companies we selected. The
companies we selected were Berry Petroleum Company, Bill Barrett
Corporation, Cabot Oil & Gas Corporation, Carrizo
Oil & Gas, Inc., Cimarex Energy, Co., Comstock
Resources, Inc., Concho Resources, Inc., Continental Resources,
Inc., Denbury Resources, Inc., Goodrich Petroleum Corporation,
Newfield Exploration Company, Oasis Petroleum, Inc., Penn
Virginia Oil & Gas, Petrohawk Energy Corporation,
Plains Exploration & Production Company, Quicksilver
Resources, Inc., SM Energy Company, Ultra Petroleum Corporation
and Whiting Petroleum Corporation. We generally benchmarked each
element of our executive compensation and total compensation
between the high and low range of compensation reported by the
companies participating in the surveys. Additionally, due to the
fact that the categories in the surveys did not always precisely
match each officers job description, several ranges may
have been considered. In reviewing the industry surveys, we
placed greater emphasis on the compensation ranges established
by oil and gas exploration companies within our general
geographical area and revenue size.
In late 2010, our Compensation Committee retained a compensation
consultant to review our policies and procedures with respect to
executive compensation. The Compensation Committee retained
Cogent Compensation Partners
(Cogent)
to review and analyze our executive officer compensation
policies. Cogent reviewed the roles and job responsibilities of
each of the executive officers, compiled an industry peer group
for comparison of compensation policies and then prepared and
provided to the Compensation Committee an executive compensation
review for the Company. The peer group utilized for the analysis
included the following companies: Berry Petroleum Company, Bill
Barrett Corporation, Cabot Oil & Gas Corporation,
Carrizo Oil & Gas, Inc., Comstock Resources, Inc.,
Concho Resources, Inc., Continental Resources, Inc., EXCO
Resources, Inc., Forest Oil Corporation, Goodrich Petroleum
Corporation, Oasis Petroleum, Inc., Petrohawk Energy
Corporation, Quicksilver Resources, Inc., Range Resources
Corporation, Rosetta Resources, Inc., SandRidge Energy, Inc., SM
Energy Company, Swift Energy Company, Venoco, Inc. and Whiting
Petroleum Corporation Based on the Compensation Committees
review of the information provided to it by Cogent, the
Compensation Committee recommended adjustments to each of the
named executive officers base salaries.
A-14
As part of the annual compensation review process, each named
executive officer prepares a self-evaluation regarding his
respective accomplishments and contributions for the past year
for the Compensation Committee. The self-evaluations and the
survey information are provided by the Chief Executive Officer
to the Compensation Committee along with compensation
recommendations for each of the named executive officers with
respect to the annual determinations of their base salaries.
This information may also be considered by the Chief Executive
Officer and the Compensation Committee in determining the cash
bonuses for the named executive officers. These determinations
are typically made at the beginning of the year subsequent to
the compilation and analysis of the prior years financial
and operational results. This information may also be used in
connection with determinations regarding grants of restricted
stock and stock options.
The Chief Executive Officer may or may not make recommendations
regarding his own compensation. Our Chief Executive Officer does
not vote on items before the Compensation Committee, however,
the Compensation Committee solicits his views on compensation
matters, including as they relate to the compensation of the
other named executive officers and members of senior management
reporting to the Chief Executive Officer.
In each case, once the Compensation Committee receives and
reviews the supporting materials and the Chief Executive
Officers recommendations as to named executive officer
compensation, it meets with the Chief Executive Officer to
discuss those recommendations. The Compensation Committee will
then meet without the Chief Executive Officer to further discuss
and analyze the recommendations and supporting materials before
making a determination with respect to named executive officer
compensation.
Compensation
Philosophy
We believe that attracting and retaining key executive officers
is paramount to our success. The Compensation Committee believes
that compensation paid to the named executive officers should be
aligned with our performance on both a short-term and long-term
basis, while remaining competitive with that of our peer
companies with whom we compete for executive talent. The
Compensation Committee believes that compensation should be
structured to ensure that a significant portion of the
compensation opportunity is directly related to our success at
efficiently growing stockholder net asset value, our stock
performance and other factors that directly and indirectly
influence stockholder value. The Compensation Committee
routinely reviews its policies and practices and has determined
that there are no risks arising from them that would be
reasonably likely to have a material adverse effect on us. While
compensation amounts differ for each employee, the method of
awarding it and mixture of it is not structured differently for
different divisions.
Compensation
Program
For 2010, our total compensation program for the named executive
officers was designed to consist primarily of the following:
|
|
|
|
|
Base Salaries;
|
|
|
|
Non-Equity Incentive Compensation and Bonuses;
|
|
|
|
401(k) Matching and Performance Contributions;
|
|
|
|
Long-term Incentive Compensation consisting of stock options and
restricted stock; and
|
|
|
|
Post-termination Compensation.
|
For our named executive officers in 2010, base salaries
comprised on average 43% of cash compensation, discretionary
cash bonuses comprised on average 17% of cash compensation,
non-equity incentive plan payments comprised on average 35% of
cash compensation and 401(k) matching and performance
contribution comprised the remaining 5% of cash compensation.
These percentages vary depending on both the individual named
executive officers performance and our performance. In
determining how many stock options or shares of restricted stock
to grant, we consider the amount of equity that will help retain
and motivate the named executive officers in connection with a
review of competitive compensation data and individual
performance.
A-15
Base
Salaries
The base salaries paid to the named executive officers are
viewed as the basic compensation for their services. Base
salaries for our named executive officers are established based
on the scope of their responsibilities, individual performance
and experience, taking into account competitive market
compensation paid by other companies for similar positions.
Generally, we believe that our executive base salaries should be
within the range of salaries being paid to executives in similar
positions with similar responsibilities at comparable companies,
in line with our compensation philosophy. Base salaries are
reviewed annually, and adjusted from time to time to realign
salaries with market levels after taking into account individual
responsibilities, performance and experience.
Our Chief Executive Officer is the only named executive officer
that has entered into an employment agreement with us. Pursuant
to the agreement entered into in 1997, Mr. Brigham was
initially entitled to receive a base salary of $275,000 and is
eligible for increases in his annual base salary, not less
frequently than once each fiscal year. The Compensation
Committee undertakes the same process with respect to the
consideration of increases in Mr. Brighams base
salary as it does for the other named executive officers.
The base salaries paid to each of the named executive officers
in calendar year 2010 are set forth in the Summary Compensation
Table on page A-21.
Non-Equity
Incentive Plan Compensation and Discretionary Bonuses
Non-equity incentive plan compensation is paid to the named
executive officers upon the successful attainment of certain
performance objectives on our part and in part on the named
executive officers individual performance and
accomplishments. In assessing the named executive officers
performance, the Compensation Committee considers actual results
for each of our performance objectives, compared to the goals
established at the beginning of the year. In assessing
performance, the Compensation Committee may also consider
unforeseen or uncontrollable circumstances that occurred during
the year that may have had an impact on the established goals.
For each named executive officer, the Compensation Committee
also considers the individual contributions and accomplishments
during the prior year. The amount of the award may be adjusted
if, in the opinion of the Compensation Committee, additional
amounts are necessary to adequately reward and retain the named
executive officer.
In addition, a discretionary bonus may be awarded if, in the
opinion of the Compensation Committee, additional amounts may be
necessary in order to reward
and/or
retain the named executive officer. Such discretionary bonuses
were awarded in 2009 and 2010. No discretionary bonuses were
awarded in 2008.
Pursuant to his employment agreement, Mr. Brigham is
entitled to receive a cash bonus in an amount not to exceed 75%
of his annual base salary. For 2010, Mr. Brighams
eligibility for non-equity incentive plan compensation and a
discretionary bonus was subject to the same criteria as the
other named executive officers.
For 2010, our named executive officers performance
objectives were based upon the achievement of targeted levels of
all sources total proved finding cost and growth in average
daily production for the calendar year. Lower levels of success
provide smaller bonuses than the higher levels. The objective is
to provide a reasonable and optimal cash incentive for the named
executive officers.
A-16
The targeted levels for 2010 were:
All
Sources Total Proved Finding Cost Ratio (50%
Factor)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
All Sources
|
|
% of
|
|
Factor
|
|
|
Total Proved Cost/Boe
|
|
Gross Salary
|
|
Multiple
|
|
% Bonus
|
|
³
$36.00
|
|
|
0
|
%
|
|
|
.50
|
|
|
|
0.00
|
%
|
$30.00 to $35.99
|
|
|
10
|
%
|
|
|
.50
|
|
|
|
5.00
|
%
|
$27.00 to $28.99
|
|
|
20
|
%
|
|
|
.50
|
|
|
|
10.00
|
%
|
$24.00 to $26.99
|
|
|
30
|
%
|
|
|
.50
|
|
|
|
15.00
|
%
|
$21.00 to $23.99
|
|
|
40
|
%
|
|
|
.50
|
|
|
|
20.00
|
%
|
$18.00 to $20.99
|
|
|
50
|
%
|
|
|
.50
|
|
|
|
25.00
|
%
|
$15.00 to $17.99
|
|
|
60
|
%
|
|
|
.50
|
|
|
|
30.00
|
%
|
$12.00 to $14.99
|
|
|
70
|
%
|
|
|
.50
|
|
|
|
35.00
|
%
|
$9.00 to $11.99
|
|
|
80
|
%
|
|
|
.50
|
|
|
|
40.00
|
%
|
< $9.00
|
|
|
90
|
%
|
|
|
.50
|
|
|
|
45.00
|
%
|
Average
Daily Production (50%
Factor)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Avg. Daily
|
|
% of
|
|
Factor
|
|
|
Production (Boe)
|
|
Gross Salary
|
|
Multiple
|
|
% Bonus
|
|
< 5,000
|
|
|
0
|
%
|
|
|
.50
|
|
|
|
0.00
|
%
|
5,000 to 5,833
|
|
|
10
|
%
|
|
|
.50
|
|
|
|
5.00
|
%
|
5,835 to 6,667
|
|
|
20
|
%
|
|
|
.50
|
|
|
|
10.00
|
%
|
6,668 to 7,000
|
|
|
30
|
%
|
|
|
.50
|
|
|
|
15.00
|
%
|
7,001 to 7,667
|
|
|
40
|
%
|
|
|
.50
|
|
|
|
20.00
|
%
|
7,668 to 8,000
|
|
|
60
|
%
|
|
|
.50
|
|
|
|
30.00
|
%
|
>8,000
|
|
|
80
|
%
|
|
|
.50
|
|
|
|
40.00
|
%
|
For 2010, we achieved an All Sources Total Proved Finding Cost
Ratio between $9 and $11.99 and Average Daily Production of
greater than 8,000 Boe. As such, the performance cash bonus
equaled 80% (40% + 40%) of the named executive
officers gross salary.
On April 7, 2011, our Compensation Committee approved
performance objectives for our named executive officers based
upon the achievement of targeted levels of all sources total
proved finding cost and growth in average daily production for
the calendar year. Lower levels of success will provide smaller
bonuses than the higher levels. The objective is to provide a
reasonable and optimal cash incentive for the named executive
officers. Only those executive officers employed by us at the
time bonuses are paid, which will be in the spring of 2012, may
receive bonuses. The Compensation Committee reserves the right
to revise the targeted goals for 2011 to enable us to insure
that the achievement of our bonus objectives, which are based
A-17
on certain levels of drilling expenditures and results, are not
substantially distorted by a substantial change in expenditures
relative to those currently planned. The targeted levels for
2011 are as follows:
All
Sources Total Proved Finding Cost Ratio (50%
Factor)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
All Sources
|
|
% of
|
|
Factor
|
|
|
Total Proved Cost/Boe
|
|
Gross Salary
|
|
Multiple
|
|
% Bonus
|
|
³
$35.00
|
|
|
0
|
%
|
|
|
.50
|
|
|
|
0.00
|
%
|
$25.00 to $34.99
|
|
|
10
|
%
|
|
|
.50
|
|
|
|
5.00
|
%
|
$16.00 to $24.99
|
|
|
20
|
%
|
|
|
.50
|
|
|
|
10.00
|
%
|
$14.00 to $15.99
|
|
|
30
|
%
|
|
|
.50
|
|
|
|
15.00
|
%
|
$12.00 to $13.99
|
|
|
40
|
%
|
|
|
.50
|
|
|
|
20.00
|
%
|
$10.00 to $11.99
|
|
|
50
|
%
|
|
|
.50
|
|
|
|
25.00
|
%
|
$8.00 to $9.99
|
|
|
60
|
%
|
|
|
.50
|
|
|
|
30.00
|
%
|
$6.00 to $7.99
|
|
|
70
|
%
|
|
|
.50
|
|
|
|
35.00
|
%
|
$4.00 to $5.99
|
|
|
80
|
%
|
|
|
.50
|
|
|
|
40.00
|
%
|
< $4.00
|
|
|
90
|
%
|
|
|
.50
|
|
|
|
45.00
|
%
|
Average
Daily Production (50%
Factor)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Avg. Daily
|
|
% of
|
|
Factor
|
|
|
Production (Boe)
|
|
Gross Salary
|
|
Multiple
|
|
% Bonus
|
|
< 12,500
|
|
|
0
|
%
|
|
|
.50
|
|
|
|
0.00
|
%
|
12,500 to 13,499
|
|
|
10
|
%
|
|
|
.50
|
|
|
|
5.00
|
%
|
13,500 to 14,499
|
|
|
20
|
%
|
|
|
.50
|
|
|
|
10.00
|
%
|
14,500 to 15,499
|
|
|
30
|
%
|
|
|
.50
|
|
|
|
15.00
|
%
|
15,500 to 16,499
|
|
|
40
|
%
|
|
|
.50
|
|
|
|
20.00
|
%
|
16,500 to 17,499
|
|
|
60
|
%
|
|
|
.50
|
|
|
|
30.00
|
%
|
>17,499
|
|
|
80
|
%
|
|
|
.50
|
|
|
|
40.00
|
%
|
401(k)
Matching and Performance Contributions
We matched 25% of the pre-tax contributions our employees,
including the named executive officers, made to our 401(k) plan
between January 1, 2010 and December 31, 2010. We also
made additional performance based matching contributions to our
401(k) plan upon our achievement of targeted levels of all
sources total proved finding costs for the calendar year. Total
contributions by the named executive officers and us did not
exceed limitations imposed by law on tax-qualified 401(k) plans.
The targeted levels for 2010 were:
All
Sources Total Proved Finding Cost Ratio (100%
Factor)
:
|
|
|
|
|
All Sources Total
|
|
% of Employee 401(K)
|
Proved Finding Cost/Boe
|
|
Contribution Matched
|
|
³
$42.00
|
|
|
00.0
|
%
|
$36.00 to $41.99
|
|
|
25.0
|
%
|
$30.00 to $35.99
|
|
|
50.0
|
%
|
$24.00 to $29.99
|
|
|
75.0
|
%
|
$18.00 to $23.99
|
|
|
100.0
|
%
|
$12.00 to $17.99
|
|
|
150.0
|
%
|
<$12.00
|
|
|
200.0
|
%
|
A-18
For 2010, we achieved an All Sources Total Proved Finding Cost
of less than $12. As such, the 401(k) matching contributions
equaled 200% of the contributions made by the named executive
officers, except as limited by law.
On April 7, 2011, our Compensation Committee approved our
matching 25% of the first $16,500 pre-tax contributions made by
our named executive officers to their 401(k) plan between
January 1, 2011 and December 31, 2011. In addition,
our Compensation Committee approved our making additional
performance based matching contributions to our 401(k) plan for
2011 upon our achievement of targeted levels of all sources
total proved finding costs for the calendar year. The
Compensation Committee reserves the right to revise the targeted
goals for 2011 to enable us to insure that the achievement of
our bonus objectives, which are based on certain levels of
drilling expenditures and results, are not substantially
distorted by a substantial change in expenditures relative to
those currently planned. The targeted levels for 2011 are as
follows:
All
Sources Total Proved Finding Cost Ratio (100%
Factor)
:
|
|
|
|
|
All Sources Total
|
|
% of Employee 401(K)
|
Proved Finding Cost/Boe
|
|
Contribution Matched
|
|
³
$30.00
|
|
|
00.0
|
%
|
$24.00 to $29.99
|
|
|
25.0
|
%
|
$20.00 to $23.99
|
|
|
50.0
|
%
|
$16.00 to $19.99
|
|
|
75.0
|
%
|
$12.00 to $15.99
|
|
|
100.0
|
%
|
$8.00 to $11.99
|
|
|
150.0
|
%
|
<$8.00
|
|
|
200.0
|
%
|
Matching and performance contributions to the 401(k) plan for
each of our named executive officers for 2010 can be found in
the Summary Compensation Table on page A-21 and are
included within the All Other Compensation.
Long Term
Incentive Compensation
We believe that a high level of quality long-term performance is
achieved through an ownership culture that encourages such
performance by our executive officers through the use of stock
and stock-based awards. Our 1997 Incentive Plan was established
to provide our employees, including our named executive
officers, with incentives to help align their interests with the
interests of stockholders. We have historically elected to use
stock options and restricted stock as the primary long-term
equity incentive vehicles. The stock options and restricted
stock provide long-term incentives for our named executive
officers performance since their value is tied directly to
our stock price and provide retention incentives with delayed
vesting.
Our stock compensation plans have provided the principal method
for our executive officers to acquire equity in our company. The
Compensation Committee believes that the vesting periods
contained in the stock option and restricted stock awards made
to the named executive officers provide assurance that the named
executive officers will have sufficient equity holdings to
provide incentive for performance. Our Compensation Committee
has made an initial recommendation that we adopt stock ownership
guidelines requiring each of our named executive officers to
hold an amount of shares equal in value to three times their
base salary. Our Compensation Committee is continuing to discuss
the details and mechanics of these guidelines and once they have
been prepared, plans to present them to our Board of Directors
for their review.
Our 1997 Incentive Plan authorizes us to grant shares of stock
options and restricted stock to purchase shares of our common
stock to our employees, directors and consultants, including our
named executive officers. Our Compensation Committee oversees
the administration of the 1997 Incentive Plan. Equity grants are
made to executive officers at the commencement of employment and
generally on an annual basis thereafter. In addition, equity
grants are occasionally made following a significant change in
job responsibilities, subsequent to a significant accomplishment
benefiting us, or to meet other special retention objectives.
The Compensation Committee reviews and approves equity awards to
named executive officers based upon a
A-19
review of competitive compensation data, its assessment of
individual performance, a review of each executives
existing long-term incentives, and retention considerations.
On an annual basis, the Compensation Committee considers making
additional awards of stock options
and/or
restricted stock to the named executive officers. The
Compensation Committee relies on both stock option grants and
restricted stock grants to provide equity incentives for the
named executive officers. The Compensation Committee believes
that limited grants of restricted stock are immediate
compensation for the named executive officers that help provide
retention incentive in the event that our stock price goes down
for any reason.
The Compensation Committee granted 5,000 shares of
restricted stock to each of the named executive officers on
January 1, 2010. As a retention incentive, the Company has
historically granted 5,000 shares of restricted stock to
the each of the named executive officers on January 1 of each
year. These yearly grants insure that each named executive
officer continually has 5,000 shares of restricted stock
vesting on January 1 of each year. In line with this practice,
the Compensation Committee also granted 5,000 shares of
restricted stock to each of the named executive officers on
January 1, 2011.
The Compensation Committee granted an aggregate of
17,793 shares of restricted stock to each of the named
executive officers on March 9, 2010 as part of a
discretionary bonus. The Compensation Committee also granted an
aggregate of 71,856 shares of restricted stock to each of
the named executive officers on March 16, 2011 as a
discretionary bonus.
The Compensation Committee granted options to purchase
100,000 shares of stock to each of our named executive
officers on April 29, 2010.
The stock option and restricted stock awards typically vest
incrementally over a five-year period or cliff vest at the end
of the five-year period. The stock options generally expire
between seven and ten years after the date of grant. The
exercise prices for the stock options are set at the average of
the high and low sales prices on the date of the grant. Neither
stock option nor restricted stock awards are dated prior to the
date of the Compensation Committee approval of the grant.
The aggregate grant date fair value of stock options and
restricted stock for calendar year 2010 is set forth in the
Summary Compensation Table on the following page and the number
of stock options and shares of restricted stock granted to the
named executive officers in calendar year 2010 are set forth in
the Grants of Plan Based Awards Table on
page A-22.
Perquisites
Pursuant to our Chief Executive Officers employment
agreement, we purchase life and long-term disability insurance
for Mr. Brigham in addition to the life and long-term
disability provided to all other employees, including the named
executive officers.
The dollar value of the premiums paid for the additional life
and long-term disability insurance for Mr. Brigham are set
forth in the Summary Compensation Table below.
A-20
Summary
Compensation Table
The table below summarizes the total compensation paid to or
earned by our named executive officers for the fiscal years
ended December 31, 2010, 2009, and 2008.
Summary
Compensation Table
For Fiscal Years Ending December 31, 2010, 2009, and
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
All Other
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Total
|
Name & Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)(a)
|
|
($)(a)
|
|
($)
|
|
($)(b)
|
|
($)
|
|
Ben M. Brigham
|
|
|
2010
|
|
|
$
|
436,257
|
|
|
$
|
204,598
|
|
|
$
|
169,903
|
|
|
$
|
1,254,000
|
|
|
$
|
349,005
|
|
|
$
|
36,435
|
|
|
$
|
2,450,198
|
|
Chief Executive Officer,
|
|
|
2009
|
|
|
|
349,346
|
|
|
|
56,000
|
|
|
|
339,675
|
|
|
|
476,800
|
|
|
|
|
|
|
|
8,694
|
|
|
|
1,230,515
|
|
President and Chairman of
|
|
|
2008
|
|
|
|
405,132
|
|
|
|
|
|
|
|
36,875
|
|
|
|
203,200
|
|
|
|
|
|
|
|
9,328
|
|
|
|
654,535
|
|
the Board
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eugene B. Shepherd, Jr.
|
|
|
2010
|
|
|
$
|
306,873
|
|
|
$
|
115,135
|
|
|
$
|
125,227
|
|
|
$
|
1,254,000
|
|
|
$
|
245,498
|
|
|
$
|
33,923
|
|
|
$
|
2,080,656
|
|
Executive Vice President
|
|
|
2009
|
|
|
|
245,738
|
|
|
|
57,365
|
|
|
|
245,358
|
|
|
|
458,100
|
|
|
|
|
|
|
|
4,125
|
|
|
|
1,010,686
|
|
and Chief Financial Officer
|
|
|
2008
|
|
|
|
284,979
|
|
|
|
|
|
|
|
36,875
|
|
|
|
203,200
|
|
|
|
|
|
|
|
3,875
|
|
|
|
528,929
|
|
David T. Brigham
|
|
|
2010
|
|
|
$
|
259,772
|
|
|
$
|
97,463
|
|
|
$
|
116,400
|
|
|
$
|
1,254,000
|
|
|
$
|
207,817
|
|
|
$
|
33,923
|
|
|
$
|
1,969,375
|
|
Executive Vice President
|
|
|
2009
|
|
|
|
208,020
|
|
|
|
37,397
|
|
|
|
210,383
|
|
|
|
425,200
|
|
|
|
|
|
|
|
4,125
|
|
|
|
885,125
|
|
Land and Administration
|
|
|
2008
|
|
|
|
241,238
|
|
|
|
|
|
|
|
36,875
|
|
|
|
203,200
|
|
|
|
|
|
|
|
3,875
|
|
|
|
485,188
|
|
Jeffery E. Larson
|
|
|
2010
|
|
|
$
|
243,502
|
|
|
$
|
91,359
|
|
|
$
|
113,356
|
|
|
$
|
1,254,000
|
|
|
$
|
194,801
|
|
|
$
|
37,322
|
|
|
$
|
1,934,340
|
|
Executive Vice President
|
|
|
2009
|
|
|
|
194,992
|
|
|
|
35,681
|
|
|
|
195,908
|
|
|
|
369,034
|
|
|
|
|
|
|
|
4,125
|
|
|
|
799,740
|
|
Exploration
|
|
|
2008
|
|
|
|
225,794
|
|
|
|
|
|
|
|
36,875
|
|
|
|
203,200
|
|
|
|
|
|
|
|
6,319
|
|
|
|
472,188
|
|
A. Lance Langford
|
|
|
2010
|
|
|
$
|
250,902
|
|
|
$
|
94,135
|
|
|
$
|
114,743
|
|
|
$
|
1,254,000
|
|
|
$
|
200,721
|
|
|
$
|
33,923
|
|
|
$
|
1,948,424
|
|
Executive Vice President
|
|
|
2009
|
|
|
|
200,917
|
|
|
|
36,462
|
|
|
|
202,589
|
|
|
|
411,700
|
|
|
|
|
|
|
|
4,125
|
|
|
|
855,793
|
|
Operation
|
|
|
2008
|
|
|
|
232,655
|
|
|
|
|
|
|
|
36,875
|
|
|
|
203,200
|
|
|
|
|
|
|
|
5,793
|
|
|
|
478,523
|
|
|
|
|
(a)
|
|
The grant date fair value is determined in accordance with FASB
ASC Topic 718. The grant date fair value of restricted shares is
determined by the mean of the high and low sales prices on the
date of grant. An option pricing model is used to determine the
fair value of option awards.
|
|
(b)
|
|
All Other Compensation includes the 401(k) match outlined in
above 401(k) Matching and Performance Contributions. Each of the
Named Executive Officers All Other Compensation for 2010
includes $33,923 in 401(k) matching contributions. All Other
Compensation for 2010 also includes $2,512 of insurance premiums
for Ben M. Brigham and di minimis perquisites of $3,399 for
Jeffery E. Larson. All Other Compensation for 2009 includes
$4,125 in 401(k) matching contributions. All Other Compensation
for 2009 also includes $4,569 of insurance premiums for Ben M.
Brigham. Each of the Named Executive Officers All Other
Compensation for 2008 includes $3,875 in 401(k) matching
contributions, which is comprised of the base 25% contribution.
All Other Compensation for 2008 also includes $2,072 of
insurance premiums paid by us and di minimis perquisites of
$3,381 for Ben M. Brigham, $1,918 for A. Lance Langford and
$2,444 for Jeffery E. Larson.
|
A-21
Grant of
Plan Based Awards
The table below summarizes all grants of plan based awards made
during 2010.
2010
Grants of Plan Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
Exercise or
|
|
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
Base Price
|
|
Closing
|
|
Grant Date Fair
|
|
|
|
|
Shares of
|
|
Securities
|
|
of Option
|
|
Price on
|
|
Market Value of
|
|
|
|
|
Stock or
|
|
Underlying
|
|
Awards
|
|
Grant Date
|
|
Stock and
|
|
|
|
|
Units
|
|
Options
|
|
($/Share)
|
|
($/Share)
|
|
Option Awards
|
Name
|
|
Grant Date
|
|
(#)
|
|
(#)
|
|
(b)
|
|
(c)
|
|
($)(d)
|
|
Ben M. Brigham
|
|
|
1/1/2010
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
$
|
13.55
|
|
|
$
|
67,750
|
|
|
|
|
3/9/2010
|
|
|
|
6,041
|
|
|
|
|
|
|
|
|
|
|
$
|
16.89
|
|
|
|
102,153
|
|
|
|
|
4/29/2010
|
|
|
|
|
|
|
|
100,000
|
|
|
$
|
19.12
|
|
|
$
|
19.40
|
|
|
|
1,254,000
|
|
Eugene B. Shepherd, Jr.
|
|
|
1/1/2010
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
$
|
13.55
|
|
|
$
|
67,750
|
|
|
|
|
3/9/2010
|
|
|
|
3,399
|
|
|
|
|
|
|
|
|
|
|
$
|
16.89
|
|
|
|
57,477
|
|
|
|
|
4/29/2010
|
|
|
|
|
|
|
|
100,000
|
|
|
$
|
19.12
|
|
|
$
|
19.40
|
|
|
|
1,254,000
|
|
David T. Brigham
|
|
|
1/1/2010
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
$
|
13.55
|
|
|
$
|
67,750
|
|
|
|
|
3/9/2010
|
|
|
|
2,877
|
|
|
|
|
|
|
|
|
|
|
$
|
16.89
|
|
|
|
48,650
|
|
|
|
|
4/29/2010
|
|
|
|
|
|
|
|
100,000
|
|
|
$
|
19.12
|
|
|
$
|
19.40
|
|
|
|
1,254,000
|
|
Jeffery E. Larson
|
|
|
1/1/2010
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
$
|
13.55
|
|
|
$
|
67,750
|
|
|
|
|
3/9/2010
|
|
|
|
2,697
|
|
|
|
|
|
|
|
|
|
|
$
|
16.89
|
|
|
|
45,606
|
|
|
|
|
4/29/2010
|
|
|
|
|
|
|
|
100,000
|
|
|
$
|
19.12
|
|
|
$
|
19.40
|
|
|
|
1,254,000
|
|
A. Lance Langford
|
|
|
1/1/2010
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
$
|
13.55
|
|
|
$
|
67,750
|
|
|
|
|
3/9/2010
|
|
|
|
2,779
|
|
|
|
|
|
|
|
|
|
|
$
|
16.89
|
|
|
|
46,993
|
|
|
|
|
4/29/2010
|
|
|
|
|
|
|
|
100,000
|
|
|
$
|
19.12
|
|
|
$
|
19.40
|
|
|
|
1,254,000
|
|
|
|
|
(a)
|
|
We do not maintain equity incentive plans based on incentive
thresholds. See All Other Stock Awards for inclusion of
restricted stock awards.
|
|
(b)
|
|
Option exercise price is equal to the mean between the high and
low sales prices on the date of grant. If the market is closed
on the grant date, the mean of the prior trading days high
and low prices is used.
|
|
(c)
|
|
If the market is closed on the grant date, the closing price
from the prior trading day is reported.
|
|
(d)
|
|
The grant date fair value is determined in accordance with FASB
ASC Topic 718. The grant date fair value of restricted shares is
determined by the mean of the high and low sales prices on the
date of grant. An option pricing model is used to determine the
fair value of option awards.
|
A-22
Outstanding
Equity Awards
The following table sets forth the outstanding equity awards of
our named executive officers at December 31, 2010.
Outstanding
Equity Awards
At Fiscal Year End December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
|
Payout
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Number of
|
|
|
Unearned
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
Unearned
|
|
|
Shares,
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
Shares, Units
|
|
|
Units or
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Units of
|
|
|
or Other
|
|
|
Other
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
Stock That
|
|
|
Stock That
|
|
|
Rights That
|
|
|
Rights That
|
|
|
|
Options
|
|
|
Options
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Have Not
|
|
|
Have Not
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Vested
|
|
|
Vested
|
|
|
Vested
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Ben M. Brigham
|
|
|
16,000
|
|
|
|
24,000
|
(b)
|
|
$
|
5.08
|
|
|
|
|
|
|
|
10/10/2015
|
|
|
|
35,000
|
(f)
|
|
|
953,400
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
80,000
|
(c)
|
|
|
2.20
|
|
|
|
|
|
|
|
4/22/2019
|
|
|
|
6,041
|
(g)
|
|
|
164,557
|
|
|
|
|
|
|
|
|
|
|
|
|
68,000
|
|
|
|
272,000
|
(d)
|
|
|
5.95
|
|
|
|
|
|
|
|
8/10/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(e)
|
|
|
19.12
|
|
|
|
|
|
|
|
4/29/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eugene B. Shepherd, Jr.
|
|
|
56,000
|
|
|
|
14,000
|
(a)
|
|
$
|
6.145
|
|
|
|
|
|
|
|
9/14/2013
|
|
|
|
35,000
|
(f)
|
|
|
953,400
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
|
|
24,000
|
(b)
|
|
|
5.08
|
|
|
|
|
|
|
|
10/10/2015
|
|
|
|
3,339
|
(g)
|
|
|
92,589
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
80,000
|
(c)
|
|
|
2.20
|
|
|
|
|
|
|
|
4/22/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,000
|
|
|
|
216,000
|
(d)
|
|
|
5.95
|
|
|
|
|
|
|
|
8/10/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(e)
|
|
|
19.12
|
|
|
|
|
|
|
|
4/29/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David T. Brigham
|
|
|
|
|
|
|
12,000
|
(a)
|
|
$
|
6.145
|
|
|
|
|
|
|
|
9/14/2013
|
|
|
|
35,000
|
(f)
|
|
|
953,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,000
|
(b)
|
|
|
5.08
|
|
|
|
|
|
|
|
10/10/2015
|
|
|
|
2,877
|
(g)
|
|
|
78,369
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
80,000
|
(c)
|
|
|
2.20
|
|
|
|
|
|
|
|
4/22/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,000
|
|
|
|
184,000
|
(d)
|
|
|
5.95
|
|
|
|
|
|
|
|
8/10/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(e)
|
|
|
19.12
|
|
|
|
|
|
|
|
4/29/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffery E. Larson
|
|
|
2,000
|
|
|
|
12,000
|
(a)
|
|
$
|
6.145
|
|
|
|
|
|
|
|
9/14/2013
|
|
|
|
35,000
|
(f)
|
|
|
953,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,000
|
(b)
|
|
|
5.08
|
|
|
|
|
|
|
|
10/10/2015
|
|
|
|
2,697
|
(g)
|
|
|
73,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,000
|
(c)
|
|
|
2.20
|
|
|
|
|
|
|
|
4/22/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129,100
|
(d)
|
|
|
5.95
|
|
|
|
|
|
|
|
8/10/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(e)
|
|
|
19.12
|
|
|
|
|
|
|
|
4/29/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A. Lance Langford
|
|
|
4,000
|
|
|
|
12,000
|
(a)
|
|
$
|
6.145
|
|
|
|
|
|
|
|
9/14/2013
|
|
|
|
35,000
|
(f)
|
|
|
953,400
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
24,000
|
(b)
|
|
|
5.08
|
|
|
|
|
|
|
|
10/10/2015
|
|
|
|
2,779
|
(g)
|
|
|
75,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,000
|
(c)
|
|
|
2.20
|
|
|
|
|
|
|
|
4/22/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168,000
|
(d)
|
|
|
5.95
|
|
|
|
|
|
|
|
8/10/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(e)
|
|
|
19.12
|
|
|
|
|
|
|
|
4/29/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
These options vested on September 14, 2011.
|
|
(b)
|
|
One-third of these options vested on October 10, 2011 and
will vest on each of October 10, 2012 and October 10,
2013.
|
|
(c)
|
|
Twenty-five percent of these options vested on April 22,
2011 and will vest on each of April 22, 2012,
April 22, 2013 and April 22, 2014.
|
|
(d)
|
|
Twenty-five percent of these options vested on August 10,
2011 and will vest on each of August 10, 2012,
August 10, 2013 and August 10, 2014.
|
|
(e)
|
|
Twenty percent of these options vested on April 29, 2011
and will vest on each of April 29, 2012, April 29,
2013, April 29, 2014 and April 29, 2015.
|
|
(f)
|
|
5,000 shares vest on January 1st of each of the next
five years and 5,000 shares vested on September 10,
2011 and will vest on September 10, 2012.
|
|
(g)
|
|
These shares vested January 1, 2011.
|
A-23
Options
Exercised and Stock Vested
The number and value of options and stock acquired by our named
executive officers in 2010 are set forth in the following table.
Options
Exercised and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
Number of
|
|
|
|
|
Number of Shares
|
|
Value Realized
|
|
Shares Acquired
|
|
Value Realized
|
|
|
Acquired on Exercise
|
|
on Exercise
|
|
on Vesting
|
|
on Vesting
|
Name
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
|
Ben M. Brigham
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
154,050
|
|
Eugene B. Shepherd, Jr.
|
|
|
150,000
|
|
|
|
2,071,766
|
|
|
|
10,000
|
|
|
|
154,050
|
|
David T. Brigham
|
|
|
64,000
|
|
|
|
1,118,965
|
|
|
|
10,000
|
|
|
|
154,050
|
|
Jeffery E. Larson
|
|
|
81,737
|
|
|
|
1,019,807
|
|
|
|
10,000
|
|
|
|
154,050
|
|
A. Lance Langford
|
|
|
129,000
|
|
|
|
1,762,475
|
|
|
|
10,000
|
|
|
|
154,050
|
|
Post
Termination Compensation
Accelerated
Vesting of Stock Options and Restricted Stock
Change
of Control Agreements
Each of the named executive officers, other than Ben M. Brigham,
has entered into a separate Change of Control Agreement with us
providing for automatic vesting of all stock options held by the
named executive officer upon the occurrence of a Change of
Control and execution of a general release in our favor.
A Change of Control will generally be deemed to have occurred if
(A) any affiliates and associates
of a person, together with any nominees or appointees of such
person (other than Ben or Anne Brigham, us or any entity or plan
established by us) constitute at least 51% of members of our
Board of Directors, (B) our stockholders approve a
transaction with respect to which persons who were our
stockholders immediately prior to such transaction do not,
immediately thereafter, own more than 50% of the combined voting
power entitled to vote generally in the election of directors,
(C) we sell, lease or exchange or agree to sell, lease or
exchange all or substantially all of our assets and following
such transaction we do not continue our business following
substantially the same business plan or we are to be dissolved
and liquidated or (D) any person becomes the beneficial
owner directly or indirectly, of our securities representing in
the aggregate 50% or more of either the then outstanding shares
of common stock or the voting securities, in either such case
other than solely as a result of acquisitions of such securities
directly from us.
Chief
Executive Officer Employment Agreement
Pursuant to Mr. Brighams Employment Agreement, upon
termination by him for Good Reason or by us other than upon his
death or disability or for Cause, all unvested stock options and
shares of restricted stock held by Mr. Brigham shall vest.
Cause is generally defined as (A) the willful and continued
failure to substantially perform his duties or (B) the
willful engaging in misconduct which is materially injurious to
us, monetarily or otherwise. Good Reason is generally defined as
(A) a material breach by us of the Employment Agreement, or
(B) a material diminution of Mr. Brighams
authority, duties, or responsibilities.
Restricted
Stock Agreements
Death
Upon a named executive officers termination of employment
due to death, any shares of restricted stock held by the named
executive officer that have not vested shall be deemed to have
vested as of the date of the named executive officers
death.
A-24
Disability
or Just Cause
A portion of any unvested shares of restricted stock held by a
named executive officer shall vest upon his termination of
employment due to a Disability or involuntary termination of the
named executive officer by us for reasons other than Just Cause.
Disability is generally deemed to have occurred if, in the good
faith judgment of the Compensation Committee, the named
executive officer has become unable to continue the proper
performance of his duties on a full-time basis as a result of
his physical or mental incapacity. Just Cause generally includes
conduct by the named executive officer that constitutes willful
misconduct or gross negligence in the performance of his duties;
fraud, dishonesty, or a criminal act; embezzlement of funds or
misappropriation of other property, any act or conduct that, in
the good faith opinion of the Board of Directors or the
President, is materially detrimental to us or reflects
unfavorably on us or the named executive officer to such an
extent that our best interests reasonably require the named
executive officers discharge.
Upon such an event, a ratable portion of the number of
restricted shares held by the named executive officer that were
due to vest next will be deemed to have vested. The ratable
portion shall be determined by multiplying the number of shares
that were due to vest next by a fraction with a numerator equal
to the number of full months which have then elapsed since the
last date of termination of a restricted period and a
denominator equal to the total number of months between the last
date of termination of a restricted period and the next
scheduled termination date, and rounding to the closest whole
number. The restricted period applicable to such ratable portion
shall terminate.
Fundamental
Change or Change of Control
If either (A) Ben M. Brigham is no longer both the Chief
Executive Officer and Chairman of the Board, or (B) any
person becomes the beneficial owner, directly or indirectly, of
our securities representing in the aggregate forty-nine percent
(49%) or more of either the then outstanding shares of our
common stock or our voting power, in either such case, and the
named executive officers employment is involuntarily
terminated within two years, then immediately upon such
termination, any unvested restricted shares shall vest fully.
The following table summarizes the number and value of
restricted shares that vest upon a fundamental change or change
in control. Value is calculated using a year-end market price of
$27.24 per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Shares
|
|
|
Restricted Shares that
|
|
Realized Upon
|
|
|
Vest Upon Change of
|
|
Change of
|
|
|
Control
|
|
Control
|
Name
|
|
(#)
|
|
($)
|
|
Ben M. Brigham
|
|
|
41,041
|
|
|
$
|
1,117,957
|
|
Eugene B. Shepherd, Jr.
|
|
|
38,399
|
|
|
|
1,045,989
|
|
David T. Brigham
|
|
|
37,877
|
|
|
|
1,031,769
|
|
Jeffery E. Larson
|
|
|
37,697
|
|
|
|
1,026,866
|
|
A. Lance Langford
|
|
|
37,779
|
|
|
|
1,029,100
|
|
Stock
Option Agreements
Death,
Disability and Certain Terminations
Upon a named executive officers termination of employment
due to death or disability or involuntary termination by us for
reasons other than fraud, dishonesty or other acts that our
Board of Directors determines are materially detrimental to us,
a portion of any unvested stock options held by a named
executive officer shall vest.
Upon such an event, a ratable portion of the number of stock
options held by the named executive officer that were due to
vest next will be deemed to have vested. The ratable portion
shall be determined by multiplying the number of stock options
that were due to vest next by a fraction with a numerator equal
to the number of full months which have then elapsed since the
last vesting date and a denominator equal to the total number of
months between the last vesting date and the next scheduled
vesting date, and rounding to the closest whole number.
A-25
Fundamental
Change
If as a result of any merger or acquisition transaction
involving the issuance or redemption of our equity interests,
more than 50% of such equity interests is owned by a party other
than certain of our affiliates, then immediately prior to such
event, all unvested stock options will vest.
The following table summarizes the number and value of options
for which vesting is accelerated upon a fundamental change.
Value is calculated using the year-end market price of $27.24
per share less the exercise price times the number of options.
Options that are out of the money are not included for valuation
purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Underlying Options
|
|
|
|
|
|
Value of Options
|
|
|
|
Vesting Upon
|
|
|
|
|
|
Realized Upon
|
|
|
|
Fundamental
|
|
|
Option Exercise
|
|
|
Change of
|
|
|
|
Change of Control
|
|
|
Price
|
|
|
Control
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
($)
|
|
|
Ben M. Brigham
|
|
|
24,000
|
|
|
$
|
5.080
|
|
|
$
|
531,840
|
|
|
|
|
80,000
|
|
|
$
|
2.200
|
|
|
$
|
2,003,200
|
|
|
|
|
272,000
|
|
|
$
|
5.955
|
|
|
$
|
5,789,520
|
|
|
|
|
100,000
|
|
|
$
|
19.118
|
|
|
$
|
812,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
9,136,760
|
|
Eugene B. Shepherd, Jr.
|
|
|
14,000
|
|
|
$
|
6.145
|
|
|
$
|
295,330
|
|
|
|
|
24,000
|
|
|
$
|
5.080
|
|
|
$
|
531,840
|
|
|
|
|
80,000
|
|
|
$
|
2.200
|
|
|
$
|
2,003,200
|
|
|
|
|
216,000
|
|
|
$
|
5.955
|
|
|
$
|
4,597,560
|
|
|
|
|
100,000
|
|
|
$
|
19.118
|
|
|
$
|
812,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
8,240,130
|
|
David T. Brigham
|
|
|
12,000
|
|
|
$
|
6.145
|
|
|
$
|
253,140
|
|
|
|
|
24,000
|
|
|
$
|
5.080
|
|
|
$
|
531,840
|
|
|
|
|
80,000
|
|
|
$
|
2.200
|
|
|
$
|
2,003,200
|
|
|
|
|
184,000
|
|
|
$
|
5.955
|
|
|
$
|
3,916,440
|
|
|
|
|
100,000
|
|
|
$
|
19.118
|
|
|
$
|
812,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
7,516,820
|
|
Jeffery E. Larson
|
|
|
12,000
|
|
|
$
|
6.145
|
|
|
$
|
253,140
|
|
|
|
|
24,000
|
|
|
$
|
5.080
|
|
|
$
|
531,840
|
|
|
|
|
80,000
|
|
|
$
|
2.200
|
|
|
$
|
2,003,200
|
|
|
|
|
129,100
|
|
|
$
|
5.955
|
|
|
$
|
2,747,894
|
|
|
|
|
100,000
|
|
|
$
|
19.118
|
|
|
$
|
812,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
6,348,274
|
|
A. Lance Langford
|
|
|
12,000
|
|
|
$
|
6.145
|
|
|
$
|
253,140
|
|
|
|
|
24,000
|
|
|
$
|
5.080
|
|
|
$
|
531,840
|
|
|
|
|
80,000
|
|
|
$
|
2.200
|
|
|
$
|
2,003,200
|
|
|
|
|
168,000
|
|
|
$
|
5.955
|
|
|
$
|
3,575,880
|
|
|
|
|
100,000
|
|
|
$
|
19.118
|
|
|
$
|
812,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
7,176,260
|
|
Severance
Benefits
The following sections describe severance benefits that would be
payable to our executive officers in certain circumstances under
agreements in effect as of December 31, 2010. See the
Schedule 14D-9
for information about additional benefits payable under new
agreements entered into in connection with the Merger Agreement.
Change
of Control Agreements
The Change of Control Agreements provide for certain severance
benefits for named executive officers, other than the Chief
Executive Officer, following a Change of Control and the
occurrence of a Termination
A-26
Event. A Termination Event is defined as either termination of
employment by us without Cause or termination by the named
executive officer with Good Reason.
Cause is generally defined as (A) the named executive
officers conviction of, or plea of nolo contendere to, any
felony of theft, fraud, embezzlement or violent crime causing
substantial harm to us or our affiliates, (B) the willful
and continued failure by the named executive officer to
substantially perform his duties or (C) the willful
engaging by the named executive officer in misconduct which is
materially injurious to our interests.
Good Reason is generally defined as (A) a material
dimunition in the nature or scope of the named executive
officers duties from those immediately prior to the date
on which a Change of Control occurs, (B) a material
diminution in the named executive officers base
compensation from that provided immediately prior to the date on
which the Change of Control occurs, (C) any required
relocation of the named executive officer of more than fifty
miles from the location where the named executive officer was
based and performed services immediately prior to the date on
which the Change of Control occurs.
Provided the named executive officer executes a general release
in our favor, the severance benefits payable following a Change
of Control and Termination Event include (A) the payment of
a sum equal to two times the named executive officers
annual base salary and cash bonuses, (B) continued
participation in our life and disability insurance plans for a
period of 18 months or if earlier, until such time as the
named executive officer obtains other employment,
(C) continued participation in our health benefit plans as
long as such coverage is nontaxable and until such time as the
named executive officer obtains other employment and
(D) for a period of five years, payment of all reasonable
legal fees and expenses incurred by the named executive officer
in seeking to obtain or enforce any right or benefit under the
Change of Control Agreement.
Additionally, if in our determination, the total sum of
(i) the payments and benefits to be paid or provided to a
named executive officer under the Change of Control Agreement
are considered to be parachute payments within the
meaning of Section 280G of the Internal Revenue Code of
1986 (the Code) and (ii) any other payments and
benefits which are considered to be parachute
payments, to be paid or provided to a named executive
officer (the Total Amount) exceed the amount such
named executive officer can receive without having to pay excise
tax with respect to all or any portion of such payments or
benefits under Section 4999 of the Code, then the amount
payable to the named executive officer shall be reduced to the
greater of zero or the highest amount which will not result the
named executive officer having to pay excise tax with respect to
any payments and benefits under Section 4999 of the Code
(the Reduced Amount); provided, however, that in the
event that the Reduced Amount minus any and all applicable
federal, state and local taxes is less than the Total Amount
minus any and all applicable federal, state and local taxes,
then the reduction of the amount payable to the named executive
officer shall not be made.
Chief
Executive Officer Employment Agreement
Ben M. Brighams Employment Agreement provides for
severance benefits in the event that he terminates his own
employment with us for Good Reason or if we terminate his
employment other than upon his death or disability or for Cause.
The severance benefits to be to paid to Mr. Brigham include
(i) a sum equal to (A) the amount of his annual base
salary that he would have received during the remainder of his
employment term under the Employment Agreement, plus (B) an
amount equal to the average annual bonus received during the
immediately preceding two years, multiplied by the number of
years (with portions of a year expressed as a fraction) in the
remainder of his employment term, (ii) immediate vesting of
all previously granted and outstanding restricted stock and
options, (iii) continuation of life insurance coverage
pursuant to Mr. Brighams Employment Agreement for
20 years following his termination, and (iv) continued
participation in medical and dental benefit plans maintained by
the Company as of his termination (if Mr. Brigham was
participating in such Company-maintained plans as of the date of
his termination of employment), provided that such coverage is
either nontaxable or otherwise exempt from Section 409A of
the Code. Mr. Brighams Employment Agreement contains
an automatic revolver such that there will never be less than
three years left in its term.
A-27
The following table summarizes the severance, health and life
and disability benefits payable to our named executive officers
following a Change in Control and Termination Event and to our
Chief Executive Officer if we terminate for Good Reason or other
than Cause.
Potential
Post-Employment Severance Payments
At December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
All Other
|
|
|
|
|
Severance Pay
|
|
Health Benefits
|
|
Benefits
|
|
Total
|
Name
|
|
($)
|
|
($)(a)
|
|
($)(a)
|
|
($)
|
|
Ben M. Brigham
|
|
$
|
2,239,534
|
|
|
$
|
25,151
|
|
|
$
|
896
|
|
|
$
|
2,265,581
|
|
Eugene B. Shepherd, Jr.
|
|
|
621,417
|
|
|
|
25,151
|
|
|
|
896
|
|
|
|
647,464
|
|
David T. Brigham
|
|
|
526,037
|
|
|
|
25,151
|
|
|
|
896
|
|
|
|
552,084
|
|
Jeffery E. Larson
|
|
|
493,092
|
|
|
|
25,151
|
|
|
|
2,057
|
|
|
|
520,300
|
|
A. Lance Langford
|
|
|
508,076
|
|
|
|
25,151
|
|
|
|
896
|
|
|
|
534,123
|
|
|
|
|
(a)
|
|
Health and All Other Benefits calculated using the name
executive officers benefit elections in place as of
December 31, 2010.
|
Income
Tax Considerations
Section 162(m) of the Code generally disallows a federal
income tax deduction to any publicly held corporation for
compensation paid in excess of $1 million in any taxable
year to the chief executive officer or any of the three other
most highly compensated executive officers (other than our
principal financial officer) who are employed by the corporation
on the last day of the taxable year, but does allow a deduction
for performance-based compensation as defined by the
Code. We believe that the stock option awards under the 1997
Incentive Plan qualify as performance-based compensation and are
not subject to any deductibility limitations under Code
Section 162(m). However, salary and bonuses paid to the
executive officers and restricted stock grants made pursuant to
the 1997 Incentive Plan are not exempt from this limit.
We consider deductibility in the design and administration of
our other executive compensation plans and programs. However, we
believe that it is in our best interests and the best interest
of our stockholders that we retain flexibility and discretion to
make compensation awards, whether or not deductible, when such
awards are consistent with our strategic goals.
Section 280G of the Code limits the tax deductibility by
corporations of amounts paid to certain persons that are treated
as excess parachute payments. Excess parachute payments are also
subject to an excise tax payable by the recipient of such
payments. Parachute payments arise with regard to payments made
to executives in connection with a transaction that gives rise
to a change in the ownership or effective control of us or in
the ownership of a substantial portion of our assets. Parachute
payments become excess parachute payments if the total amount of
such payments exceeds a certain threshold amount. Examples of
types of payments that could give rise to parachute payments are
accelerated vesting of stock options and restricted stock upon a
change of control and severance payments made upon termination
of employment in connection with a change of control.
Director
Compensation
In 2010, non-employee directors received an annual retainer of
$23,000 and $2,500 per meeting attended in person or $1,000 per
meeting attended by phone. The Chairman of the Audit Committee
received an annual retainer of $10,500 and other members of the
Audit Committee received a $5,000 annual retainer. The Chairman
of the Compensation Committee received an annual retainer of
$5,200 and other members of the committee received a $4,000
annual retainer. Members of committees receive $1,100 per
meeting attended in person or by phone. For 2011, non-employee
directors will receive an annual retainer of $39,000, the
Chairman of the Audit Committee will receive an annual retainer
of $15,000 and the Chairman of the
A-28
Compensation Committee will receive an annual retainer of
$10,000. All other retainers and meeting fees will remain
unchanged.
Pursuant to our 1997 Director Stock Option Plan, each newly
elected non-employee director is granted an option to purchase
20,000 shares of our common stock. In addition, each
non-employee director receives an option to purchase
10,000 shares of our common stock on December 31 of each
year. The options under the plan are granted at fair market
value on the grant date and become exercisable, subject to
certain conditions, in five equal annual installments on the
first five anniversaries of the grant date. In the event any
person will become the beneficial owner of more than 49% of our
equity interests, then immediately prior to such event, all
unvested stock options will vest.
The following table summarizes the annual compensation for our
non-employee directors during 2010. Messrs. Ben M.
Bud Brigham and David T. Brigham are employee
directors and did not receive any additional compensation for
their service on our Board of Directors.
Director
Compensation Table
For Fiscal Year-Ending December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Pension
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
Value and Non-
|
|
|
|
|
|
|
Earned or
|
|
|
|
|
|
Non-Equity
|
|
Qualified Deferred
|
|
|
|
|
|
|
Paid in
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
|
|
Cash
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Name
|
|
($)
|
|
($)
|
|
($)(a)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Harold D. Carter
|
|
$
|
55,900
|
|
|
$
|
|
|
|
$
|
178,300
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
234,200
|
|
Stephen C. Hurley
|
|
|
62,700
|
|
|
|
|
|
|
|
178,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
241,000
|
|
Stephen P. Reynolds
|
|
|
53,000
|
|
|
|
|
|
|
|
178,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
231,300
|
|
Hobart A. Smith
|
|
|
54,700
|
|
|
|
|
|
|
|
178,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233,000
|
|
Scott W. Tinker
|
|
|
50,000
|
|
|
|
|
|
|
|
178,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
228,300
|
|
|
|
|
(a)
|
|
The grant date fair value is determined in accordance with FASB
ASC Topic 718. The grant date fair value of restricted shares is
determined by the mean of the high and low sales prices on the
date of grant. An option pricing model is used to determine the
fair value of option awards.
|
A-29
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below provides information concerning (i) the
only persons known by us, based upon statements filed by such
persons pursuant to Section 13(d) or 13(g)
and/or
Section 16 of the Exchange Act, to own beneficially in
excess of 5% of the common stock as of October 27, 2011,
and (ii) the shares of common stock beneficially owned, as
of October 27, 2011, by each current director, each
executive officer listed in the Summary Compensation Table on
page A-21,
and all current directors and executive officers as a group.
Except as indicated, each individual has sole voting power and
sole investment power over all shares listed opposite his name.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficially
|
|
|
Options
|
|
|
|
|
|
|
|
|
|
Owned
|
|
|
Exercisable
|
|
|
Total Shares
|
|
|
|
|
|
|
Excluding
|
|
|
Within
|
|
|
Beneficially
|
|
|
Percent
|
|
|
|
Options
|
|
|
60 days
|
|
|
Owned(a)
|
|
|
of Class
|
|
|
Directors and Executive Officers(b):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ben M. Brigham(c)
|
|
|
2,089,512
|
|
|
|
220,000
|
|
|
|
2,309,512
|
|
|
|
1.90
|
%
|
David T. Brigham(d)
|
|
|
153,507
|
|
|
|
172,000
|
|
|
|
325,507
|
|
|
|
*
|
|
A. Lance Langford
|
|
|
70,833
|
|
|
|
114,000
|
|
|
|
184,833
|
|
|
|
*
|
|
Jeffery E. Larson(e)
|
|
|
45,037
|
|
|
|
94,275
|
|
|
|
139,312
|
|
|
|
*
|
|
Eugene B. Shepherd, Jr.
|
|
|
164,376
|
|
|
|
262,000
|
|
|
|
426,376
|
|
|
|
*
|
|
Harold D. Carter(f)
|
|
|
349,393
|
|
|
|
56,000
|
|
|
|
405,393
|
|
|
|
*
|
|
Stephen C. Hurley
|
|
|
31,500
|
|
|
|
56,000
|
|
|
|
87,500
|
|
|
|
*
|
|
Stephen P. Reynolds
|
|
|
133,777
|
|
|
|
46,000
|
|
|
|
189,777
|
|
|
|
*
|
|
Hobart A. Smith
|
|
|
52,614
|
|
|
|
56,000
|
|
|
|
108,614
|
|
|
|
*
|
|
Scott W. Tinker
|
|
|
1,500
|
|
|
|
26,000
|
|
|
|
27,500
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All current directors and executive officers as a group
(10 persons)
|
|
|
3,092,049
|
|
|
|
1,102,275
|
|
|
|
4,204,324
|
|
|
|
3.45
|
%
|
|
|
|
*
|
|
Represents less than 1%
|
|
(a)
|
|
According to SEC rules, beneficial ownership includes shares as
to which the individual or entity has voting power or investment
power and any shares that the individual has the right to
acquire within 60 days of the date of this table through
the exercise of any stock option or other right.
|
|
(b)
|
|
Unless otherwise indicated, the business address of each
director and executive officer is 6300 Bridge Point Parkway,
Building Two, Suite 500, Austin, Texas 78730.
|
|
(c)
|
|
Shares beneficially owned include 881,534 shares owned by
Ben M. Brigham and 648,740 owned by Anne L. Brigham,
3,482 shares owned by Brigham Parental Trust I (of
which Mr. and Mrs. Brigham are the trustees and which is
for the benefit of Ben Brighams mother), 1,106 shares
owned by Brigham Parental Trust II (of which Mr. and
Mrs. Brigham are the trustees and which is for the benefit
of Anne Brighams parents), 147,500 shares owned by
the 2005 Brigham Family Revocable Trust, 159,425 shares
owned by the Ben M. Brigham Grat U/a November 26, 2008
Trust, 159,425 shares owned by the Anne L. Brigham Grat U/a
November 26, 2008 Trust, and 88,400 shares held by
David T. Brigham, as custodian for each of Mr. and
Mrs. Brighams five children.
|
|
(d)
|
|
Shares beneficially owned include 88,400 shares held as a
custodian for the children of Ben M. Brigham and Anne L. Brigham.
|
|
(e)
|
|
Includes 270 shares owned by Mr. Larsons spouse.
|
|
(f)
|
|
Shares beneficially owned included 49,300 shares owned by
Harold D. Carter and 300,393 shares owned by a family
partnership.
|
The shares of common stock shown as being beneficially owned by
the persons and group in the table above do not include shares
subject to unvested stock options or shares of restricted stock
that do not vest by their terms within 60 days of the date
of this table. The vesting of all such unvested stock options
and shares
A-30
of restricted stock will be accelerated, and such stock options
and restricted stock will vest in full, immediately prior to the
Acceptance Time, as described in Item 3 of the
Schedule 14D-9
under the caption Arrangements between the Company and its
Executive Officers, Directors and Affiliates Effect
of the Offer and the Merger Agreement on Equity Awards.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors
and officers, and persons who own more than 10% of our
outstanding common stock, to file with the SEC initial reports
of ownership and reports of changes in ownership of our common
stock. Directors, officers and more than 10% stockholders are
required by SEC regulations to furnish us with copies of all
Section 16(a) forms they file. To our knowledge, based
solely on a review of the copies of such reports furnished to us
and written representations that no other reports were required,
during the year ended December 31, 2010, all of our
directors, officers and persons who owned more than 10% of our
outstanding common stock complied with all applicable
Section 16(a) filing requirements, except as follows:
(1) Mr. Lance Langford filed one late Form 4,
containing one transaction not reported on a timely basis, and
(2) Mr. Eric Sigsbey filed one late Form 4,
containing one transaction not reported on a timely basis.
TRANSACTIONS
WITH RELATED PERSONS
In the ordinary course of our business, we purchase products or
services from, or engage in other transactions with, various
third parties. Occasionally, these transactions may involve
entities that are affiliated with one or more members of our
Board of Directors. When they occur, these transactions are
conducted in the ordinary course of business and on an
arms-length basis. We adopted a Related Party Transaction Policy
by unanimous consent of the Board of Directors on
January 29, 2008. Under the Related Party Transaction
Policy, the Audit Committee will review and approve or ratify
any related person transaction that is required to be disclosed.
This review will include the following:
|
|
|
|
|
the nature of the related persons interest in the
transaction;
|
|
|
|
the material terms of the transaction, including, without
limitation, the amount and type of transaction;
|
|
|
|
the importance of the transaction to the related person;
|
|
|
|
the importance of the transaction to us;
|
|
|
|
whether the transaction would impair the judgment of a director
or executive officer to act in our best interest; and
|
|
|
|
any other matters deemed appropriate.
|
Any director who is a related person with respect to a
transaction under review will not participate in the
deliberations or vote respecting approval or ratification of the
transaction; provided, however, that such director will be
counted in determining the presence of a quorum at the meeting
where the transaction is considered.
In connection with land work necessary for certain of our
3-D
exploration, drilling and development operations, we engage
Brigham Land Management (BLM), an independent company owned and
managed by Vincent M. Brigham, a brother of Ben M. Brigham, who
is our Chief Executive Officer, President and Chairman of the
Board, and David T. Brigham, who is a director and our Executive
Vice
President-Land
and Administration. During 2010, we compared rates charged by
BLM against the rates being charged by other consulting field
land brokers and found BLMs rates to be consistent with
others being charged in the industry. During 2010, we incurred
costs charged by BLM of approximately $9.7 million. Other
participants in our exploration and development projects
reimbursed us for a portion of these amounts. At
December 31, 2010, we owed BLM $1,000.
A-31
STOCKHOLDER
PROPOSALS
If the transactions contemplated by the Merger Agreement are not
consummated, it is contemplated that the Annual Meeting of
Stockholders in 2012 will take place during the fourth week of
May or the first week in June 2012. Stockholder proposals for
inclusion in our proxy materials for the Annual Meeting of
Stockholders in 2012 must be received at our principal executive
office in Austin, Texas, addressed to the Corporate Secretary of
Brigham Exploration Company, not later than January 21,
2012.
With respect to stockholder proposals which are not intended to
be included in our proxy materials, our bylaws provide that
notice of any such stockholder proposal nominating persons for
election to the Board of Directors must be received at our
principal executive office not later than 90 days prior to
the Annual Meeting of Stockholders; and all other stockholder
proposals must be received not less than 60 nor more than
120 days prior to the meeting.
COMMUNICATIONS
WITH THE BOARD OF DIRECTORS
Stockholders may communicate with the members of our Board of
Directors by submitting correspondence to our Corporate
Secretary, Attention: Name of Board Member, Brigham Exploration
Company, 6300 Bridge Point Parkway, Building Two,
Suite 500, Austin, Texas, 78730.
A-32
ANNEX B
Board of Directors
Brigham Exploration Company
6300 Bridge Point Parkway
Austin, Texas 78730
Members of the Board of Directors:
We understand that Brigham Exploration Company (the
Company
), Statoil ASA
(
Parent
) and Fargo Acquisition Inc., a
wholly-owned subsidiary of Parent (
Merger
Sub
), propose to enter into an Agreement and Plan of
Merger (the
Merger Agreement
), pursuant to
which (i) Merger Sub will commence a tender offer (the
Tender Offer
) for all outstanding shares of
common stock, par value $0.01 per share, of the Company
(
Common Stock
) for $36.50 in cash (the
Offer Price
) and (ii) Merger Sub will
subsequently merge with and into the Company (the
Merger
and, together with the Tender Offer,
the
Transaction
). Pursuant to the
Merger, the Company will become a wholly-owned subsidiary of
Parent, and each outstanding share of Common Stock, other than
shares held by Parent, Merger Sub or the Company or any direct
or indirect wholly-owned subsidiary of Parent, Merger Sub or the
Company or as to which dissenters rights have been
perfected, will be converted into the right to receive the Offer
Price. The terms and conditions of the Tender Offer and the
Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Offer Price to
be received by holders of shares of Common Stock in the Tender
Offer and the Merger is fair, from a financial point of view, to
the holders of shares of Common Stock.
In arriving at our opinion, we have, among other things:
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(i)
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reviewed a draft dated October 16, 2011 of the Merger
Agreement;
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(ii)
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reviewed certain publicly available financial and other
information about the Company;
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(iii)
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reviewed certain information furnished to us by the management
of Company, including financial forecasts and analyses, relating
to the business, operations and prospects of the Company;
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(iv)
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held discussions with members of senior management of the
Company concerning the matters described in
clauses (ii)
and
(iii)
above;
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B-1
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(v)
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reviewed the share trading price history and valuation multiples
for the Common Stock and compared them with those of certain
publicly traded companies that we deemed relevant;
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(vi)
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compared the proposed financial terms of the Transaction with
the financial terms of certain other transactions that we deemed
relevant;
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(vii)
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performed a discounted cash flow analysis, based on projections
provided by the management of the Company, to analyze the
present value of the future unlevered cash flow streams that the
management of the Company expects to generate;
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(viii)
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reviewed certain proved oil and gas reserve data as of
December 31, 2010 furnished to us by the Company and
available in the Companys public filings; and
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(ix)
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conducted such other financial studies, analyses and
investigations as we deemed appropriate.
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In our review and analysis and in rendering this opinion, we
have assumed and relied upon, but have not assumed any
responsibility to independently investigate or verify, the
accuracy and completeness of all financial and other information
that was supplied or otherwise made available by the Company or
that was publicly available to us (including, without
limitation, the information described above), or that was
otherwise reviewed by us. We have relied on assurances of the
management of the Company that it is not aware of any facts or
circumstances that would make such information inaccurate or
misleading. In our review, we did not obtain any independent
evaluation or appraisal of any of the assets or liabilities of,
nor did we conduct a physical inspection of any of the
properties or facilities of, the Company, nor have we been
furnished with any such evaluations or appraisals of such
physical inspections, nor do we assume any responsibility to
obtain any such evaluations or appraisals.
With respect to the financial forecasts provided to and examined
by us, we note that projecting future results of any company is
inherently subject to uncertainty. The Company has informed us,
however, and we have assumed, that such financial forecasts were
reasonably prepared on bases reflecting the best currently
available estimates and good faith judgment of the management of
the Company as to the future financial performance of the
Company. We express no opinion as to the financial forecasts
provided to us by the Company or the assumptions on which they
are made.
Our opinion is based on economic, monetary, regulatory, market
and other conditions that exist and can be evaluated as of the
date hereof. We expressly disclaim any undertaking or obligation
to advise any person of any change in any fact or matter
affecting our opinion of which we become aware after the date
hereof.
We have made no independent investigation of any legal or
accounting matters affecting the Company, and we have assumed
the correctness in all respects material to our
B-2
analysis of all legal and
accounting advice given to the Company and the Board of
Directors of the Company (the
Board of
Directors
), including, without limitation, advice as
to the legal, accounting and tax consequences of the terms of,
and transactions contemplated by, the Merger Agreement to the
Company and its stockholders. In addition, in preparing this
opinion, we have not taken into account any tax consequences of
the transaction to any holder of Common Stock. We have assumed
that the final form of the Merger Agreement will be
substantially similar to the last draft reviewed by us. We have
also assumed that in the course of obtaining the necessary
regulatory or third party approvals, consents and releases for
the Transaction, no delay, limitation, restriction or condition
will be imposed that would have an adverse effect on the Company
or the contemplated benefits of the Transaction.
It is understood that our opinion is for the use and benefit of
the Board of Directors in its consideration of the Transaction,
and our opinion does not address the relative merits of the
transactions contemplated by the Merger Agreement as compared to
any alternative transaction or opportunity that might be
available to the Company, nor does it address the underlying
business decision by the Company to engage in the Transaction or
the terms of the Merger Agreement or the documents referred to
therein. Our opinion does not constitute a recommendation as to
whether any holder of shares of Common Stock should tender
shares of Common Stock pursuant to the Tender Offer or how any
holder of shares of Common Stock should vote with respect to the
Merger or any matter related thereto. In addition, you have not
asked us to address, and this opinion does not address, the
fairness to, or any other consideration of, the holders of any
class of securities, creditors or other constituencies of the
Company, other than the holders of shares of Common Stock. We
express no opinion as to the price at which shares of Common
Stock will trade at any time. Furthermore, we do not express any
view or opinion as to the fairness, financial or otherwise, of
the amount or nature of any compensation payable or to be
received by any of the Companys officers, directors or
employees, or any class of such persons, in connection with the
Transaction, whether relative to the Offer Price or otherwise.
Our opinion has been authorized by the Fairness Committee of
Jefferies & Company, Inc.
We have been engaged by the Company to act as financial advisor
to the Company in connection with the Transaction and will
receive a fee for our services, a portion of which is payable
upon delivery of this opinion and a significant portion of which
is payable contingent upon consummation of the Transaction. We
also will be reimbursed for expenses incurred. The Company has
agreed to indemnify us against liabilities arising out of or in
connection with the services rendered and to be rendered by us
under such engagement. We have, in the past, provided financial
advisory and financing services to both the Company and Parent,
including providing financial advisory services and advice to
Parent in connection with dispositions and acquisitions of
assets, and may continue to do so and have received, and may
receive, fees for the rendering of such services. We maintain a
market in the securities of the Company (but not Parent), and in
the ordinary course of our business, we and our affiliates may
trade or hold securities of the Company or Parent
and/or
their
respective affiliates for our own account and for the accounts
of our customers and,
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accordingly, may at any time hold
long or short positions in those securities. In addition, we may
seek to, in the future, provide financial advisory and financing
services to the Company, Parent or entities that are affiliated
with the Company or Parent, for which we would expect to receive
compensation. Except as otherwise expressly provided in our
engagement letter with the Company, our opinion may not be used
or referred to by the Company, or quoted or disclosed to any
person in any matter, without our prior written consent.
Based upon and subject to the foregoing, we are of the opinion
that, as of the date hereof, the Offer Price to be received by
holders of shares of Common Stock in the Tender Offer and the
Merger is fair, from a financial point of view, to the holders
of shares of Common Stock.
Very truly yours,
JEFFERIES & COMPANY, INC.
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