Other Compensation Perquisites and Other Benefits Benefits represent a relatively small part of our overall compensation package, comprising only 2% and 4% of our CEO and the average of our other NEO’s total compensation. However, these benefits help attract and retain senior level executives, and we review these benefits annually to ensure that they are competitive with industry norms. We provide benefits to all of our employees commonly offered in the oil an d gas E&P industry. These benefits consist of: x x x x x x
Group medical and dental insurance program for employees and their qualified dependents; Group life insurance for employees and their spouses; Accidental death and dismemberment coverage for employees; Long-term disability coverage Callon sponsored cafeteria plan; and a 401(k) employee savings and protection plan.
We pay the full costs of these benefits, including the 401(k) plan administration for all employees. Employee life insurance amounts surpassing the Internal Revenue Service maximum are treated as additional compensation to all employees. Our 401(k) contribution to each qualified participant, including the NEOs, is calculated based on 5% of the employee’s IRS eligible salary, excluding annual cash b onuses, and is paid one-half in cash and one-half in our common stock, limited to IRS regulation dollar limits. We also match employee deferral amounts, including amounts deferred by NEO, up to a maximum of 5% of IRS eligible compensation. Each year, we purchase a certain number of hours of flight time through a fractional aircraft ownership arrangement. These hours are made available for business use to the NEOs and our other employees in connection with their business travel requirements in an effort to reduce travel time and related disruptions and to provide additional security. We believe these flight hours are a cost-effective way to increase the NEOs availability, efficiency, and productivity. The Committee disallows employees, including NEOs, from using these hours for personal use, though the Committee recognizes occasions will arise when a personal guest (including a family member) will accompany an employee on a business related flight at no, or immaterial, incremental cost to Callon. Our NEOs are entitled to certain benefits, or perquisites, that are not otherwise available to all of our employees. We provide the CEO, CFO and other executive officers with use of a Company automobile. We purchase the automobile and pay for all maintenance, repairs, insurance and fuel. The employee is required to recognize taxable income using the Internal Revenue Service’s annual lease value method for personal use of the vehicle. We also pay a portion of the annual premium for our CEO’s term life insurance policy, for which he is the sole beneficiary. The costs associated with these benefits for the NEOs are reported as “Other Compensation” in the Summary Compensation Table. The Committee believes these perquisites are modest yet competitive with the perquisites p rovided to similarly situated oil and gas industry executives, and include the value of such benefits in determining total compensation of our NEOs. Severance Protection We have no employment agreements with our NEOs, though we believe that providing con sistent, competitive levels of severance protection to senior executives helps minimize distraction during times of uncertainty and encourage retention in these situations. To align with market practices, facilitate our ability to attract and retain execut ives, and ensure all NEOs are motivated to consider transactions that could increase stockholder value, we have entered into change -in-control severance compensation agreements with our NEOs, which include continued salary, benefits and accelerated vesting of equity awards. We believe that these provisions create important retention tools, and provide our NEOs with value in the event of a termination of employment that was beyond management’s control. In addition, the Committee believes that it is important to provide the NEOs with a sense of stability, both in the midst of transactions that may create uncertainty regarding their future employment and post-termination as they seek future employment. We believe post -termination payments allow management to focus their attention and energy on making objective business decisions that are in our best interest, without allowing personal considerations to overshadow the decision -making process. 42
