UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☑
Filed by a Party other than the Registrant ☐
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☐ Preliminary Proxy Statement
☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☑ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material Pursuant to §240.14a-12
DORCHESTER MINERALS, L.P.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☑ No fee required.
☐ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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☐ Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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Amount Previously Paid: |
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| (4) | Date Filed: |
Dorchester Minerals, L.P.
3838 Oak Lawn Avenue, Suite 300
Dallas, Texas 75219-4541
April 14, 2017
To our fellow Unitholders:
Significant results include the following:
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● |
Net Income of $21.0 million; |
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Distributions of $26.3 million to our limited partners; |
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Identification of 270 new wells completed on our Royalty Properties in seven states and 39 new wells completed on our NPI Properties in three states. Included in these totals are wells in which we own both a royalty interest and a net profits interest. Wells with such overlapping interests are counted in both categories. |
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Consummation of 37 leases and pooling elections of our mineral interest in undeveloped properties located in 22 counties and parishes in seven states. |
The enclosed Annual Report on Form 10-K includes information about activity on our Royalty Properties and Net Profits Interests. We encourage you to read this information and to contact us with any questions about your investment. In addition, the enclosed Proxy Statement contains important information concerning matters to be voted upon at our 2017 Annual Meeting. Please read the Proxy Statement and submit your vote at your earliest convenience.
We thank you for your continued support.
Very truly yours,
William Casey McManemin
Chairman and Chief Executive Officer
Dorchester Minerals, L.P.
3838 Oak Lawn Avenue, Suite 300
Dallas, Texas 75219-4541
NOTICE OF ANNUAL MEETING OF LIMITED PARTNERS
To Be Held on May 16, 2017
To the Unitholders of Dorchester Minerals:
The Annual Meeting of the Limited Partners of Dorchester Minerals, L.P. will be held at 2:00 p.m. Central Time on Tuesday, May 16, 2017, at the office of Thompson & Knight LLP, One Arts Plaza, 1722 Routh Street, Suite 1500, Dallas, TX 75201, for the following purposes:
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To elect three managers who will serve on the Board of Managers and be appointed to the Advisory Committee until the 2018 Annual Meeting of Limited Partners; |
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To approve the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year ending December 31, 2017; |
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To hold an advisory vote on the compensation of our named executive officers, as disclosed pursuant to Item 402 of Regulation S-K or any successor thereto; |
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To hold an advisory vote on the frequency of the advisory vote on executive compensation; and |
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To consider any other matters that may properly come before the meeting. |
Only holders of record of common units as of the close of business on March 23, 2017 are entitled to notice of, and to vote at, the meeting.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, WE URGE YOU TO VOTE USING ONE OF THE VOTING METHODS DESCRIBED IN THE ATTACHED MATERIALS AT YOUR EARLIEST CONVENIENCE.
By Order of the Board of Managers of
Dorchester Minerals Management GP LLC,
/s/ William Casey McManemin
William Casey McManemin
Chairman and Chief Executive Officer
April 14, 2017
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Limited Partners to be Held on May 16, 2017:
The Partnership’s Proxy Statement for the 2017 Annual Meeting of
Limited Partners and Annual Report on Form 10-K for the fiscal
year ended December 31, 2016 are available at www.dmlp.net.
Dorchester Minerals, L.P.
3838 Oak Lawn Avenue, Suite 300
Dallas, Texas 75219-4541
PROXY STATEMENT
For
ANNUAL MEETING OF LIMITED PARTNERS
To Be Held on May 16, 2017
SOLICITATION OF PROXIES
This Proxy Statement is being furnished to holders of common units in connection with the solicitation of proxies by our Board of Managers for use at the Dorchester Minerals, L.P. 2017 Annual Meeting. Our general partner is Dorchester Minerals Management LP, and its general partner is Dorchester Minerals Management GP LLC. As a result, the Board of Managers of Dorchester Minerals Management GP LLC exercises effective control of us. Dorchester Minerals Management LP is referred to herein as our general partner, and Dorchester Minerals Management GP LLC is referred to herein as the general partner of our general partner. The approximate date on which definitive copies of this proxy statement and form of proxy are intended to be released to Unitholders is April 14, 2017.
When and Where Is the 2017 Annual Meeting?
The 2017 Annual Meeting will be held at 2:00 p.m. Central Time on Tuesday, May 16, 2017, at the office of Thompson & Knight LLP, One Arts Plaza, 1722 Routh Street, Suite 1500, Dallas, TX 75201.
What Are The Board of Managers’ Proposals?
To elect three managers who will serve on the Board of Managers and be appointed to the Advisory Committee, to approve the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year ending December 31, 2017, to approve, by a non-binding advisory vote the compensation paid to the Partnership’s named executive officers as described in this Proxy Statement, and to approve, by a non-binding advisory vote the frequency of submission to unitholders of advisory “Say on Pay” proposals.
How Does the Board of Managers Recommend I Vote on the Proposals?
The Board of Managers recommends a vote FOR each of the nominees to serve on the Board of Managers and the Advisory Committee, a vote FOR the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year ending December 31, 2017, a vote FOR the approval of the compensation paid to the Partnership’s named executive officers, as described in this Proxy Statement, and a vote FOR “3 years” as the frequency for voting on “Say on Pay” proposals.
How Will Voting On Any Other Business Be Conducted?
The Board of Managers does not know of any business to be considered at the 2017 Annual Meeting other than the proposals described in this Proxy Statement. However, if any other business is properly presented, your signed proxy card gives authority to the persons named in the proxy to vote on such matters at their discretion.
Who Is Entitled to Vote?
Each Unitholder as of the close of business on March 23, 2017, the record date, is entitled to vote at the 2017 Annual Meeting.
How Many Units May Be Voted?
As of the record date, 30,675,431 units were outstanding. Each unit entitles its holder to one vote.
What is a “Quorum”?
A quorum is established if a majority of the outstanding units are represented in person or by proxy at the 2017 Annual Meeting. There must be a quorum for the 2017 Annual Meeting to be held. If you submit a properly executed proxy card, you will be considered part of the quorum. Proxies received by us that are marked “withhold authority” or abstain, or that constitute a broker non-vote, are counted as present for purposes of establishing a quorum. A broker non-vote occurs when a broker returns a valid proxy but does not vote on a particular matter because the broker does not have the discretionary voting power for that matter and has not received instructions from the beneficial owner.
What Vote Is Required to Approve the Proposals?
The affirmative vote of holders of a plurality of the outstanding units is required to elect each manager to the Board of Managers. Thus, any abstentions, broker non-votes or other limited proxies will have no effect on the outcome of the election of managers. The affirmative vote of holders of a majority of the units present in person or represented by proxy at the annual meeting and entitled to vote thereon is required to approve the appointment of Grant Thornton LLP as our registered independent public accounting firm for the year ending December 31, 2017. Abstentions will have the effect of votes against the proposal to approve Grant Thornton LLP as our independent public accounting firm, but broker non-votes and other limited proxies will have no effect on this proposal. The affirmative vote of holders of a majority of the units held by Unitholders entitled to vote thereon and present in person or by proxy shall constitute the unitholders’ non-binding approval of the “Say on Pay” proposal. Abstentions will have the effect of votes against the proposal to approve the “Say on Pay” proposal, but broker non-votes and other limited proxies will have no effect on this proposal. The affirmative vote of holders of a majority of the units held by Unitholders entitled to vote thereon and present in person or by proxy shall constitute the unitholders’ non-binding approval of the frequency of the advisory vote by unitholders on executive compensation. Thus, any abstentions, broker non-votes and other limited proxies will have no effect on the outcome of the vote. If none of the alternatives receive a majority vote, we will consider the highest number of votes cast by Unitholders to be the frequency that has been selected by the unitholders.
How Do I Vote?
You may vote by any one of three different methods:
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In Writing - You can vote by marking, signing and dating the enclosed proxy card and returning it in the enclosed envelope. If you return your signed proxy card, but do not give instructions as to how you wish to vote, your units will be voted FOR proposal nos. 1, 2 and 3 and for three years in accordance with the Board of Managers’ recommendation for proposal no. 4. |
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By Telephone - You can vote by calling the telephone number on the proxy card and following the instructions. Please have the proxy card in hand when calling. |
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In Person - You can vote by attending the 2017 Annual Meeting. |
Units represented by properly executed proxies that are not revoked will be voted in accordance with the instructions shown on the proxy card. You have the right to revoke your proxy at any time before the 2017 Annual Meeting by:
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Delivering to Dorchester Minerals, L.P., Attn: 2017 Annual Meeting, 3838 Oak Lawn Avenue, Suite 300, Dallas, Texas, 75219-4541, a written revocation; |
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Voting in person at the 2017 Annual Meeting; or; |
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Returning a later-dated proxy card. |
Attendance at the 2017 Annual Meeting will not, without further action by you, revoke your proxy.
Unitholders have no dissenters’ rights or rights of appraisal under Delaware law or our Amended and Restated Agreement of Limited Partnership.
What Does It Mean If I Receive More Than One Proxy Card?
If your units are registered differently and/or are in more than one account, you will receive more than one proxy card. Please mark, sign, date, and return all of the proxy cards you receive to ensure that all of your units are voted. We encourage you to have all accounts registered in the same name and address (whenever possible). You can accomplish this by contacting our transfer agent, American Stock Transfer & Trust Company, at (800) 937-5449.
How Can I Vote If My Units Are Held in “Street Name”?
If your units are held in the name of your broker, a bank, or other nominee, that party will give you instructions about how to vote your units.
Who Will Count the Votes?
Representatives of Broadridge Investor Communication Services, an independent tabulator, will count the votes and act as the inspector of election.
Where and When Will I Be Able to Find Out the Results of Voting?
In addition to announcing the results at the 2017 Annual Meeting, you will also be able to find the results in our Form 8-K that will be publicly filed within four business days of the 2017 Annual Meeting.
Who Is Bearing the Cost Of This Proxy Solicitation?
We are bearing the cost of soliciting proxies for the 2017 Annual Meeting. In addition to using the mail, managers, officers and employees may solicit proxies by telephone, personal interview or otherwise. They will not receive additional compensation for this activity but may be reimbursed for their reasonable out-of-pocket expenses. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to Unitholders.
How Can I Obtain A Copy of the Annual Report on Form 10-K?
A copy of our 2016 Annual Report on Form 10-K, including the consolidated financial statements filed therewith is included with this proxy statement. We will provide an additional copy of our 2016 Annual Report on Form 10-K, including the consolidated financial statements, upon written request to Dorchester Minerals, L.P., Attn: 2017 Annual Meeting, 3838 Oak Lawn Avenue, Suite 300, Dallas, Texas 75219-4541. We will furnish a requesting Unitholder with any exhibit not contained therein upon payment of a reasonable fee.
When Are the Unitholder Proposals For the 2018 Annual Meeting of Limited Partners Due?
We presently expect that our next Annual Meeting of Limited Partners will be held on May 16, 2018. Unitholder proposals for inclusion in the proxy materials relating to the 2018 Annual Meeting must be received at our principal executive office at 3838 Oak Lawn Avenue, Suite 300, Dallas, Texas 75219-4541, addressed to our general partner no later than December 15, 2017. In accordance with our Amended and Restated Agreement of Limited Partnership, Unitholders who intend to present a proposal at the 2018 Annual Meeting without inclusion of such proposal in our proxy materials are required to provide notice of such proposal to us no later than March 17, 2018, and Unitholders who intend to nominate a manager for election to the Board of Managers and Advisory Committee are required to provide notice of such proposal to us no later than February 15, 2018. If the date of the 2018 Annual Meeting is changed to a different month, we will advise our Unitholders of the new date for the submission of Unitholder proposals in one of our periodic filings with the Securities and Exchange Commission.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of our common units as of March 2, 2017. The information is set forth for (i) each nominee and current manager and named executive officer of the general partner of our general partner, (ii) all executive officers and managers of the general partner of our general partner as a group, and (iii) all those known by us to be beneficial owners of more than 5% of our common units.
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Beneficial Ownership(1) |
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Name of Beneficial Owner |
Number of Units |
Percentage | ||||
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Executive Officers, Managers and Nominees to be Managers(2) |
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William Casey McManemin (3) |
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1,212,427 |
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4.0% | ||
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James E. Raley (4) |
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13,000 |
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* | ||
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H.C. Allen, Jr. (5) |
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267,513 |
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.9% | ||
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Martha P. Rochelle (6) |
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860,376 |
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2.8% | ||
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Robert C. Vaughn (7) |
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457,948 |
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1.5% | ||
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Buford P. Berry (8) |
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2,000 |
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* | ||
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C.W. (“Bill”) Russell (9) |
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6,000 |
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* | ||
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Ronald P. Trout (10) |
13,555 |
* | ||||
| Bradley J. Ehrman (11) | 38,173 | .1% | ||||
| Leslie A. Moriyama (12) | 4,077 | * | ||||
| All executive officers and managers and nominees to be managers as a group (ten persons)(13) | 2,816,314 | 9.2% | ||||
| Holders of 5% or More Not Named Above | ||||||
| Pass Through Partners LLC (14) | 2,928,521 | 9.5% | ||||
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Less than one percent (1%) |
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(1) |
As of the record date, there were 30,675,431 common units outstanding. |
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(2) |
Unless otherwise indicated, the business address of each manager and executive officer of the general partner of our general partner is c/o Dorchester Minerals Management GP LLC, 3838 Oak Lawn Avenue, Suite 300, Dallas, Texas 75219-4541. |
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(3) |
Includes 660,570 units held by Mr. McManemin, 209,457 units held by 1307, Ltd., 5,531 units held by SAM Partners Management, Inc., 283,645 units held by Ptarmigan Royalty Partners, and 53,224 units held by Smith Allen Oil & Gas, LLP. Mr. McManemin disclaims beneficial ownership of those common units owned by 1307, Ltd., SAM Partners Management, Inc., Ptarmigan Royalty Partners, and Smith Allen Oil & Gas, LLP in which he does not have an economic interest but which he may be deemed to beneficially own based on shared voting and investment power. Mr. McManemin is individually a general partner, is the President of the other general partner and is a limited partner of 1307, Ltd. All of the remaining limited partner interest of 1307, Ltd. is owned by Mr. McManemin’s wife and children. Mr. McManemin is the Vice President and a shareholder of SAM Partners Management, Inc. and is the managing partner in Smith Allen Oil & Gas, LLP. Mr. McManemin is the managing partner of Ptarmigan Royalty Partners. | ||
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Includes 13,000 units held in an Individual Retirement Account for the benefit of Mr. Raley. |
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Includes 32,040 units held by Mr. Allen in his individual name, IRA or Keogh plan, 154,840 units held by Rabbitfoot Investments, LLC, 21,878 units held jointly by Mr. Allen and his spouse in a family trust, 5,531 units held by SAM Partners Management, Inc. and 53,224 units held by Smith Allen Oil & Gas, LLP. Mr. Allen disclaims beneficial ownership of those common units owned by Rabbitfoot Investments, LLC, SAM Partners Management, Inc. and Smith Allen Oil & Gas, LLP in which he does not have an economic interest but which he may be deemed to beneficially own based on shared voting and investment power. Mr. Allen is the Secretary and a shareholder of SAM Partners Management, Inc. and Smith Allen Oil & Gas, LLP. Rabbitfoot Investments, LLC is owned by Rabbitfoot Ranch and Cattle Company, Ltd. and its general partner is RR&CC Management, LLC which is owned by Mr. Allen and his spouse. All of the limited partner interest in Rabbitfoot Ranch and Cattle Company, Ltd. is owned by Mr. Allen’s children. |
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Includes 358,486 units held in the Martha Ann Peak A Trust and 501,890 units held by HighPoint 435 Family LP. Ms. Rochelle disclaims beneficial ownership of those common units owned by HighPoint 435 Family LP in which she does not have an economic interest but which she may be deemed to beneficially own based on shared voting and investment power. Ms. Rochelle serves as a Co-Manager of Trend2436 Asset Management LLC, the general partner of HighPoint 435 Family LP. |
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Includes 427,210 units held by Vaughn Petroleum (DMLP), LLC, 20,001 units held by Empire Partners, Ltd., and 10,737 units held by Mr. Vaughn in his individual name, IRA or Keogh Plan. Mr. Vaughn and his spouse are the only unit holders in Vaughn Petroleum (DMLP), LLC. Mr. Vaughn is the President of Empire (GP), Inc. the general partner of Empire Partners, Ltd. and Mr. Vaughn and his spouse are the shareholders of Empire (GP), Inc. All of the remaining limited partner interest of Empire Partners, Ltd. is owned by Mr. Vaughn and his spouse. |
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The business address for Mr. Berry is 1722 Routh Street, Suite 1500, Dallas, Texas 75201. The 2,000 common units are held in an Individual Retirement Account for the benefit of Mr. Berry. |
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The business address for Mr. Russell is 4695 N FM 2869, Winnsboro, Texas 75494. The 6,000 common units are held in an Individual Retirement Account for the benefit of Mr. Russell. |
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(10) |
Includes 2,250 units held individually by Mr. Trout, 8,000 units held by Mr. Trout and his spouse, 655 units held in an Individual Retirement Account for the benefit of Mr. Trout, 2,250 units held by the Benjamin R. Trout Trust and 400 units held by the Gabriel G. Trout Trust. Mr. Trout disclaims beneficial ownership of those common units owned by the Benjamin R. Trout Trust and the Gabriel G. Trout Trust in which he does not have an economic interest but which he may be deemed to own based on voting and investment power. Mr. Trout is the Trustee for the Benjamin R. Trout Trust and the Gabriel G. Trout Trust. The business address for Mr. Trout is 1241 Mohawk Trail, Richardson, Texas 75080. |
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(11) |
Includes 16,327 common units held by Mr. Ehrman in his individual name, IRA or Keogh Plan and 21,846 units held by Quiscalus Ventures, LLC in which Mr. Ehrman is the sole member. |
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(12) |
Includes 4,077 common units held by Ms. Moriyama and her spouse. |
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(13) |
Pursuant to Instruction 5 to Item 403 of Regulation S-K, the 5,531 units owned by SAM Partners Management, Inc. and the 53,224 units owned by Smith Allen Oil & Gas, LLP included in the beneficial ownership of both Mr. McManemin and Mr. Allen are only included once in this total. |
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(14) |
As reported in a Schedule 13G filed jointly on January 31, 2017 with the Securities and Exchange Commission, Pass Through Partners LLC (“PTP”), Richard LeFrak, Richard Papert, William Field and Karen LeFrak (collectively, the “Reporting Persons”) beneficially own 2,805,022, 2,828,022, 12,000, 2,149, and 3,850 common units, respectively. Each Reporting Person has sole voting and dispositive power over such common units, except that Mr. LeFrak has sole voting and dispositive power over 2,828,022 common units and shared voting and dispositive power over 82,500 common units. Mr. LeFrak is the husband of Ms. LeFrak. Mr. LeFrak is the sole shareholder of the manager of PTP and as such may be deemed to beneficially own the units directly owned by PTP. Mr. LeFrak may also be deemed to beneficially own and share voting and dispositive power over common units that are directly owned by certain LeFrak family trusts and foundations. Mr. Papert and Mr. Field are officers of affiliated entities of PTP. As a result, the Reporting Persons may be deemed to constitute a “group” for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended. Each of the Reporting Persons disclaims beneficial ownership of any units not directly owned by such Reporting Person. The business address of each of the Reporting Persons is: c/o LeFrak Organization, 40 West 57th Street, 23rd Floor, New York, NY 10019. |
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our managers, officers and persons who own more than 10% of our common units to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of common units. Managers, officers and 10% holders of the common units are required by Securities and Exchange Commission rules and 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 representations that no other reports were required, all Section 16(a) filing requirements applicable to our managers, officers and 10% holders were met except in 2016, H.C. Allen, Jr. filed one late Form 4 filing that contained four transactions not reported on a timely basis.
PARTNERSHIP GOVERNANCE
Our business and affairs are managed by and under the direction of the Board of Managers, which exercises all of our corporate powers and establishes broad corporate policies. The leadership of the Board of Managers is vested in the Chairman. In May 2015, the Board of Managers appointed Mr. McManemin, who also serves as our Chief Executive Officer, to be the Chairman of the Board of Managers. The Board of Managers does not have a Lead Independent Manager. However, the Board of Managers believes that this leadership structure is appropriate for the partnership, because our Chief Executive Officer has extensive day-to-day knowledge of the partnership’s operations and effectively facilitates information flow between management and the Board of Managers and the Advisory Committee, which are essential to effective governance.
The Board of Managers consists of five managers appointed by the five members of the general partner of our general partner and three additional managers nominated by these members and elected annually by our limited partners. The elected managers, as a group, must meet the requirements of our Amended and Restated Agreement of Limited Partnership and the Securities and Exchange Commission and NASDAQ Global Select Market (“NASDAQ “) rules for members of an audit committee.
Messrs. Allen, McManemin, Raley and Vaughn and Ms. Rochelle are the five managers appointed by the members of the general partner of our general partner and will hold office until the earlier of their death, resignation or removal from office. In the event of any vacancy on the Board of Managers left by an appointed manager, the member who holds the right to appoint the appointed manager will designate the replacement appointed manager, unless the member who otherwise holds the right to appoint the replacement appointed manager has lost his appointment right.
Messrs. Berry, Russell and Trout are the three managers who were elected at our 2016 Annual Meeting and are the three managers nominated by the members of the general partner of our general partner to stand for election to the Board of Managers at the 2017 Annual Meeting.
In the opinion of the Board of Managers, and as “independent” currently is defined by the NASDAQ rules, and assuming the three nominated managers are elected by the limited partners at the 2017 Annual Meeting, a majority of the Board of Managers after the 2017 Annual Meeting are and will be independent of management and free of any relationship that would interfere with their exercise of independent judgment. The Board of Managers has affirmatively determined that Messrs. Berry, Russell, Trout and Vaughn and Ms. Rochelle are independent. In addition to the NASDAQ “independent” rules, the Board of Managers has also affirmatively determined that Messrs. Berry, Russell and Trout also satisfy the definition of “independent” prescribed by the Securities and Exchange Commission for members of an audit committee.
The Board of Managers held 8 meetings and acted by unanimous written consent 4 times in fiscal 2016. Each Manager attended at least 75% of the total number of meetings of the Board of Managers and of the committees of the Board of Managers on which such Manager served.
The Board of Managers strongly recommends each manager attend the 2017 Annual Meeting of our limited partners. All of the eight managers currently serving attended the 2016 Annual Meeting.
The Board of Managers has an Advisory Committee that consists of Messrs. Berry, Russell and Trout. The Advisory Committee functions as the audit committee and as the compensation committee. In addition, the Advisory Committee addresses all matters concerning conflicts of interest and the application of the Business Opportunities Agreement. The Advisory Committee acted by unanimous written consent one time in fiscal 2016 and held one special meeting.
The Board of Managers does not have a nominating committee or committee performing similar functions and has not adopted a resolution addressing the nominations process nor does it consider diversity with respect to manager nominees or have a diversity policy. This arrangement is appropriate as the nominations for all managers are made by the members of the general partner of our general partner. Messrs. McManemin, Raley, Allen and Vaughn and Ms. Rochelle all participate in the consideration of nominees for the Board of Managers in their capacities as officers and/or managers of the members of the general partner of our general partner. The Board of Managers has not adopted a resolution addressing the nominations process as the general partner of our general partner is legally required to provide its members with the ability to nominate managers.
The Board of Managers does provide a process for Unitholders to send communications to it. Unitholders may contact each member of the Board of Managers in writing at their respective business addresses. See “Security Ownership of Certain Beneficial Owners and Management.”
Our partnership adopted our Code of Business Conduct and Ethics on July 17, 2003. The Board of Managers reviewed the Code of Business Conduct and Ethics in 2016 for adequacy and was satisfied therewith. The Code of Business Conduct and Ethics applies to all officers, managers, advisors and employees of our partnership and its affiliates. Upon written request, we will provide any person, without charge, a copy of the Code of Business Conduct and Ethics. Written requests should be sent to Dorchester Minerals, L.P., Attn: Code of Business Conduct and Ethics, 3838 Oak Lawn Avenue, Suite 300, Dallas, Texas 75219-4541.
ADVISORY COMMITTEE
In their service as the Audit Committee, the members of the Advisory Committee assist the Board of Managers in fulfilling its oversight responsibilities relating to our consolidated financial statements and other financial information; compliance with applicable laws, regulations and our code of conduct; independence and qualifications of the independent auditor; management’s establishment of and adherence to a system of internal accounting and disclosure controls; and the performance of the internal audit function and independent auditors. The Advisory Committee is empowered to investigate any matter brought to its attention with full access to all our books, records, facilities and personnel and may retain outside counsel, auditors or other experts to assist it. Our Board of Managers has adopted a written charter for the Advisory Committee in its service as the Audit Committee specifying its purpose of overseeing the accounting and financial reporting processes, a copy of which can be obtained free of charge on our website at www.dmlp.net. The charter is reviewed periodically to ensure that it meets all applicable legal and NASDAQ listing requirements. As interpreted in the Board of Managers’ business judgment, assuming the three nominated managers are elected by the limited partners at the 2017 Annual Meeting, each member of the Audit Committee is financially literate and two members, including C.W. (“Bill”) Russell, of the Advisory Committee possess accounting or related financial management expertise and are “audit committee financial experts” as described in Item 407(d)(5) of Regulation S-K. None of the members of the Advisory Committee has participated in the preparation of our consolidated financial statements in the previous three years.
We administer our risk oversight function through our Advisory Committee as well as through our Board of Managers as a whole. Our Advisory Committee is empowered to monitor the integrity of our financial reporting processes and systems of internal controls and provide an avenue of communication among our independent auditors, management, employees overseeing our internal audit functions and our Board of Managers. Additionally, reports are provided during our board meetings by the individuals who oversee risk management in liquidity, environmental, safety, litigation and other operational areas.
In their service as the Compensation Committee, the members of the Advisory Committee exercise the power of the Board of Managers in connection with all matters relating to compensation of executive officers who are also members of our Board of Managers. All determinations concerning executive compensation for our officers are made by the Advisory Committee as provided in our agreements of the general partner and the general partner of our general partner. Advisor compensation is approved by the Board of Managers. Because of the simple remuneration for the services of our officers and managers, the Advisory Committee does not delegate or use consultants in determining and considering amounts or form of compensation and has not adopted a Compensation Committee charter.
COMPENSATION DISCUSSION AND ANALYSIS
This following discussion gives a background of compensation paid by Dorchester Minerals Operating LP, the operating partnership controlled by our general partner, and addresses the operating partnership’s compensation-setting process and philosophy, the components of named executive officer compensation and the Advisory Committee’s decisions for compensation earned by our named executive officers in 2016. Our named executive officers in 2016 were William Casey McManemin, Leslie A. Moriyama and Bradley J. Ehrman.
Background
Our partnership does not have any employees nor does it pay any of the operating partnership’s employees, including our named executive officers, for their services, however, our named executive officers generally serve in the same capacities for the operating partnership and are compensated by the operating partnership for their service in those capacities. Such compensation is borne indirectly by us only to the extent of our obligation to reimburse the operating partnership for certain general and administrative expenses, subject to the limitation on reimbursement. It is possible that our partnership would not be obligated to reimburse the operating partnership for its compensation expenses including the salaries of our named executive officers in certain circumstances.
Each of our Appointed Managers is associated with one or more of the members of our general partner. The owners of our general partner may receive a portion of the cash flow generated by our activities and those of the operating partnership. One of our Appointed Managers, Mr. McManemin, also serves as our Chairman and Chief Executive Officer. Our Appointed Managers participation in our partnership’s results are limited to distributions from the owners of the general partner and their individual holdings of publicly traded units in our partnership, if any.
Compensation Setting Process
With limited exception, our CEO has broad discretion to establish the composition and amount of compensation for the employees of the operating partnership, including the named executive officers with the Advisory Committee approving the CEO’s compensation. Employee compensation includes salary, insurance benefits (including medical, dental, vision, life, and disability coverage), a SEP-IRA program, and discretionary merit bonuses awarded in the form of cash or DMLP units. The CEO consults with senior management (including the CFO and COO) and department managers no less frequently than annually to assess employee performance, attitude and collaboration when determining compensation. Compensation levels are to some extent impacted by the formulaic limitations on general and administrative expense reimbursement set forth in our partnership agreement.
The CEO annually reports to the Board of Managers on compensation matters including the proposed salary and benefits. The Advisory committee is required to approve compensation for any employee who is also a member of the Board of Managers. Since our formation in 2003, the CFO, COO and CEO (Messrs. Allen, Raley and McManemin)’s compensation have been subject to the approval of the Advisory Committee. Upon Mr. Allen and Mr. Raley’s retirement from these positions in May 2015, the compensation of their successors Ms. Moriyama and Mr. Ehrman, respectively, has been determined by Mr. McManemin.
Compensation Philosophy
The Advisory Committee and CEO believe in rewarding our named executive officers based on individual performance as well as aligning the interests of our named executive officers with those of our common unitholders. The CEO and the Advisory Committee believe our compensation package (including salaries, insurance benefits, SEP-IRA program and discretionary merit bonuses) of our employees including our named executive officers are appropriate and sufficient to attract, retain, incentivize and properly reward our employees.
Elements and Objectives of Compensation
Salary and Discretionary Cash Bonuses. Our CEO determines employee salaries and discretionary cash bonuses, in consultation with senior management including the CFO and the COO and from time to time the Advisory Committee. The operating partnership does not have a formulaic salary schedule or bonus plan. The CEO has broad discretion to consider a wide range of factors in determining compensation including but not limited to performance, loyalty, collaboration and attitude. The CEO and the Advisory Committee do not benchmark compensation, but consider the operating partnership and the named executive officers’ compensation to be appropriate. The objective of our salary determinations is to attract and retain our named executive officers with the goal of retaining long-term unitholder value, and the objective of discretionary cash bonuses is to reward the efforts of our named executive officers on the basis of their annual performance.
Equity Awards. Our named executive officers are eligible to participate in the Dorchester Minerals Operating LP Equity Incentive Program (the “Equity Incentive Program”) and are eligible to receive common unit awards granted by Dorchester Minerals Operating GP LLC, the administrator of the Equity Incentive Program. In determining the number of common units to be awarded to the CFO and COO, the CEO takes into account the named executive officer’s position, scope of responsibility and value creation in the Partnership.
Determination of 2016 Compensation
Mr. McManemin. The Advisory Committee maintained the salary of Mr. McManemin at $96,000 per year during 2016. This decision was in recognition of the service he provides in managing the day-to-day affairs necessary to our partnership and the operating partnership. This arrangement has been in place since the partnership began operations on January 31, 2003, and Mr. McManemin has received the same $96,000 annual salary since then. Mr. McManemin did not receive a cash bonus or any equity awards. Given his respective ownership interest in the general partner of our general partner and holdings of common units, the Board of Managers and the Advisory Committee believe that he is adequately compensated and aligned with common unitholder interests.
Ms. Moriyama. As our Chief Financial Officer, Ms. Moriyama’s base salary is $180,000 per year, based on our CEO’s subjective determination of the appropriate salary for someone with her business and financial experience in the oil and gas industry. Ms. Moriyama received a cash bonus of $30,000, and a common unit award under the Equity Incentive Program of 2,500 common units during 2016.
Mr. Ehrman. As our Chief Operating Officer, Mr. Ehrman’s base salary is $195,000 per year, based on his level of education and extensive history of managing the properties held by our partnership. Mr. Ehrman received a cash bonus of $10,000, and a common unit award under the Equity Incentive Program of 2,500 common units during 2016.
Both Ms. Moriyama and Mr. Ehrman’s cash bonus and common unit awards were determined by the CEO based on a subjective assessment of the applicable executive’s business impact, including value creation, leadership and teamwork, among other factors.
Response to Say-on-Pay Vote
The Advisory Committee and the Board of Managers considered the results of our most recent unitholder advisory vote on executive compensation at our 2014 Annual Meeting. Our unitholders overwhelmingly approved the compensation of our named executive officers, with over 96% of the common units present at the meeting voting in favor of such compensation. Accordingly, the Advisory Committee and the Board of Managers have not changed our executive compensation decisions and policies following the 2014 Annual Meeting.
SUMMARY COMPENSATION TABLE
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Name and |
Stock |
All Other |
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|
Principal |
Salary |
Bonus |
Awards |
Compensation(1) |
Total |
|||||||||||||||||
|
Position |
Year |
($) | ($) | ($) | ($) | ($) | ||||||||||||||||
|
William Casey |
2016 |
$ | 96,000 | $ | 19,200 | $ | 115,200 | |||||||||||||||
|
McManemin |
2015 |
$ | 96,000 | $ | 19,200 | $ | 115,200 | |||||||||||||||
|
Chairman and Chief |
2014 |
$ | 96,000 | $ | 19,200 | $ | 115,200 | |||||||||||||||
|
Executive Officer |
||||||||||||||||||||||
|
Leslie A. Moriyama |
2016 |
$ | 150,000 | $ | 30,000 | $ | 41,625 | $ | 52,941 | $ | 274,566 | |||||||||||
|
Chief Financial |
2015 |
$ | 93,750 | $ | 28,750 | $ | 22,770 | $ | 33,088 | $ | 178,358 | |||||||||||
|
Officer |
||||||||||||||||||||||
|
May 18, 2015-Present |
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|
Bradley J. Ehrman |
2016 |
$ | 188,700 | $ | 10,000 | $ | 41,625 | $ | 48,065 | $ | 288,390 | |||||||||||
|
Chief Operating |
2015 |
$ | 178,079 | $ | 19,435 | $ | 22,770 | $ | 44,057 | $ | 264,341 | |||||||||||
|
Officer |
||||||||||||||||||||||
|
May 18, 2015-Present |
||||||||||||||||||||||
|
(1) Compensation for Retirement Benefits |
GRANTS OF PLAN-BASED AWARDS
|
Name |
Grant Date |
All Other Stock Awards: Number of Units (#) |
Grant Date Fair Value of Unit Awards ($)(1) | |||
|
Leslie A. Moriyama |
12/16/2016 (2) |
2,500 |
$41,625 | |||
|
Bradley J. Ehrman |
12/16/2016 (2) |
2,500 |
$41,625 |
|
(1) |
The amounts in this column are the grant date fair value of unit awards. |
|
(2) |
These common unit awards were awards of fully-vested common units granted to the named executive officers pursuant to the Dorchester Minerals Operating LP Equity Incentive Program. |
COMPENSATION OF DIRECTORS
Appointed Managers receive no remuneration for serving on the Board of Managers, but each member of the Advisory Committee received an annual retainer fee of $35,000 during 2016 and will receive $35,000 during 2017. In addition, members of the Advisory Committee receive $1,500 for each meeting of any special committees. In 2016, one special committee meeting was held.
DIRECTOR COMPENSATION FOR 2016
|
Fees Earned or Paid in Cash |
Total | |||
|
Name |
($) |
($) | ||
|
Buford P. Berry |
$36,500 |
$36,500 | ||
|
C.W. ("Bill") Russell |
$36,500 |
$36,500 | ||
|
Ronald P. Trout |
$36,500 |
$36,500 |
COMPENSATION COMMITTEE REPORT
The Advisory Committee has reviewed and discussed the Compensation Discussion and Analysis with management and based on that review and discussion recommends to the Board of Managers its inclusion in the Proxy Statement.
March 2, 2017
C.W. (“Bill”) Russell
Buford P. Berry
Ronald P. Trout
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers serves as a member of the board or compensation committee of any entity that has one or more of its executive officers serving as a member of the Board of Managers or the Advisory Committee, which functions as our compensation committee.
REPORT OF THE AUDIT COMMITTEE
As members of the Audit Committee of the Board of Managers, we are responsible for helping to ensure the reliability of the Partnership's consolidated financial statements. In keeping with this goal, the Board of Managers has adopted a written charter for the Audit Committee to follow. The Audit Committee reviewed and reassessed the charter's adequacy on March 2, 2017.
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 Marketplace Rules and the most recent interpretations of those standards.
Review and Discussions. The Audit Committee has reviewed and discussed the Partnership's audited consolidated financial statements with management. It has also discussed with the independent auditors the matters required to be discussed by Auditing Standard No. 1301 Communications with Audit Committees. Additionally, the Audit Committee has received the written disclosures and the letter from the independent accountants at Grant Thornton LLP, as required by the Public Company Accounting Oversight Board Ethics and Independence Rule 3526 (Communication With Audit Committees Concerning Independence), and has discussed with the independent accountants their independence.
Recommendation to Include Audited Consolidated Financial Statements in Annual Report. Based on the Audit Committee's discussions with management and the independent accountants and its review of the representation of management and the report of the independent accountants to the Audit Committee, the Audit Committee recommended that the Board of Managers include the audited consolidated financial statements in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission.
March 2, 2017
Buford P. Berry
C.W. (“Bill”) Russell
Ronald P. Trout
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 2016, we and our wholly-owned subsidiaries reimbursed certain direct and indirect expenses to the operating partnership and our general partner. The reimbursements were made pursuant to the Partnership’s Amended and Restated Agreement of Limited Partnership and Administrative Services Agreements or office lease agreements between the operating partnership and Dorchester Minerals Oklahoma LP or Maecenas Minerals, L.L.P., both wholly-owned subsidiaries of the Partnership. No management fees or any other type of compensation is paid by or to any related party, other than compensation reported pursuant to Item 402 of Regulation S-K.
Reimbursement of Our General Partner
Our general partner was reimbursed $1,739,717 for expenses incurred in 2016 pursuant to our Amended and Restated Agreement of Limited Partnership. Our general partner is not compensated for services provided in acting as our general partner. However, we reimburse our general partner on a monthly basis for all expenses incurred or payments made on our behalf, and all other necessary or appropriate expenses allocable to us. Such expenses include both direct expenses and management expenses. Pursuant to our Amended and Restated Agreement of Limited Partnership, direct expenses include
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● |
professional fees and expenses, such as audit, tax, legal and engineering costs; |
|
● |
regulatory fees and expenses; |
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● |
ad valorem taxes; |
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● |
severance taxes; |
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● |
the fees and expenses of independent managers of our general partner and its general partner; and |
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● |
premiums for officers’ and managers’ liability insurance. |
Management expenses are expenses of the general partner and its affiliates incurred on our behalf and include:
|
● |
rent, wages, salaries and the cost of employee benefit plans provided to employees and officers that are properly allocable to us; and |
|
● |
all other necessary or appropriate expenses allocable to us but do not include items classified as direct expenses or production costs. |
As a result of the limitation on management expenses discussed below, recovery of additional expenses may occur by changing the classification of the expenses only to the extent that (i) a portion of management expense is reduced by shifting certain costs to direct expenses or production cost, and (ii) such classification change impacts a period when management expense could otherwise exceed the 5% cap and (iii) such excess above the cap cannot be recovered in future or past fiscal years.
Our reimbursements to our general partner of management expenses (excluding overhead expenses included in production costs that are deducted in determining net profits interests) during any fiscal year are limited to an amount not greater than five percent (5%) of the sum of our distributions to our partners for that fiscal year, adjusted for changes in cash reserves, plus expenses paid by us for that year for direct and management expenses and production costs which are capital in nature and charged against the net profits interests, and increases in taxes and regulatory compliance costs.
To the extent that actual reimbursement for management expenses in any fiscal year is less than five percent (5%) of this sum, our reimbursement to our general partner may exceed the 5% limitation by the amount of that difference at any time during the succeeding three fiscal years. If reimbursement to our general partner was limited by the 5% limitation during the preceding three fiscal years, the amount by which the management expenses are less than the 5% limitation in the current year may be used to permit our general partner to recoup the deficit from the preceding years.
Our Amended and Restated Agreement of Limited Partnership generally may not be amended to increase the 5% limitation on the reimbursement of management expenses.
Reimbursement to the Operating Partnership
In 2016, the operating partnership was reimbursed an aggregate of $933,588 from Dorchester Minerals Oklahoma LP and Maecenas Minerals, L.L.P., our wholly-owned subsidiaries, pursuant to Administrative Service Agreements or office lease agreements. The operating partnership provided the wholly-owned subsidiaries services related to accounting, internal controls, management of data processing systems, preparation of all federal and state tax reports, service as paymaster, preparation of periodic financial statements and banking and other financial relationships. The operating partnership was reimbursed for the payment of all direct and indirect costs and expenses incurred in the performance of the services provided, including without limitation, (i) attributable secretarial, telephone, office rent and other office expenses, (ii) attributable salaries and other compensation expenses of employees, officers and directors, (iii) other attributable administrative expenses, (iv) travel expenses, (v) legal and accounting costs and expenses and (vi) expenses incurred in providing or obtaining such other professional, technical, administrative services and advice as deemed necessary or desirable. Reimbursements made pursuant to the Administrative Service Agreements were not also made pursuant to the Amended and Restated Agreement of Limited Partnership.
Review, Approval or Ratification of Transactions with Related Persons
Whenever any potential conflict of interest exists or arises between our general partner or any of its affiliates and us or any of our partners, our general partner resolves that conflict. Our Amended and Restated Agreement of Limited Partnership requires our general partner to seek approval of a majority of the members of the Advisory Committee of the general partner of our general partner as to a proposed resolution of the conflict. In addition to approval by the Advisory Committee the resolution of the conflict of interest must also be fair and reasonable to us. Any resolution of a conflict of interest shall also be conclusively deemed fair and reasonable to us if such resolution is:
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● |
on terms no less favorable to us than those generally being provided to or available from unrelated third parties, or |
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● |
fair to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to us). |
Our general partner, or its general partner’s Advisory Committee if its approval is sought, is authorized, in connection with its determination of what is fair and reasonable to us, and in connection with its resolution of any conflict of interest, to consider:
|
● |
the relative interests of any party to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interest, |
|
● |
any customary or accepted industry practices and any customary or historical dealings with a particular person, |
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● |
any applicable generally accepted accounting practices or principles, and |
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● |
such additional factors as our general partner’s, or its general partner’s Advisory Committee, determines in its sole discretion to be relevant, reasonable or appropriate under the circumstances. |
Whenever our Amended and Restated Agreement of Limited Partnership requires that a particular transaction, arrangement or resolution of a conflict of interest be fair and reasonable, the fair and reasonable nature of that transaction, arrangement, or resolution shall be considered in the context of all similar or related transactions.
EXECUTIVE OFFICERS AND MEMBERS OF THE BOARD OF MANAGERS
William Casey McManemin, age 56, has served as Chief Executive Officer and as a manager of Dorchester Minerals Management GP LLC and as Chief Executive Officer of Dorchester Minerals Operating GP LLC and Dorchester Minerals, L.P. since 2001. He was also appointed Chairman of the Board of Managers in May, 2015. He received his Bachelor of Science degree in Petroleum Engineering from Texas A&M University in 1984 and is a Registered Professional Engineer in the State of Texas. The members of the general partner of our general partner have determined that Mr. McManemin’s extensive and varied professional experience in petroleum engineering, extensive history of managing the majority of the properties held by the Partnership, as well as his strong executive management skills, qualify him to continue to serve on the Board of Managers.
H.C. Allen, Jr., age 78, has served as a manager of Dorchester Minerals Management GP LLC since 2001 and as Chief Financial Officer of Dorchester Minerals Operating GP LLC and Dorchester Minerals, L.P. from 2001 – May 2015. He co-founded SASI Minerals Company, Republic Royalty Company, Spinnaker Royalty Company, L.P. and CERES Resource Partners, LP with Mr. McManemin in 1988, 1993, 1996 and 1998, respectively. He received his Bachelor of Business Administration degree from the University of Texas in 1962 and his Master of Business Administration degree from the University of North Texas in 1963. The members of the general partner of our general partner have determined that Mr. Allen’s business and financial experience with the Partnership and other companies within our industry and his extensive history of managing the majority of the properties held by the Partnership qualifies him to continue to serve on the Board of Managers.
Bradley J. Ehrman, age 40, has served as Chief Operating Officer of Dorchester Minerals Operating GP LLC and Dorchester Minerals, L.P. since May 2015. He previously served as the Engineering Manager of Dorchester Minerals Operating LP from 2004 to 2011 and Vice President of Operations from 2011 to May 2015. He received a Bachelor of Science degree in Petroleum Engineering from the University of Alberta in 1999 and received his Master of Business Administration from the Jones Graduate School of Management at Rice University in 2004.
Leslie A. Moriyama, age 38, has served as Chief Financial Officer of Dorchester Minerals Operating GP LLC and Dorchester Minerals, L.P. since May 2015. She received a Bachelor of Commerce in Accounting and a Bachelor of Arts in Economics from the University of Calgary and is a Chartered Accountant. She previously served as a Director of Capital Markets and Accounting Advisory Services at PricewaterhouseCoopers LLC from 2014 to 2015 and as Manager-Financial Reporting and Director-Accounting of the Mid-Continent Business Unit of Encana Oil & Gas (USA) Inc. from 2009 to 2014.
James E. Raley, age 77, is currently Vice Chairman and has been a manager of Dorchester Minerals Management GP LLC since 2001. Previously Mr, Raley served as Chief Operating Officer of Dorchester Minerals Operating GP LLC and Dorchester Minerals, L.P. from 2001 – May 2015. He had served as a general partner of Dorchester Hugoton since 1990. He received a Bachelor of Science degree in Mechanical Engineering from Texas Tech University in 1962. The members of the general partner of our general partner have determined that Mr. Raley’s extensive history of managing a portion of the properties held by the Partnership, as well as his long standing management experience with the Partnership, provides our Board of Managers with considerable knowledge and understanding of the Partnership’s properties and its strategic matters and qualifies him to continue to serve on the Board of Managers.
Martha P. Rochelle, age 63, has served as a manager of Dorchester Minerals Management GP LLC since 2013. Ms. Rochelle earned a Bachelor of Arts with High Honors from the University of Texas in 1974 and a Juris Doctor from Southern Methodist University School of Law in 1976. Following law school, she clerked for a federal judge and then entered private practice. For a period of more than twenty years, her practice focused on corporate and tax-exempt finance. Ms. Rochelle continues to serve as an advisor to tax-exempt entities. The members of the general partner of our general partner have determined that Ms. Rochelle’s extensive legal experience in corporate and finance matters and other business experience qualifies her to continue to serve on the Board of Managers.
Robert C. Vaughn, age 61, has served as a manager of Dorchester Minerals Management GP LLC since 2001. Mr. Vaughn has served in various capacities with Vaughn Petroleum (DMLP), LLC and affiliated entities since 1979, including as Chairman, President and Chief Executive Officer. He co-founded Republic Royalty Company in 1993 and Dorchester Minerals, L.P. in 2003. He received his Bachelor of Business Administration from the University of Texas at Austin. He currently serves on the Board of Trustees of the Culver Educational Foundation, the Development Board of The University of Texas at Austin and the Board of Visitors of the McDonald Observatory and Department of Astronomy of the University of Texas at Austin. The members of the general partner of our general partner have determined that Mr. Vaughn’s education and experience as a founder and executive of the Partnership and of other companies within our industry provides our Board of Managers with considerable knowledge and understanding of strategic matters and qualifies him to continue to serve on the Board of Managers.
BOARD OF MANAGERS QUALIFICATIONS
In considering whether to recommend any candidate for inclusion in the Board’s slate of recommended nominees, the members of the general partner of our general partner consider criteria such as the candidate’s integrity, business acumen, age, experience, commitment, diligence, conflicts of interest and the ability to act in the interests of all limited partners. We seek nominees with a diversity of experience, professions, skills, geographic representation and backgrounds. The members of the general partner of our general partner do 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 managers, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the Board of Managers to fulfill its responsibilities.
ELECTION OF MANAGERS TO THE BOARD OF MANAGERS
WHO WILL BE APPOINTED TO THE ADVISORY COMMITTEE
(PROPOSAL NO. 1 ON THE PROXY CARD)
Unitholders are entitled to elect three managers to the Board of Managers who will also be appointed to serve on the Advisory Committee. Nominations for the election of these managers listed below were made by the members of the general partner of our general partner and approved by its Board of Managers. If elected, all nominees are expected to serve until the 2018 Annual Meeting of Limited Partners or until their successors are duly elected.
NOMINEES FOR ELECTION
Buford P. Berry, age 81, has served as a manager and an Advisory Committee Member of Dorchester Minerals Management GP LLC since February 2003. He is currently of counsel to Thompson & Knight LLP, a Texas based law firm. Mr. Berry has been an attorney with Thompson & Knight LLP, serving in various capacities since 1963, including as Managing Partner from 1986 to 1998. Mr. Berry previously served as a Vice Chairman of the Advisory Board of the Institute for Energy Law of the Center for American and International Law (formerly Southwestern Legal Foundation). He is a past Chairman of the Natural Resources Committee of the Taxation Section of the American Bar Association and a past Chairman of the Southwestern Legal Foundation Oil and Gas Tax Institute. From 1958 to 1960, Mr. Berry served as a Lieutenant in the United States Naval Reserve. He received his Bachelor of Business Administration degree in 1958 and his Bachelor of Laws Degree in 1963, both from the University of Texas. The members of the general partner of our general partner have determined that Mr. Berry’s experience advising companies in the oil and gas industry, as well as his prior experience serving as a member of the board of directors of HollyFrontier Corporation, qualify him to continue to serve on our Board of Managers.
C. W. “Bill” Russell, age 75, has served as a manager and an Advisory Committee Member of Dorchester Minerals Management GP LLC since May 2004. Mr. Russell was employed by KPMG, LLP and predecessor firms from 1967 until his retirement in 1995. Elected as a partner in 1974, Mr. Russell concentrated in the field of energy taxation and served in various capacities at KPMG including as National Director, technical tax services – energy and chairman of the KPMG International Petroleum Group. He co-authored Income Taxation of Natural Resources, from 1986 to 2000. He currently performs tax services and related accounting functions for independent oil and gas producers and individuals. Mr. Russell is a graduate of the University of Texas at Arlington and is a certified public accountant. The members of the general partner of our general partner have determined that Mr. Russell’s extensive financial and accounting background brings considerable financial experience to the Board of Managers and qualifies him to continue to serve on our Board of Managers.
Ronald P. Trout, age 77, has served as a manager and an Advisory Committee Member of Dorchester Minerals Management GP LLC since February 2008. Mr. Trout currently serves on the Board of Trustees and Audit Committee of The Cushing MLP Total Return Fund, a New York Stock Exchange listed closed-end investment company. Mr. Trout previously served as an Advisor and Audit Committee member of Dorchester Hugoton, Ltd., one of our predecessors, from 2001 through 2003 and a Director of Galaxy Energy Corporation from November 2006 through December 2008. He was a Senior Vice President and one of the founding partners of Hourglass Capital Management Corp., a Texas-based investment management company until his retirement in April 2001. Prior to the formation of Hourglass, he was a Senior Vice President of Mercantile Securities Corp., the trust investment arm of Mercantile Bank. Mr. Trout has been a Chartered Financial Analyst since 1970 and is a current member of the Dallas Association of Investment Analysts and past President of the Oklahoma Chapter of the Analysts Society. Mr. Trout received a B.S. and M.S. in Business Administration with a major in Finance from the University of Missouri. The members of the general partner of our general partner have determined that Mr. Trout’s extensive financial background brings considerable financial experience to the Board of Managers and qualifies him to continue to serve on our Board of Managers.
THE BOARD OF MANAGERS RECOMMENDS THAT UNITHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE BOARD OF MANAGERS’ NOMINEES.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL NO. 2 ON THE PROXY CARD)
The Board of Managers recommends the approval of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year ending December 31, 2017. Grant Thornton LLP has been our independent registered accounting firm since 2003.
Representatives of Grant Thornton LLP are expected to be present at the Annual Meeting of Unitholders and will be given the opportunity to make a statement, if they desire to do so, and to respond to appropriate questions. Although unitholder approval of the appointment of Grant Thornton LLP is not required, the Board believes that it is appropriate to seek unitholder approval of this appointment. If the unitholders fail to approve the appointment, the Advisory Committee and the Board of Managers will consider whether or not to retain Grant Thornton LLP. Even if the appointment is approved, the Board of Managers, at its discretion, may direct the appointment of a different independent registered accounting firm at any time during the year if it determines that such a change would be in our best interest and the best interests of our unitholders.
During 2016 and 2015, we incurred the following fees with Grant Thornton:
|
2016 |
2015 |
|||||||
|
AUDIT FEES |
$ | 258,640 | $ | 283,640 | ||||
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AUDIT-RELATED FEES |
— | |||||||
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TAX FEES |
— | — | ||||||
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ALL OTHER FEES |
— | — | ||||||
The Advisory Committee has adopted procedures for pre-approving all audit and permitted non-audit services provided by our independent auditor. Part of this approval process includes making a determination on whether non-audit services are consistent with the Securities and Exchange Commission’s rules on auditor independence. The Advisory Committee periodically monitors the services rendered and actual fees paid to the independent auditors to ensure such services are within the parameters approved.
Unless unitholders specify otherwise in the proxy, proxies solicited by the Board of Managers will be voted by the persons named in the proxy at the Annual Meeting of Unitholders to approve the appointment of Grant Thornton LLP as our independent registered accounting firm for 2017.
THE BOARD OF MANAGERS RECOMMENDS THAT UNITHOLDERS VOTE “FOR” THE APPOINTMENT OF GRANT THORNTON LLP.
PROPOSAL TO APPROVE, BY A UNITHOLDER NON-BINDING ADVISORY VOTE, THE COMPENSATION PAID TO THE PARTNERSHIP’S NAMED EXECUTIVE OFFICERS, PURSUANT TO ITEM 402 OF REGULATION S-K OR ANY SUCCESSOR THERETO, COMMONLY REFERRED TO AS A “SAY ON PAY” PROPOSAL
(PROPOSAL NO. 3 ON THE PROXY CARD)
The Board of Managers recommends the approval of the compensation paid to the Partnership’s named executive officers as described in this Proxy Statement.
As required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd Frank Act”), we are submitting a “Say on Pay” proposal for our unitholders’ consideration. This proposal provides Unitholders with the opportunity to cast an advisory vote on the compensation of the Partnership’s executive officers, in their capacities as the executive officers of our general partner, the general partner of our general partner and the operating partnership of our general partner. As discussed in the Compensation Discussion and Analysis, our overall compensation program is intended to ensure that the compensation and incentive opportunities provided to our executives and employees remain competitive and align the executive officers’ interest with those of the common unitholders. Our Advisory Committee and Chief Executive Officer believe our compensation program is sufficient to attract, retain, incentivize and properly reward our employees, including executive officers.
We invite you to carefully review the Compensation Discussion and Analysis including the tabular and other disclosures on executive compensation contained in this proxy statement. Based upon that review, the Board of Managers recommends that the Unitholders approve, on an advisory basis, the following resolution at the annual meeting:
RESOLVED, that the compensation paid to the Partnership’s named executive officers, as discussed and disclosed pursuant to Item 402 of Regulation S-K in the Compensation Discussion and Analysis, the compensation table, and any narrative executive compensation disclosure contained in this Proxy Statement is hereby approved”.
While the vote does not bind the Board of Managers to any particular action, the Board of Managers values the input of our Unitholders, and will take into account the outcome of this vote in considering future compensation arrangements.
THE BOARD OF MANAGERS RECOMMENDS THAT UNITHOLDERS VOTE “FOR” THE APPROVAL OF THE COMPENSATION PAID TO THE PARTNERSHIP’S NAMED EXECUTIVE OFFICERS AS DESCRIBED IN THIS PROXY STATEMENT.
PROPOSAL TO ESTABLISH, BY A UNITHOLDER NON-BINDING ADVISORY VOTE, THE FREQUENCY OF SUBMISSION TO UNITHOLDERS OF ADVISORY “SAY ON PAY” PROPOSALS
(PROPOSAL NO. 4 ON THE PROXY CARD)
Under the Dodd Frank Act, the Partnership is also required to seek a non-binding advisory unitholder vote regarding the frequency of submission to unitholders of a “Say on Pay” advisory vote such as that set forth in Proposal No. 3. As discussed in Proposal No. 3, the Board of Managers values the input of our unitholders regarding the compensation of the Partnership’s executive officers. Unitholders can advise the Board of Managers on whether such votes should occur every year, every two years, or every three years, or may abstain from voting. Although this vote is advisory and non-binding, our Board of Managers will review voting results and give serious consideration to the outcome of such voting. A scheduling vote similar to this will occur at least every six years.
The average and total annual compensation of the Partnership’s named executive officers is $188,739 and $754,956, respectively. Our Board of Managers recommends that the advisory unitholder vote on executive compensation be held every three years. We believe a triannual vote aligns best with our partnership structure, risk profile and the frequency of recruiting and retaining executives.
Please mark on the Proxy Card your preference as to the frequency of holding “Say on Pay” unitholder advisory votes as either every year, every two years, or every three years or mark “abstain.” You are not voting to approve or disapprove the Board of Managers’ recommendation on this item.
THE BOARD OF MANAGERS RECOMMENDS A VOTE “FOR” “3 YEARS” AS THE FREQUENCY FOR VOTING ON “SAY ON PAY” PROPOSALS.
OTHER MATTERS
The Board of Managers does not intend to present any other matters at the 2017 Annual Meeting and knows of no other matters that will be presented. However, if any other matters come before the 2017 Annual Meeting, it is the intention of the persons named in the enclosed proxy to vote in accordance with their judgment on such matters.
By Order of the Board of Managers of Dorchester Minerals Management GP LLC,
/s/ William Casey McManemin
William Casey McManemin
Chairman and Chief Executive Officer
April 14, 2017
PROXY
DORCHESTER MINERALS, L.P.
PROXY FOR 2017 ANNUAL MEETING OF LIMITED PARTNERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF MANAGERS
The undersigned hereby appoints each of William Casey McManemin and James E. Raley proxy and attorney in-fact with full power of substitution, on behalf and in the name of the undersigned, to represent the undersigned and to vote as specified on the reverse side all common units of Dorchester Minerals, L.P., which the undersigned is entitled to vote at the Annual Meeting of Limited Partners on May 16, 2017 at 2:00 p.m. Central Time at the office of Thompson & Knight LLP, One Arts Plaza, 1722 Routh Street, Suite 1500, Dallas, TX 75201 or any adjournments or postponements thereof.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL ONE, FOR PROPOSALS TWO AND THREE, AND THREE YEARS FOR PROPOSAL FOUR AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
Continued and to be marked, dated and signed on the reverse side and
returned in the enclosed envelope, voted telephonically or voted via the internet.
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VOTE BY INTERNET – www.proxyvote.com Use the internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
Electronic Delivery of Future PROXY MATERIALS If you would like to reduce the costs incurred by our partnership in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE – 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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The Board of Managers recommends that you vote FOR the following: |
For |
Withhold |
For All |
To withhold authority to vote for any | |||||
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All |
All |
Except |
individual nominee(s), mark "For All | ||||||
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1. |
Election of Managers with subsequent appointment to the Advisory Committee |
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Except" and write the number(s) of the | ||||
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Nominees |
nominee(s) on the line below. | ||||||||
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01 Buford P. Berry 02 C.W. (“Bill”) Russell 03 Ronald P. Trout |
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The Board of Managers recommends that you vote FOR the following: |
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For |
Against |
Abstain |
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2. |
Approval of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year ending December 31, 2017 |
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| The Board of Managers recommends that you vote FOR the following: | |||||||||
| 3. | Approval of, by a unitholder non-binding advisory vote, the compensation paid to the Partnership’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, commonly referred to as a “Say on Pay” proposal |
For
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Against
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Abstain
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The Board of Managers recommends that you vote THREE YEARS for the following: |
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| 4. | The establishment, by a unitholder non-binding advisory vote, of the frequency of submission to unitholders of advisory “Say on Pay” proposals |
One Year
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Two Years
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Three Years
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Abstain
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| 5. | Such other business as may properly come before the meeting or any adjournment or postponement thereof | ||||||||
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” PROPOSAL NOS. 1, 2 AND 3, AND “3 YEARS” ON PROPOSAL NO. 4, AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, INCLUDING, AMONG OTHER THINGS, CONSIDERATION OF ANY MOTION MADE FOR ADJOURNMENT OR POSTPONEMENT OF THE MEETING.
Please sign exactly as your name(s) appear(s) hereon. When signing as
attorney, executor, administrator, or other fiduciary, please give full
title as such. Joint owners should each sign personally. All holders must
sign. If a corporation or partnership, please sign in full corporate or
partnership name, by authorized officer.
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Signature (PLEASE SIGN WITHIN BOX) |
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Signature (PLEASE SIGN WITHIN BOX) |
Date |