AE Adams Resources and Energy Inc

ITEM 1 - APPROVAL OF NOMINEES FOR DIRECTOR

ELECTION OF DIRECTORS

The persons named as proxy holders in the enclosed proxy have been selected by the Board of Directors to serve as proxies (‟Proxy Holders”) and will vote the shares represented by valid proxies at the Annual Meeting and any adjournments thereof.  The proxy holders have indicated that they intend to vote ‟FOR” election as director each of the persons named as a nominee below under ‟Nominees for Director” unless authority to vote in the election of directors is withheld on each proxy or unless otherwise specified on each proxy.  Each duly elected director will hold office until the 2018 Annual Meeting of Shareholders or until his or her successor shall have been elected and qualified.  Although the Board of Directors of the Company does not contemplate that a nominee will be unable to serve, if such a situation arises prior to the Annual Meeting, the Proxy Holders will vote for the election of such other person as may be nominated by the Board of Directors.  Proxies cannot be voted in the election of directors for more than eight persons, as that is the number of nominees named herein.

Directors shall be elected by a plurality of the votes of the shares present or represented by proxy and entitled to vote at the Annual Meeting.  Withholding authority will have the effect of a vote cast ‟AGAINST” Item 1.  Broker non-votes will not be counted in the tabulations of the votes cast on Item 1 and will have no effect on the outcome of the vote.

The Board of Directors unanimously recommends a vote ‟FOR” the election of the nominees listed below.

For each of the Company’s directors, the following table sets forth their names, ages, principal occupations, other directorships of public companies held by them and length of continuous service as a director.  Any directorship of public companies held by the nominees within the last five years is also presented below.

Thomas S. Smith

Mr. Smith was appointed as President and Chief Executive Officer of the Company in February 2015. He retired from KSA Industries, Inc. (“KSAI”), an affiliate of the Company, on March 20, 2015 where he had been President since November 2013. Previously, Mr. Smith was an Executive Vice President with KSAI for more than five years.  He holds a Bachelor’s degree in Finance from the University of Texas.

E.C. Reinauer, Jr.

Mr. Reinauer was elected to the Company’s Board at the time of the Company’s initial public offering in 1973.  Mr. Reinauer previously held a Financial Industry Regulatory Authority (FINRA) Series 7 certification.  He possesses extensive knowledge of the Company’s history and has had direct management oversight in a variety of international projects throughout the world.  He previously served in the US Navy.  He holds a bachelor’s in Business Administration from Texas Tech University and a Master in Business Administration from the Wharton School of Finance.

Larry E. Bell

Mr. Bell has extensive industry and risk management experience.  His area of expertise includes commodity pricing risks, accounting and reporting internal controls as well as traditional property and casualty exposure management. Mr. Bell previously held a Financial Industry Regulatory Authority (FINRA) Series 7 certification.  Mr. Bell’s previous position was Risk Manager with Holly Frontier Corporation and he retired in 2012.  Mr. Bell holds a  Bachelor’s degree from the University of Oklahoma with majors in Finance and Accounting.

Townes G. Pressler

Mr. Pressler is President and founder of Tepee Petroleum, an independent oil and gas producer based in Houston, and he is founder of Pressler Petroleum Consultants, Inc., which provides engineering consulting services and appraisals.  Prior to 1985, Mr. Pressler was President of Philip Hill Energy, President of Republic Oil and Gas Corp., and Chief Petroleum Engineer for Barnhart Co. after his initial years with Exxon.  Mr. Pressler is a 1959 graduate of the University of Texas with a Bachelor’s of Science Degree in Petroleum Engineering, and is a Registered Professional Engineer.

Michelle A. Earley

Ms. Earley is a Partner at Locke Lord LLP.  Michelle has extensive experience in merger, acquisition, and disposition transactions, securities regulation matters and securities offerings, including representing purchasers and sellers of publicly-traded and privately-held companies, representing issuers and selling shareholders in connection with the public offering and private placement of debt and equity securities, tender offers, exchange offers and advising management and boards of directors on general corporate governance matters.  She has her undergraduate degree from Texas A&M University and a Juris Doctorate from Yale Law School.

Murray E. Brasseux

Mr. Brasseux has extensive banking experience including energy lending practices.  Mr. Brasseux was the Managing Director, Oil & Gas Finance at BBVA Compass and retired in 2014.  Mr. Brasseux holds a Bachelor’s of Science in Finance and MS in Finance from Louisiana State University.

Richard C. Jenner

Mr. Jenner is the co-managing partner of Endeavor Natural Gas, LP, a private equity backed exploration and production company.  He has been active in the oil and gas industry for over 30 years with specific expertise in the prospective areas of Texas and Louisiana, the Company’s primary area of operation.  Mr. Jenner is a petroleum engineer with a Bachelor’s of Science degree from the Colorado School of Mines and a Master of Business Administration from University of Chicago.

W. R. Scofield

Mr. Scofield is the President and Chief Operating Officer of KSA Industries, Inc.  Mr. Scofield has extensive experience with a diverse group of businesses, including oil and gas, agriculture, automotive, insurance and professional sports.  He also represents the Company’s largest shareholder group.  Mr. Scofield is a graduate of the University of Texas and holds a Bachelor’s of Business Administration and a Master of Professional Accounting, specializing in taxation.

Independence

The Company’s Board of Directors is comprised of a majority of independent directors as defined under NYSE MKT listing standards. There are no family relationships among any of the directors or executive officers of the Company.  The Board has determined that the following Directors are independent: Messrs. Reinauer, Bell, Pressler, Brasseux, Jenner and Ms. Earley. The Board has determined that none of the designated independent directors have any relationship that, under NYSE MKT rules, would preclude their service on any of the standing committees of the Board.  In making its determination, the Board considered transactions and relationships between each director or his immediate family and the Company and its subsidiaries, including those reported under ‟Compensation Committee Interlocks and Insider Participation” and ‟Transactions with Related Persons” below.  The purpose of this review was to determine whether any such relationships or transactions were material and, therefore, inconsistent with a determination that the director is independent.  In addition, the Board requires each of its members and each of the director nominees to disclose in an annual questionnaire any relationship they or their family members may have had with the Company, its subsidiaries, its independent accountants, directors and officers within the past five years. The Board considers any such relationship in making its determination.  Messrs. Smith and Scofield are considered inside directors because of their employment with the Company and KSAI, respectively.  Mr. Smith also beneficially owns 46.9% of the Company’s outstanding common stock.

Meetings and Committees of the Board

In 2016, the full Board and/or its committees met four times and all director nominees attended all of the meetings of the Board and the committees on which they served for the period in which they held office.  It is the Company’s policy that all persons nominated for election to the Board at the time of the annual meeting be present at such meeting.  All directors at the time of the 2016 annual meeting attended the 2016 annual meeting.  The Board has four standing committees – the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Investment Committee.

⁽¹⁾ Mr. Bell is an independent director, Chairman of the Audit Committee and is the Company’s designated Audit Committee financial expert under Item 407(d) (5) of Regulation S-K.

⁽²⁾ Mr. Pressler is an independent director, Chairman of the Compensation Committee and Chairman of the Nominating and Corporate Governance Committee.

⁽³⁾ Mr. Jenner is an independent director and serves as Chairman of the Investment Committee.

The responsibilities of the Audit Committee, Compensation Committee, and the Nominating and Corporate Governance Committee and the Investment Committee are described in each of the committees’ respective charters, which were adopted by the respective committees and the Board.  These committee charters are available on the Company’s website at www.adamsresources.com , under Investor Relations – Corporate Profile – Corporate Governance.  Copies may also be obtained by writing to Investor Relations, Adams Resources & Energy, Inc., 17 South Briar Hollow Lane, Suite 100, Houston, Texas 77027.

Nomination Policy

The Nominating and Corporate Governance Committee identifies and recommends to the Board nominees for directors to be considered at the annual meeting of shareholders or to serve as replacements in the event of a vacancy on the Board.  Each of the members of the Nominating Committee is independent, as defined in Section 803A of the listing standards of the NYSE MKT.  The Nominating and Corporate Governance Committee will also consider nominees submitted by shareholders to the Secretary of the Company if submitted in accordance with the procedures set forth in the Company’s Bylaws. You may obtain a copy of the Bylaws by writing to Adams Resources & Energy, Inc., 17 South Briar Hollow Lane, Suite 101, Houston Texas 77027, Attention:  Corporate Secretary, David Hurst. The Company’s Bylaws can also be found on the Company’s website at www.adamsresources.com , under Investor Relations – Corporate Profile – Corporate Governance.

In identifying and evaluating candidates for nomination to the Board, the Nominating and Corporate Governance Committee considers several factors including: education, experience, knowledge, expertise, independence and availability to effectively carry out the duties of a Board member.  The qualifications and backgrounds of prospective candidates are reviewed in the context of the current composition of the Board to ensure the Board maintains the proper balance of knowledge and experience to effectively manage the Company’s business for the long-term interests of the shareholders.  The Nominating and Corporate Governance Committee initially identifies candidates for nomination through the Committee’s and management’s general industry contacts.  It has not been the practice of the Nominating and Corporate Governance Committee to consider for nomination any specific director candidates recommended by shareholders as no such request has ever occurred.  The Nominating and Corporate and Governance Committee will review its policy position if such a request is received.  Shareholders may communicate with the Board of Directors as described herein below.

The Nominating and Corporate Governance Committee views diversity expansively and considers, among other things, functional areas of business and financial expertise, educational and professional background, and those competencies that it deems appropriate to develop a cohesive board such as ethics, integrity, values, practical wisdom, mature judgment and the ability of the candidate to represent the interests of all shareholders and not those of a special interest group.  Specifically with respect to the experience and qualifications of each of the persons nominated to serve on the Board of Directors, the Nominating and Corporate Governance Committee considered the following information to conclude that each such nominee should serve as a director of the Company.

              Messrs. Pressler, Reinauer, Bell, Brasseux, Jenner, Scofield and Ms. Earley have previously stood for election to the Board of Directors.   In connection with the Annual Meeting, the Nominating and Corporate Governance Committee has recommended the Directors listed in this proxy.

Communications with the Board

Any shareholder may communicate with the Board, a committee of the Board or any individual director by sending written communication addressed to the Board of Directors of Adams Resources & Energy, Inc., a committee or such individual director or directors, 17 South Briar Hollow Lane, Suite 100, Houston, Texas 77027, Attention: Investor Relations Manager.  All communications will be forwarded to the Board, a committee of the Board or such individual director or directors in accordance with the request of the shareholder.

Board’s Role in Risk Oversight

The Board’s role in the Company’s risk oversight process includes receiving regular reports from members of senior management on areas of material risk to the Company, including operational, financial, legal, regulatory, and strategic risks.  The Audit Committee is responsible for oversight of risks relating to the Company’s accounting matters, financial reporting and legal and regulatory compliance.  To satisfy these oversight responsibilities, the Audit Committee meets regularly with management, the Company’s internal auditor and independent registered public accounting firm.  The Compensation Committee is responsible for overseeing risks relating to employment policies and the Company’s policies on structuring compensation programs.  To satisfy these oversight responsibilities, the Compensation Committee meets regularly with management to understand the implications of compensation decisions, particularly the risks the Company’s compensation policies pose to the Company’s finances, human resources and shareholders.

Thomas S. Smith was appointed to the additional office of President and Chief Executive Officer of the Company in February 2015; he has served as Chairman of the Board of Directors since November 2013.  Mr. Smith also beneficially owns 46.9 % of the Company’s outstanding common stock.

Josh C. Anders joined the Company in 2016 and previously served as Vice President, Controller and Principal Accounting Officer for Southwestern Energy Company.  Mr. Anders holds a Bachelor’s of Science in Finance from Louisiana State University and a Master of Business Administration from Texas A&M University.  He serves as the Company’s principal financial and accounting officer.  Mr. Anders is a Certified Public Accountant in the State of Texas.

Sharon C. Davis joined the Company in 1992 and was previously employed by Arthur Andersen & Co.  Ms. Davis was appointed as Executive Vice President and Chief Operating Officer in March 2015.  Ms. Davis holds a Bachelor’s of Business Administration degree in Accounting from the University of Houston.  Ms. Davis is a Certified Public Accountant in the State of Texas.

Geoffrey L. Griffith joined the Company in 2004 as President, GulfMark Energy, Inc.  Mr. Griffith’s roles and responsibilities have increased since joining the company in 2004.  Mr. Griffith holds a Bachelor’s of Arts in Business Administration from Colorado College.

James L. Brown joined the Company in 1986 as a terminal manager.  He has served as President of Service Transport Company since 2013.  Mr. Brown attended Lamar University.

(1)	All Other compensation includes employer matching contributions to the Company’s 401(K) savings plan, a car allowance, reimbursement for club dues and life and disability insurance premiums.  The named executive officers receive no other perquisites or personal benefits.

(2)	Mr. Smith was appointed as President and Chief Executive Officer in February 2015 with an annual salary of $400,000.  His compensation for 2014 was solely as a director.

(3)	Mr. Anders joined the Company as Executive Vice President, Chief Financial Officer and Treasurer in December 2016.

COMPENSATION, DISCUSSION AND ANALYSIS

Background

The Company competes for talent in the Houston, Texas marketplace which is heavily tied to the energy industry and related fields.  There is strong demand for executives in the energy industry (and Houston in particular).  Within the public company community, Adams Resources & Energy, Inc. is consistently listed as one of the Houston areas’ top 100 companies as ranked by revenues.  As a measure of results, the Company’s ‟Performance Graph” prepared under the applicable rules of the Securities and Exchange Commission appears in the Company’s Annual Report on Form 10-K.  The Performance Graph data indicates that the Company outperformed its Integrated Oil and Gas peer group in each of the last five years ended December 31, 2016.  The Company outperformed the S&P 500 index in three of the last five years, but the S&P 500 has had higher returns than AE during the last two years.

Determine the Form and Amount of Compensation

Compensation Philosophy and Objectives

The Company’s compensation philosophy has the following objectives and executive compensation levels are determined in consideration thereof:

·	Establish and maintain a level of compensation that is competitive within the Company’s industry and region.

·	Provide an incentive mechanism for favorable results.

·	Maintain a compensation system that is consistent with the objectives of sound corporate governance.

Design of Reward

As of December 31, 2016, it was the policy of the Company to pay all forms of compensation in cash.  The Company is currently conducting a review to develop a long term incentive plan that appropriately aligns officers of the Company and promotes retention of talent.  The Company management and the Compensation Committee review the results of the annual ‟Say on Pay” vote by shareholders for feedback on its executive compensation amounts.

Elements of Compensation

Currently, the Company’s executive compensation program comprises the following elements:

·	Base salary

·	Discretionary bonus

·

Benefits

The Company utilizes these three elements of executive compensation to retain its executive officer group.  Discretionary bonuses are also used as an incentive for favorable results.  The discretionary bonus may also serve as a supplement to base salary levels, while allowing the Board flexibility when results are not consistent with expectations.  Discretionary bonuses are anticipated to increase or decrease with the prevailing trend for consolidated net earnings, cash flow and execution of our growth strategy.

The Company also provides employee benefits, primarily consisting of a 401(k) Plan (discussed below) and an employer sponsored medical plan.  The benefits provided to the executive officer group are no different than those offered to non-executive employees.  Currently, the Company does not provide stock options or other common stock incentives.  At the current time, the Company does not offer a defined benefit pension plan nor does it offer deferred compensation.

Perquisites

The Company provides the following:

·	Life and Disability Insurance Premiums

·	Automobile Allowance

·	Club Dues Reimbursement

Club dues reimbursements and automobile allowances are paid to the executive officers consistent with the payment of such amounts to non-executive employees.  The requirement to pay such amounts is negotiated with the executive at the time of their initial employment.  Life and disability insurance premiums are paid on behalf of the executives consistent with the payment of such insurance premiums for non-executive employees.  Perquisite amounts are not considered annual salary for bonus purposes.

401(k) Plan

The Company offers a 401(k) plan to its employees and its executive officers.  As referenced in footnote (1) to the Summary Compensation Table, the Company makes a matching contribution to the plan.  In 2016, the Company matched 100% of employee contributions up to 3% of compensation and matched 50% of employee contributions from 3% to 5% of compensation, subject to the Internal Revenue Service annual limits.  This policy conforms to the Internal Revenue Service allowed safe harbor rules for matching contributions.

Compensation and Risk

In order to establish and maintain profitability, the Company becomes exposed to risk.  The most significant areas of risk involve commodity price risk, customer credit risk, safety and security concerns and oil and gas exploration investment risk.  Compensation policies for all employees are designed to promote the provision of management safeguards against risk and not incentivize excessive risk-taking.  Compensation policies toward this aim include the following:

·	generally short-term contractual obligations with actual results fixed and determinable prior to the payment of employee bonuses;

·	a segregated internal reporting structure that puts the employees charged with managing and reporting risk on a separate reporting track from those employees committing the Company to contractual obligations, thereby providing independent monitoring of risk mitigation practices and procedures.

On a scheduled basis over the course of the year, Mr. Bell, representing the Compensation and Audit Committees, conducts interviews with key non-executive operating and accounting personnel to monitor compliance with the Company’s designed internal control structure and overall corporate strategies. Management has concluded that compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

Compensation Process

-- Mr. Smith, President and Chief Executive Officer

Mr. Smith was appointed President and Chief Executive Officer of the Company in February 2015. Since Mr. Smith is a 46.9% beneficial owner of the Company’s common stock, it was not practical to engage in the traditional formal employment negotiation process in order to determine his executive compensation.  By mutual agreement between Mr. Smith and the Compensation Committee of the Board, Mr. Smith’s annual base salary was set at $400,000, an amount less than his predecessor’s base salary but more than the current Chief Operating Officer’s base salary.  Mr. Smith requested that the Compensation Committee not consider him for a bonus in 2015 or 2016.

Pay Ratio Disclosure Rule

In August 2015 pursuant to a mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd – Frank Act”), the Securities and Exchange Commission (“SEC”) adopted a rule requiring annual disclosure of the ratio of the median employee’s annual total compensation to the total annual compensation of the principal executive officer (‟PEO”).  The Company’s PEO is Mr. Smith.  The purpose of the new required disclosure is to provide a measure of the equitability of pay within the organization.  The Company believes its compensation philosophy and process yield an equitable result and is presenting such information in advance of the required disclosure date as follows:

 

In determining the median employee, a listing was prepared of all employees as of December 31, 2016.  Employees on leave of absence were excluded from the list and wages and salaries were annualized for those employees that were not employed for the full year of 2016.  The median amount was selected from the annualized list.  For simplicity, the value of the Company’s 401(k) plan and medical benefits provided was excluded as all employees including the PEO are offered the exact same benefits and the Company utilizes the Internal Revenue Service safe harbor provision for 401(k) discrimination testing.  As of December 31, 2016 the Company employed 654 persons of which 434 are professional truck drivers.