Table of Contents
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. )
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Filed by the Registrant |
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Filed by a Party other
than the Registrant |
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CHECK THE APPROPRIATE BOX: |
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Preliminary Proxy Statement |
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Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Under Rule
14a-12 |
SOUTHWESTERN ENERGY COMPANY
(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): |
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No fee
required. |
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Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11. |
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Title of each class of securities to which transaction
applies: |
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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Proposed maximum aggregate value of transaction: |
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5) Total fee paid: |
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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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Form, Schedule or Registration Statement No.: |
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Table of Contents
Learn
More |
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Read about Southwestern Energy Company and
vote online
www.swnannualmeeting.com
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Table of Contents
Q&A with Chairman of the
Board
What were the Boards key priorities
over the past year?
Addressing SWNs balance sheet leverage
was our first priority as we entered 2016. We as well as our shareholders
recognized that we were in a low commodity price environment, and that $2.75
billion in credit facilities and just over $1.0 billion in publicly traded notes
would be coming due by 2018. The Board formed an ad hoc committee of outside
directors to support the development of new financial strategies. This committee
met regularly with the Companys management and external advisers. With input
from this committee, the Company successfully rearranged and extended the
maturities of its principal bank credit agreements to 2020, raised roughly $1.25
billion in equity, and paid down over $1.0 billion in bank and bond debt,
leaving us on sound footing for a more challenging commodity price environment
going forward.
Our entire Board has also worked
diligently over the past year to ensure our CEO leadership transition was as
smooth as possible. This transition came during a difficult time for the Company
as well as the industry. Bill Way, our CEO, demonstrated his effectiveness as a
leader and is wholly focused on delivering long-term value to our
shareholders.
In addition, our Board has a keen interest
in executive talent management as well as governance best practices. We
rigorously evaluate both executive management as well as the Board. I can assure
you that this is a very active and engaged Board.
How does the Board manage
risk?
Risk management has continued to be an
important topic over the past year. While the entire Board is engaged in the
challenge of risk management, the Audit Committee serves as the Boards initial
touchpoint for identifying and managing risks. With Bill Ways leadership in
conjunction with the Board, we continue to deepen our capabilities in risk
assessment via a committee of officers and senior managers that meet regularly
and identify and assess risks that can affect our business, including their
potential impact, the velocity with which they can arise, and action plans to
mitigate such risks. Senior management reports to the Audit Committee on
developments relating to risk at each quarterly meeting. One of our biggest
risks is commodity prices, and we have made significant progress over the past
year regarding the assessment and implementation of our hedging
strategies.
How does the Board monitor
environmental, social and sustainability matters?
This topic is top of mind for our Board
and our shareholders. We begin every Board meeting with a review of
environmental and safety performance. Our Health, Safety, Environment and
Corporate Responsibility Committee meets quarterly to review these topics in
more detail, including legislative and regulatory developments affecting our
industry and the Companys programs promoting safety, environmental stewardship
and responsibility as a corporate citizen. This committee also makes
recommendations to the Compensation Committee on the metrics for environmental
performance and safety used in our annual incentive awards. Our risk management
process also addresses the long-term sustainability of our business. We are
excited to have met our goal, announced in 2012, of being fresh water neutral by
2016: our Company replenishes or offsets more water from fresh water sources
through conservation projects and innovation than we use in our operations. I
encourage you to read our Corporate Responsibility report on our
website.
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What is the Boards focus going
forward?
Going forward our Board will continue to
focus its governance efforts on ensuring SWN delivers value to our shareholders
in what has become an increasingly dynamic and competitive industry
environment.
Tell us about your role as Chairman of
the Board.
As non-executive Chairman, I work closely
with our CEO, Bill Way, in setting the Boards agendas, provide feedback to
management from the Boards executive sessions, and facilitate discussion and
collaboration amongst directors. While the skill set on our Board is deep, we
have begun the process of expanding the breadth and diversity of our Board. We
recently added Jon Marshall to the Board, a former public company CEO with
significant industry and governance experience. After this annual meeting, the
median director tenure will be 5 years, with all having held CEO, CFO or other
senior management positions with energy companies or investors in the
sector.
Catherine A. Kehr
Chairman of the Board
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Proxy Statement
Highlights
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Director Since |
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Committees |
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Attendance Rate % |
Name and Occupation |
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Age |
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Independent |
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Audit |
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Compensation |
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N&G |
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HSE&CR |
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John D. Gass VP, Chevron Corporation President, Chevron
Gas and Midstream (retired) |
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65 |
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2012 |
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✓ |
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Chair |
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Chair |
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100 |
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Catherine A. Kehr SVP and Director, Capital Research Company
(retired) |
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54 |
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2011 |
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✓ |
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Member |
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Chair |
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100 |
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Greg D. Kerley CFO, Southwestern Energy (retired) |
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61 |
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2010 |
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✓ |
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Member |
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Member |
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100 |
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Jon A. Marshall CEO & President, GlobalSantaFe Corporation
(retired) |
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65 |
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2017 |
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✓ |
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N/A |
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Elliott Pew COO, Common Resources (retired) |
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62 |
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2012 |
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✓ |
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Member |
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100 |
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Terry W. Rathert CFO, Newfield Exploration Company
(retired) |
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64 |
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2014 |
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✓ |
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Chair |
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Member |
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100 |
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Alan H. Stevens E&P Executive (retired) |
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72 |
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2010 |
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✓ |
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Member |
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Member |
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100 |
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William J. Way President and CEO, Southwestern Energy
Company |
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2016 |
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100 |
N&G: Nominating and Governance Committee
HSE&CR: Health, Safety, Environment
and Corporate Responsibility Committee
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Proxy Statement Highlights |
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Board Highlights |
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We seek to ensure that a strong
balance of skills, experience, personal qualities and diversity are
represented in the boardroom. Our focus is to ensure that our directors
bring their particular background, insights and knowledge together for the
benefit of Southwestern Energy and our shareholders. |
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Relevant
Skills |
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7 of our 8
director nominees have extensive experience in the oil and gas
sector. |
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Thorough understanding
of our business
Our
director nominees bring together extensive experience in areas relevant to
our business including energy, finance and strategy.
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Experience and Leadership |
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All of our director
nominees have experience in leadership roles serving in senior
management positions or on boards of public companies. |
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Experience and proven
track-record in positions of leadership
Our
director nominees have acquired significant experience in leadership that
includes being a public company CEO, CFO, COO or Board
member.
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Tenure
Balance |
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Refreshed over
time
Our
director nominees offer a balance of experience and fresh perspectives,
with an average tenure of less than 5 years.
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Independence |
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7 of our 8
director nominees have been determined by our Board to be independent,
under the standards set forth in the SEC rules, the Corporate Governance
Rules of the NYSE and the Companys corporate governance
policies. |
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Independent oversight
to serve the long-term interests of Southwestern Energy and our
shareholders.
Almost all
of our directors are independent, and non-executive leadership directors
meet regularly without executive leadership present.
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Corporate
Governance Snapshot |
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The Board of Southwestern Energy is
committed to the highest standards of corporate governance. The Corporate
Governance section of our proxy statement describes our governance
framework in depth, highlights of which include: |
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Adoption of best
practices |
Boardroom
culture |
Board
independence |
●Annual Say on Pay vote
●Majority voting in director elections
●Annual election of all directors
●Proxy access
●Ability to call special meetings
●Active shareholder engagement program
●No supermajority voting standards |
●Disciplined decision-making
●Long-term outlook
●Focus on company risks
●Difficult questions directed to executive leadership and
directors
●Practices for increasing Board diversity |
●7 of our 8 director nominees have been determined to be
independent
●Independent Chair
●All standing committees consist of entirely independent
directors
●Executive sessions at nearly all Board and standing
committee meetings
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Proxy Statement Highlights |
Who We
Are
At Southwestern Energy, creating Value+ is
our core mission, implemented through our culture of continuous improvement,
innovation and responsibility. Our approach to all things at Southwestern Energy
is governed by our Formula.
Our
Formula |
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SWNs mission is to create Value+ by
providing energy to our world. Our Formula represents the essence of our
corporate philosophy and how we operate. |
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This Formula is the essence of our
corporate philosophy and how we operate our business. Our goal is to manage our
business for long-term shareholder growth, and a primary tool for achieving
long-term growth is disciplined capital allocation and investment practices. At
Southwestern Energy, we exercise this discipline by seeking to achieve $1.30 of
present value cash flow, discounted at 10%, for
each dollar invested, which we refer to as 1.3 PVI. We also seek ways to
consistently deliver more to our shareholders through innovation and new ideas
that will create value for every dollar we invest, increasing the value of our
assets by delivering better and safer operations year over year.
Corporate
Responsibility
SWNs business strategy and corporate
responsibility efforts are rooted in our Formula and the values it represents.
Our corporate responsibility strategy focuses on the health and safety of our
workforce, environmental stewardship, community engagement and the
identification of emerging strategic challenges and opportunities.
In our communities, we cultivate ongoing
dialogue with local officials, community members, businesses, nonprofit
organizations, emergency responders and land/mineral owners. These dialogues
help to address the needs of communities and provide stakeholders with a better
understanding of our operations. We also proactively seek out stakeholders at
the regional and national levels to engage in problem-solving dialogues and
productive partnerships.
Our V+ Development Solutions division
oversees much of this corporate responsibility work. It was formed to apply
innovative thinking to find and build solutions for achieving balance among our
economic, environmental and social impacts. V+ Development Solutions focuses in
particular on advancing the development of Americas abundant supply of natural
gas as an essential part of future energy sources. To learn more about
sustainable development at SWN, please see Corporate GovernanceCorporate
Responsibility section below in this proxy statement. Our full Corporate
Responsibility Report is available at our website at www.swn.com under the section Our
Commitments and the link to Corporate Responsibility.
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Proxy Statement Highlights |
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2016 Shareholder
Outreach
Our Board and executive leadership team
value feedback provided by our shareholders. In addition to the dozens of
meetings executive leadership and investor relations personnel held with
shareholders throughout the year, we reached out to representatives from holders
of approximately 80% of our outstanding shares during 2016 specifically to
discuss our compensation and corporate governance practices. In the fall of 2016
we spoke directly with representatives of approximately half of our top 25
shareholders, representing approximately 40% of our outstanding shares, about
the corporate governance and compensation practices important to them. While
those shareholders had differing views on some of the topics discussed, we
received the following feedback:
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A substantial majority of our
shareholders indicated strong support of our compensation and governance
practices, and also took the opportunity to share their views on how we
might enhance these practices. |
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A number of our shareholders asked
about our commitment to the environment, both in the communities in which
we operate and as a participant in industry-wide efforts. |
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In all cases, comments and feedback
were shared with the Audit Committee, the Compensation Committee, the
Nominating and Governance Committee, the Health, Safety, Environmental and
Corporate Responsibility Committee, and full Board, as
appropriate. |
Following this dialogue with our
shareholders, the Compensation Committee directed the implementation of changes
to the executive compensation program and related disclosures, which are
discussed below in 2017 Executive Compensation Updates in the Compensation
Discussion and Analysis section in this proxy statement.
2016 Executive
Compensation Highlights
Our executive compensation program is
designed to reward our executives for producing sustainable results consistent
with our strategy; to attract and retain the highest quality talent; and to
align pay with the long-term interests of shareholders. Our executive pay is
tied to company performance. Based on our
performance, the total pay mix for our Named Executive Officers (other than
Steven Mueller, who ceased to be our CEO in January 2016) for 2016 was as
follows:
CEO Pay
Distribution
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All Other
NEO Pay Distribution |
(1) |
Represents base
salaries in effect as of December 31, 2016, actual performance-based
annual bonus awards for 2016, which were paid in 2017, and the grant date
value of the 2016-2018 performance awards, restricted stock and options
(granted in December 2015 and January 2016). The Bonus consists of total
annual bonus payments, which include objective and discretionary
components. The Other pay consists of any changes in pension value and
nonqualified deferred compensation earnings and all other compensation,
each as disclosed in the Summary Compensation
Table. |
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Proxy Statement Highlights |
What We Do |
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✓Mix of Awards. Our executive compensation program contains both cash and equity
components and is weighted heavily toward long-term equity-based
incentives, with a mix of these incentives among performance-based stock
units, stock options and restricted stock.
✓Share Ownership Guidelines. Our NEOs must hold equity of a value equivalent to
multiples of their base salaries (two times for senior vice presidents,
three times for executive vice presidents and six times for our
CEO).
✓Clawbacks. If we restate our financial statements, other than as a result of
changes to accounting rules or regulations, we may recover incentive
compensation that was paid or granted in the three-year period prior to
the restatement, regardless of whether misconduct caused the
restatement. |
✓Double-Trigger Severance. Cash severance in connection with a change in control is
paid only if an actual or constructive termination of employment also
occurs.
✓Annual Risk
Assessments. The Compensation Committee
analyzes risk in setting executive compensation each year.
✓Reward Future Performance. Annual option, restricted stock and performance unit
awards vest over periods of three, four and three years, respectively, to
reward sustained company performance over time.
✓Peer Group Comparison. With the help of independent compensation consultants,
we annually analyze executive compensation relative to peer companies and
published survey data for peer
companies. |
What We Do
Not Do |
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✗No Tax Gross
Ups. We eliminated the excise tax gross-up
feature in all severance agreements entered into with NEOs first employed
after 2009, who include our current CEO and general counsel.
✗No Automatic Base
Salary Increases. Our NEOs base salaries
are reviewed annually and the decisions are based on market data provided
by our independent compensation consultants. No increases were made for
2016, other than for Mr. Way and Mr. Bergeron in connection with their
promotions in 2016. |
✗No Hedging and
Pledging Company Stock. Our policies
prohibit the pledging and hedging of our stock by our executives and
directors.
✗No Repricing of Stock
Options. We do not permit the repricing of
stock options without shareholder
approval. |
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Proxy Statement Highlights |
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Voting at the Annual
Meeting
Every vote cast at the Annual Meeting
plays a part in the future of Southwestern Energy. Please review our proxy
statement and take the time to vote right away, using one of the methods
explained below.
Who is entitled to vote?
Stockholders who own shares of common
stock as of March 29, 2017, the Record Date, may vote at the meeting. There were
502,526,469 shares of common stock outstanding on that date. Each share of
common stock entitles the holder to one vote on all matters submitted to a vote
at the Annual Meeting and any adjournment or postponement of the
meeting.
Voting Matters |
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You are being asked to vote on
the following: |
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Proposal |
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Board Recommendation |
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(page) |
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Proposal No. 1: Election of
Directors |
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FOR each of the nominees |
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Proposal No. 2: Non-Binding Advisory Vote to Approve the
Compensation of our Named |
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FOR |
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Executive Officers |
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Proposal No. 3: Non-Binding Advisory Vote on
the Frequency of Future Say-on-Pay Votes |
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FOR ONE
YEAR |
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66 |
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Proposal No. 4: Approval of amendment to the
2013 Incentive Plan |
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FOR |
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67 |
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Proposal No. 5: Ratification of Independent
Registered Public Accounting Firm |
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FOR |
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Proposal No. 6: Focus on For and Against
Votes (Stockholder Proposal) |
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AGAINST |
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81 |
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How to
Vote |
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Even if you plan to attend the
Annual Meeting in person, please vote immediately using one of the
following advanced voting methods. In all cases, you will need to have your proxy card in
hand. |
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By
Internet Vote your shares online
at www.proxyvotenow.com/swn |
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By
Telephone Vote your shares by
calling 1 (866) 257-2279 |
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By
Mail Vote by mail by marking,
dating and signing your proxy card or voting instruction form and
returning it in the postage-paid
envelope |
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Proxy Statement Highlights |
Attending the Annual
Meeting |
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9:00 a.m., Central Daylight Time
Tuesday, May 23, 2017 Southwestern Energy Company 10000 Energy
Drive Spring, Texas 77389 |
All shareholders as of the record
date or holders of proxies for them may attend the Annual Meeting but must
have photo identification and proof of stock ownership and, in the case of
a proxy holder, the proxy. If you are a shareholder of record (your shares
are held in your name) or hold a proxy for such a shareholder, valid photo
identification such as a drivers license or passport showing a name that
matches our records will suffice. If you are a beneficial owner (your
shares are held through a broker, bank or nominee) or hold a proxy for
such a shareholder, you must provide valid photo identification and
evidence of current ownership of the shares, which you can obtain from
your broker, bank or nominee. |
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Learn more about the 2017 Annual
Meeting at www.swnannualmeeting.com |
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Questions and Answers about the Annual
Meeting and Voting |
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Please see the Questions and
Answers about the Annual Meeting and Voting section beginning on page 83
for answers to common questions on the rules and procedures surrounding
the proxy and Annual Meeting process. |
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Table of
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10000 Energy Drive
Spring, Texas
77389
Notice of
Annual Meeting of Stockholders on May 23, 2017
The Annual Meeting of Stockholders of
Southwestern Energy Company, or the Company, will be held at Southwestern Energy
Company Headquarters, 10000 Energy Drive, Spring, Texas 77389, on Tuesday, May
23, 2017, at 9:00 a.m., Central Daylight Time, for the following
purposes:
(1) |
To elect eight directors to the
Board to serve until the 2018 Annual Meeting or until their respective
successors are duly elected and qualified, and the Board intends to
present for election John D. Gass, Catherine A. Kehr, Greg D. Kerley, Jon
A. Marshall, Elliott Pew, Terry W. Rathert, Alan H. Stevens and William J.
Way; |
(2) |
To conduct an advisory vote to
approve the compensation of our Named Executive Officers for 2016
(Say-on-Pay); |
(3) |
To conduct an advisory vote on
the frequency of future Say-on-Pay votes; |
(4) |
To approve an amendment to the
Southwestern Energy Company 2013 Incentive Plan to increase the number of
shares authorized for issuance; |
(5) |
To ratify the appointment of
PricewaterhouseCoopers LLP, or PwC, to serve as the Companys independent
registered public accounting firm for the fiscal year ending December 31,
2017; |
(6) |
To conduct an advisory vote on a
stockholder proposal regarding voting standards, if properly presented;
and |
(7) |
To transact such other business
as may properly come before the meeting or any adjournment or adjournments
thereof. |
The Board of Directors has fixed the close
of business on March 29, 2017, as the Record Date for the determination of
stockholders entitled to notice of and to vote at the meeting and any
adjournment thereof. The Companys 2016 Annual Report, which is not part of the
proxy soliciting material, is enclosed.
You are welcome to attend the meeting. If
you do not attend, it is important that your shares be represented and voted at
the meeting. You can vote your shares by completing and returning the enclosed
proxy card or voting instruction card. Alternatively, you can vote your shares
by telephone or over the Internet as described in more detail in this proxy
statement. You may revoke a proxy at any time prior to its exercise by giving
written notice to that effect to the Secretary of the Company or by submitting a
later-dated proxy or subsequent Internet or telephonic proxy. If you attend the
meeting, you may revoke any proxy you previously granted and vote in
person.
By Order of the Board of
Directors
JOHN C. ALE
Secretary
April 12,
2017
IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS FOR THE 2017 ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MAY 23, 2017:
The
Notice of Internet Availability of Proxy Materials, Notice of Annual
Meeting of Stockholders, 2017 proxy statement and the 2016 annual
report to stockholders are available free of charge at:
www.swnannualmeeting.com |
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Proxy
Statement Table of Contents
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Proposal
No. 1 Election of Directors
At this meeting, stockholders are being
asked to elect eight directors to serve until the next Annual Meeting or until
their respective successors are duly elected and qualified.
Voting
The shares of common stock represented by
the enclosed proxy will be voted as instructed by the stockholder for the
election of the nominees named in this section. If no direction is made, the
proxy will be voted FOR the election of all of the nominees named below other
than in the case of broker non-votes, which will be treated as described below.
This year, with no stockholders having made nominations, the number of nominees
equals the number of directors to be elected. Our bylaws provide that, in any
uncontested election of directors (an election in which the number of nominees
does not exceed the number of directors to be elected), any nominee who receives
a greater number of votes cast FOR his or her election than votes cast
AGAINST his or her election will be elected to the Board.
Shares not represented in person or by
proxy at the Annual Meeting, abstentions and broker non-votes will have no
effect on the election of directors, other than counting for purposes of a
quorum. Our bylaws also provide that any nominee who does not receive a majority
of votes cast FOR his or her election in an uncontested election is expected
to tender his or her conditional resignation to the Chairman of the Board promptly following the certification of the vote,
which resignation shall be promptly considered through a process overseen by the
Nominating and Governance Committee, excluding (other than in certain limited
circumstances set forth in our bylaws) any nominees who did not receive a
majority vote. If any nominee becomes unavailable for any reason or if a vacancy
should occur before the election, the shares of common stock represented by the
enclosed proxy may be voted for such other person as the Board may recommend.
The Company does not expect that any nominee will be unavailable for
election.
The Board, upon the recommendation of the
Nominating and Governance Committee, has proposed the eight nominees set forth
below for election as directors. All nominees for director are presently
directors of the Company and, with the exception of Mr. Marshall, who joined the
Board in February 2017, were elected by over 94% of votes cast by stockholders
at the 2016 Annual Meeting.
Information concerning the nominees is set
forth below.
Recommendation of the Board |
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The Board recommends
that the stockholders vote FOR the election of each of the nominees to the Board
as set forth in this proposal. |
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Table of
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Proposal No. 1 Election of Directors |
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Selection Criteria for Nominees for Directors
Each member of the Board is expected to
bring a valuable and often different perspective to the governance of the
Company. When these differing skill sets are combined in an environment of
interaction and respect, they give a greater overall skill set to the Board and provide a strong governance structure. Our
Corporate Governance Guidelines, which are available on our website at
www.swn.com
under Corporate Governance, set forth certain criteria that apply to the
selection of director candidates:
Director Selection Criteria |
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●Each director
nominee should be an individual of the highest character and integrity and
have the ability to work well with others
●Each director
nominee should have an inquiring mind, vision and good
judgment
●Each director
nominee should be free of any conflict of interest that would violate any
applicable law or regulation or interfere with the proper performance of
the responsibilities of a director
●Each director
nominee should possess substantial and significant business experience in
specific areas of expertise that would be important to the Company in the
performance of the duties of a director
●Each director
nominees skill set should complement the backgrounds and experience of
other Board members
●Each director
nominee should have sufficient time available to devote to the affairs of
the Company to carry out the responsibilities of a
director
●Each director
nominee should have the capacity and desire to represent the balanced,
best interests of all stockholders and objectively appraise management
performance |
The Nominating and Governance Committee
evaluates the qualifications of each director candidate against the foregoing
criteria in recommending to the Board concerning that individuals election or
re-election as a director, including members of the Nominating and Governance
Committee. The Nominating and Governance Committee, with direct input and advice
from our CEO, is responsible for assessing the appropriate mix of skills and
characteristics required of Board members based on the Boards perceived needs
at a given point in time and periodically reviews and updates the foregoing
criteria as deemed necessary. The Company is committed to considering candidates
for the Board regardless of gender, ethnicity and national origin. Any search
firm retained to assist the Nominating and Governance Committee in seeking
candidates is instructed to seek diverse candidates from traditional and
nontraditional candidate groups.
Each directors continuation on the Board
is reviewed before that director is considered for re-election at the expiration
of his or her term. In connection with its annual recommendation of a slate of
nominees, the Nominating and Governance Committee, in consultation with the CEO,
reviews and assesses the contributions of those directors selected for
re-election. At the conclusion of this process, the Chairman of the Nominating
and Governance Committee reports the Nominating and Governance Committees
conclusions to the full Board. Once a director reaches the age of 75, he or she
may not be considered for re-election to the Board of Directors, with certain
exceptions provided in our corporate governance guidelines.
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|
Proposal No. 1 Election of Directors |
2016
Board Highlights
In the first quarter of 2016, the Board
oversaw Mr. Ways successful transition to President and CEO, following Steven
Muellers resignation as CEO in January 2016. During that same period, the Board
worked diligently with the Companys leadership to respond wisely to the
continued low commodity price environment. Under the Boards oversight, the
Companys executive leadership put in place a series of priorities and
commitments, including investing within cash flow, focusing on strengthening the
balance sheet and managing risk through a strategic hedging program.
In 2016, the Board held five regularly
scheduled meetings and three special meetings. As was the case in 2015, each
director attended 100% of the meetings of the Board and the Committees of which
he or she was a member as well as the 2016 Annual Meeting. The Board also
reestablished an ad hoc Finance Committee to be readily available, as necessary,
to assist on matters related to our efforts to reduce and rearrange our
outstanding debt.
Below each nominees biography, we have
included an assessment of the skills and qualifications that nominee brings to
the Board.
Table of
Contents
Proposal No. 1 Election of
Directors |
|
Nominees for Election
JOHN D. GASS |
|
|
|
|
Independent
Director
Age: 65
Director since: 2012
Committees: Compensation (Chair); Health, Safety,
Environment and Corporate Responsibility (Chair)
Other Public Boards: Weatherford International, Ltd; Suncor
Energy Inc. |
|
Director
Qualification Highlights
●Former Senior Executive with Major
Integrated Oil and Gas Company
●Operational and HSE
Experience
●Midstream Experience
●Public Company Board
Service |
Mr. Gass retired in 2012 as Vice President
of Chevron Corporation and President of Chevron Gas and Midstream. In this role,
he was responsible for Chevrons global natural gas marketing and trading
activities, as well as Chevrons pipeline, power and worldwide shipping
operations. Mr. Gass began his career in 1974 in Chevrons Gulf of Mexico
business unit in New Orleans, and over the next 38 years held positions of
increasing responsibility, including heading the companys exploration and
production operations in southern Africa and in Australia and Papua New Guinea.
Mr. Gass served as a director of Sasol Chevron Holdings Ltd and GS Caltex. Mr.
Gass has been a director of Weatherford International, Ltd. since June 2013 and
serves on the Compensation and the Health, Safety and Environment Committees. He
became a director of Suncor Energy Inc. in February 2014, where he serves on its
Governance Committee and chairs its Human Resources and Compensation
Committee.
Skills and Qualifications of Particular
Relevance to Southwestern Energy
Mr. Gass has extensive experience with
leading exploration and production and midstream operational units of a major
integrated energy company, including senior executive experience. He also brings
valuable governance experience gained from his service on two other public
company board of directors. This industry, leadership and public company board
experience enhances the Boards skills in strategic planning, executive
compensation and oversight of operations, including HSE matters.
CATHERINE A. KEHR |
|
|
|
|
Independent Director and
Chairman of the Board
Age: 54
Director since: 2011
Committees: Audit; Nominating and Governance
(Chair)
Other Public Boards: California Resources
Corporation |
|
Director
Qualification Highlights
●Investor
Perspective
●Capital Markets
Experience
●Energy Sector
Knowledge
●Talent Development
●Public Company Board
Service |
Ms. Kehr retired in 2006 as a Senior Vice
President and Director of Capital Research Company, a division of The Capital
Group Companies, one of the worlds largest investment management organizations
and manager of the American Funds. In this role, Ms. Kehr was responsible for
investment analysis and a portfolio manager of global energy equities. Prior to
that, Ms. Kehr was an investment analyst and portfolio manager with
responsibility for global energy high yield debt. Prior to her tenure with The
Capital Group Companies, she held various managerial positions at Atlantic
Richfield Company and Payden and Rygel. In 2002, the Reuters Survey ranked Ms.
Kehr among the top 10 individual U.S. fund managers. Ms. Kehr has been a
director of California Resources Corporation since February 2015 and serves on
its Audit Committee and chairs its Compensation Committee.
Skills and Qualifications of Particular
Relevance to Southwestern Energy
Ms. Kehr has a
keen understanding of financial analysis, investments and capital markets honed
through her experience investing across the entire energy spectrum. She also
brings governance perspective from her service as a director of another E&P
company. Ms. Kehr brings a valuable investor perspective and understanding of
shareholder value to our Board, and her skills complement those of the other
nominees.
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Table of
Contents
|
Proposal No. 1 Election of
Directors |
GREG D.
KERLEY |
|
|
|
|
Independent
Director
Age: 61
Director since: 2010
Committees: Health, Safety, Environment and Corporate
Responsibility; Nominating and Governance
Other Public Boards: None |
|
Director
Qualification Highlights
●Former Public Company CFO
●Former CPA
●Finance and Accounting
Experience
●Energy Executive
Experience
●Risk Management
Experience |
Mr. Kerley retired as Executive Vice
President and Chief Financial Officer of Southwestern Energy in October 2012.
Mr. Kerley began his career at Southwestern Energy in 1990 as Controller and
Chief Accounting Officer, eventually serving as Treasurer and Secretary before
being named Senior Vice President and Chief Financial Officer in 1998. Prior to
joining the Company, Mr. Kerley held senior financial and accounting positions
at Agate Petroleum Inc. and was a manager for Arthur Andersen LLP specializing
in the energy sector. In 2010, Institutional Investor ranked Mr. Kerley as one
of the top performing CFOs in the exploration and production sector.
Skills and Qualifications of Particular
Relevance to Southwestern Energy
Mr. Kerley has extensive experience in
finance, accounting, and financial reporting, including serving as chief
financial officer of a publicly traded company. In addition to financial
expertise, he also has executive leadership experience and more than 30 years of
oil and gas industry experience. These skills complement those of other nominees
and add to a balanced Board.
JON A.
MARSHALL |
|
|
|
|
Independent
Director
Age: 65
Director since: 2017
Committees: None joined Board in February
2017
Other Public Boards: Noble Corporation plc, Cobalt
International Energy, Inc. |
|
Director
Qualification Highlights
●Former Public Company CEO
●Operational Experience
●Public Company Board Service
●Risk Management
Experience |
Mr. Marshall retired as President and
Chief Operating Officer of Transocean Ltd., a role in which he served in 2007
and 2008. Prior to that, Mr. Marshall served as the Chief Executive Officer and
President of GlobalSantaFe Corporation from 2003 to 2007, when it merged with
Transocean. Mr. Marshall also served on the boards of directors of those
companies. Mr. Marshall has served as a director of Noble Corporation plc since
2009, where he currently serves as chairman of its HSE & Engineering
Committee and as a member of its Audit and Finance Committees, and has served as
a director of Cobalt International Energy, Inc. since 2010, where he currently
serves as chairman of its Compensation Committee.
Skills and Qualifications of Particular
Relevance to Southwestern Energy
Mr. Marshall has significant experience as
a senior executive of multiple energy companies and as a member of multiple
boards of directors of energy companies. In particular, he was Chief Executive
Officer of another NYSE-listed company and led it though transformative changes.
This industry, leadership and public company board experience enhances the
Boards skills in strategic planning, executive compensation and oversight of
operations.
Table of
Contents
Proposal No. 1 Election of
Directors |
|
ELLIOTT PEW |
|
|
|
|
Independent
Director
Age: 62
Director since: 2012
Committees: Compensation
Other Public Boards: Enerplus Corporation |
|
Director
Qualification Highlights
●Board Chairman of Public E&P
Company
●Former COO of Private E&P
Company
●Former Public Company Senior
Executive
●Extensive Exploration,
Development and Operational Experience
●Geological and Geophysical
Skills |
Mr. Pew retired as Chief Operating Officer
of Common Resources, LLC, a Houston-based exploration and production company, in
2010. Mr. Pew was a co-founder of Common Resources, LLC and served as Chief
Operating Officer from 2007 until the company was sold in 2010. Prior to that,
Mr. Pew was executive vice president of exploration at Newfield Exploration
Company, where he led Newfields worldwide exploration program. Prior to his
work at Newfield, Mr. Pew was a senior executive with American Exploration
Company, a natural resource exploration and production company, since
1992.
Since June 2014, Mr. Pew has served as
chairman of the board of directors of Enerplus Corporation, a publicly traded
North American energy producer, where he has been an independent director since
2010. Since 2010, Mr. Pew also served as a director of private exploration and
production companies, first Common Resources II from 2010 to 2012 and then
Common Resources III from 2012 until its sale in 2016.
Skills and Qualifications of Particular
Relevance to Southwestern Energy
Mr. Pew has
extensive governance experience as a geologist, in exploration, development and
operations, including service as a senior executive for over 15 years.
Additionally, he served as a co-founder, COO and finally director of a private
exploration and production company for over 8 combined years. Mr. Pews
expertise and experience will continue to complement the skills of the other
nominees and provide significant contributions to the Companys
Board.
TERRY W. RATHERT |
|
|
|
|
Independent
Director
Age: 64
Director since: 2014
Committees: Audit (Chair); Compensation
Other Public Boards: None |
|
Director Qualification
Highlights
●Former Public Company
CFO
●Finance
Experience
●Energy Executive
Experience
●Risk Management
Experience
●Private Company Board
Service |
Mr. Rathert was a co-founder of Newfield
Exploration Company, a publicly traded E&P company, where he served in
various positions, including as executive vice president and chief financial
officer and as secretary, from 1989 until his retirement in August 2014. Prior
to Newfield, Mr. Rathert was director of economic planning and analysis for
Tenneco Oil Exploration and Production Company.
Since January 2015, Mr. Rathert has served
as a director of Kaspar Companies Inc. and Kaspar Texas Traditions, each a
privately held company, and since November 2015, has served as a director of
Encino Energy LLC, a privately held exploration and production
company.
Skills and Qualifications of Particular
Relevance to Southwestern Energy
Mr. Rathert has
an extensive background in the oil and gas industry, including service as chief
financial officer of a publicly traded company in this sector. This experience
and knowledge, particularly in financial and reporting matters, enhances the mix
of skills on the Board.
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Contents
|
Proposal No. 1 Election of
Directors |
ALAN H.
STEVENS |
|
|
|
|
Independent
Director
Age: 72
Director since: 2010
Committees: Nominating and Governance; Health, Safety,
Environment and Corporate Responsibility
Other Public Boards: None |
|
Director Qualification
Highlights
●Former COO of Publicly Traded E&P
Company
●Extensive Geological and Geophysical
Experience
●Talent Management
●Risk Management Experience
●Public Company Board
Experience |
Mr. Stevens has an extensive background in
domestic and international oil and gas exploration and production, spanning over
38 years. Mr. Stevens held various managerial, geological and geophysical
positions at Occidental Petroleum Corporation, Tenneco Oil Company and Exxon
Corporation. Mr. Stevens is also a former President and Chief Operating Officer
of the Companys subsidiaries Southwestern Energy Production Company and SEECO,
Inc., positions from which he retired in 2001. Mr. Stevens served as a director
of Derek Oil & Gas Company, a Canadian exploration, development and
production company, from 2004 through 2010.
Skills and Qualifications of Particular
Relevance to Southwestern Energy
Mr. Stevens has
extensive exploration and production company experience, gained while working at
a number of industry leaders across more than three decades. His background in
operations, coupled with his technical education and experience, provides
invaluable expertise on the Board.
WILLIAM J.
WAY |
|
|
|
|
Director
Age: 58
Director since: 2016
Committees: None
Other Public Boards: None |
|
Director Qualification
Highlights
●Companys Current CEO and Former
COO
●Extensive Managerial, Operational, Technical
and Leadership Experience in domestic and international Upstream and
Midstream Sectors
●HSE
Experience
●Talent and Risk
Management |
Mr. Way currently is President and Chief
Executive Officer of the Company, having been named Chief Executive Officer in
January 2016. From December 2014 to January 2016, he was President and Chief
Operating Officer of the Company. Mr. Way joined Southwestern as Executive Vice
President and Chief Operating Officer in October 2011. Prior to Southwestern, he
was Senior Vice President Americas of BG Group plc with responsibility for
E&P, Midstream, LNG and global shipping operations in the U.S., Trinidad and
Tobago, Chile, Bolivia, Canada and Argentina. From 1981 until 2007, he held
various senior technical, operational and leadership positions at ConocoPhillips
in the U.S. and globally.
Skills and Qualifications of Particular
Relevance to Southwestern Energy
Mr. Ways leadership position as Chief
Executive Officer of the Company gives the Board direct insights into the
Companys operations, strategy and talent development as well as its relations
with investors and other key stakeholders. Mr. Ways extensive leadership
experience in upstream and midstream businesses adds to the Boards knowledge in
these areas.
Table of
Contents
Corporate Governance
Corporate Governance Policies
Southwestern Energy recognizes that strong
corporate governance plays an important part in achieving our objective of
enhancing the Companys long-term value for our shareholders. Executive
leadership, led by the CEO, is responsible for running the Companys operations,
under the oversight of the Board of Directors.
The Board has adopted corporate governance
principles, which together with our Amended and Restated Certificate of
Incorporation, Amended and Restated Bylaws and Board committee charters, serve
as the framework of the Board and its committees. From time to time, the Board
revises its corporate governance policies in response to changing regulatory
requirements, evolving best practices, and the perspective of our shareholders
and other stakeholders.
Corporate
Governance Materials |
|
The following materials related
to corporate governance at Southwestern Energy are available at
www.swn.com, under the section Corporate Governance. |
●Certificate of
Incorporation
●Bylaws
●Audit Committee
Charter
●Compensation Committee Charter
●Nominating and
Governance Committee Charter
●Health, Safety,
Environment and Corporate Responsibility Committee
Charter
●Corporate Governance
Guidelines |
●Business
Conduct Guidelines
●Code of
Ethics for Section 406 Officers
●Anti-Corruption Compliance Policy
●Confidential Complaint Procedures for Questionable
Accounting Practices
●Procedures for Contacting the Board
●Political Contributions Policy
|
Copies of all of these documents are also
available in print free of charge to any stockholder upon request to our
Investor Relations Department located at our corporate headquarters and
reachable at (832) 796-4700.
Board Leadership Structure and Executive
Sessions
Currently an independent director,
Catherine A. Kehr, serves as Chairman of the Board of Directors. At many times
in our past, the Board has named the CEO as Chairman with an independent
director serving as presiding, or lead, director. The Board may modify the
current structure again in the future if it determines that is would be more
effective and likely to advance the interests of the Company and its
stockholders.
The independent directors are required to
meet in executive sessions as appropriate matters for their consideration arise,
but, in any event, at least once a year. During 2016, the Board conducted these
executive sessions at each of its regularly scheduled meetings. The agenda of these executive sessions includes such topics as the
participating directors determine. The Chairman of the Board (or the presiding
director if the CEO is Chairman) acts as the chair of all executive sessions and
is responsible for coordinating the activities of the other outside directors,
as required by our corporate governance guidelines and the NYSE listing
standards. The Chairman (or the presiding director if the CEO is Chairman) also
acts as the liaison director for any informal, confidential communications with
the CEO outside of the normal committee and Board procedures.
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Table of
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Director Independence
The Companys Corporate Governance
Guidelines require that a majority of the members of the Board be independent of
the Companys executive leadership and its significant stockholders. For a
director to be deemed independent, the Board must affirmatively determine that
the director has no material relationship with the Company or its affiliates
(either directly or as a partner, stockholder or officer of an organization that
has a relationship with the Company or its affiliates), or any person (including
the director) that, with its affiliates, is the beneficial owner of 5% or more
of the Companys outstanding voting stock or any member of the executive
leadership of the Company or his or her affiliates. Material relationships
include commercial, banking, industrial, consulting, legal, accounting,
charitable and familial relationships. For making this determination, the Board
has adopted a set of director independence standards as required by the NYSE.
Under the Boards independence standards, a director will not be deemed
independent if he or she:
● |
is, or within the past three years has
been, employed by the Company or any of its affiliates; |
● |
has an immediate family member who is,
or within the past three years has been, an officer of the Company or any
of its affiliates; |
● |
has received during any twelve-month
period within the last three years more than $120,000 in direct
compensation from the Company and its affiliates (collectively), excluding
director and committee fees and pension or other forms of deferred
compensation for prior service (provided such compensation is not
contingent in any way on continued service); |
● |
is, together with members of his or her
immediate family, the beneficial owner of 5% or more of the Companys
outstanding voting stock, or is employed or retained by or serves as an
officer, director or representative of, any person that, together with its
affiliates, is the beneficial owner of 5% or more of the Companys
outstanding voting stock, except in each case (i) to the extent the stock
has been beneficially owned continuously for at least two years or (ii)
the beneficial ownership first equals or exceeds 5% after he or she
becomes a director; |
● |
has an immediate family member who has
received during any twelve-month period within the last three years more
than $120,000 in direct compensation from the Company and its affiliates
(collectively), excluding compensation for service as a non-officer
employee of the Company; |
● |
(A) is a partner or an employee of a
present or former independent registered public accounting firm of the
Company or any of its affiliates; (B) is the immediate family member of a
current partner of any such firm, or a current employee of such firm who
personally works on the Companys audit; or (C) within the past three
years, has been a partner or employee of any such firm or has any
immediate family member who has been a partner of such firm or an employee
of any such firm, and personally worked on the Companys
audit; |
● |
is, or has an immediate family member
who is, currently employed (or within the last three years has been
employed) as an officer of another entity where any executive officer of
the Company or any of its affiliates serves (or served) on the
compensation committee of such entity; or |
● |
is a current employee, or has an
immediate family member who is an officer, of any entity that has made
payments to, or received payments from, the Company for property or
services in an amount which in any of the last three fiscal years of such
entity exceeds the greater of $1,000,000, or 2% of the entitys
consolidated gross revenues. |
Contributions to tax-exempt entities are
not considered to be payments for purposes of the foregoing standards, but are
considered in determining whether a director has a material relationship with
the Company. None of the contributions made by the Company to tax exempt
organizations for which one of our independent directors serves as an officer
exceeded the greater of $1 million, or 2% of such tax exempt organizations
consolidated gross revenues in any single fiscal year within the preceding three
years.
Our Board has determined that all of the
nominees for director, other than our CEO, Mr. Way, are independent under our
applicable independence standards.
Table of Contents
Stockholder Rights
Under our Amended and Restated Certificate
of Incorporation and our Amended and Restated Bylaws, our stockholders have the
right to call a special meeting of stockholders and to nominate director
candidates to appear in our proxy. Holders of at least 20% of our common stock
meeting certain net long holding requirements may require the secretary to
call a special meeting.
Under our Amended and Restated Bylaws, our
stockholders have the right of proxy access. A stockholder, or a group of up to
20 stockholders (with funds having specified relationships constituting a single
stockholder), owning 3% or more of the Companys outstanding common stock
continuously for at least the preceding three years may nominate and include in
the Companys proxy materials director candidates constituting up to
20% of the Board or two directors, whichever is
greater, provided that the stockholder(s) and the nominee(s) satisfy the
requirements specified in the Amended and Restated Bylaws. Shares that have been
loaned during any portion of the three-year holding period count as being owned
as long as certain conditions for the recall of shares are met. This is in
addition to the right of any stockholder to nominate director candidates outside
the proxy access process.
We have no supermajority voting
requirements.
Our Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws are available to stockholders at
no charge upon request to the Secretary or on our website at www.swn.com.
The Boards Role in Risk
Management
One of the primary responsibilities of the
Board is reviewing the Companys strategic plans and objectives, including the
principal risk exposures of the Company. Although each committee of the Board is
responsible for evaluating certain risks and overseeing the management of such
risks, the entire Board is regularly informed through committee reports about
such risks. This enables the Board and its committees to coordinate the risk
oversight role, particularly with respect to risk interrelationships.
Our Board has delegated to the Audit
Committee, which is comprised solely of independent directors, oversight
responsibility relating to how the Company manages our enterprise risk issues.
In this connection, the Audit Committee discusses with executive leadership, the
internal auditor (or internal audit service provider) and the independent
auditors (i) the Companys major risk exposures (whether financial, operating or
otherwise), (ii) the steps executive leadership has taken to monitor and control
such exposures (including the Companys risk assessment and risk management
policies) and manage legal compliance programs, and (iii) such other
considerations as may be relevant to their respective audits. Management
conducts quarterly enterprise risk management reviews and updates the Audit
Committee at least quarterly. In addition, at least annually, the entire
Board engages in a review of the Companys
strategic plan and the principal current and future risk exposures of the
Company, and the corporate compliance officer also discusses with the Board the
focus and results of the Companys legal compliance program conducted for
employees in all locations.
In addition to the Audit Committees
oversight role in evaluating how the Company manages our enterprise risk issues,
our Compensation Committee evaluates the design of all of our incentive plans to
assess whether any portion of our incentive compensation programs encourages
excessive risk taking by plan participants. The evaluation conducted by the
Compensation Committee is discussed on page 35 under Compensation Risk
Assessment. The Nominating and Governance Committee oversees risks associated
with the composition of the Board and other types of risks within its areas of
responsibility. The Health, Safety, Environment and Corporate Responsibility
Committee reviews health, safety and environmental risks associated with our
operations, as well as political and public policy matters that affect the
Company and related risks.
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Table of Contents
Communications with the
Board of Directors
The Board provides a process for
stockholders and other interested persons to send communications to the
independent Chairman of the Board, the non-employee directors as a group or any
of the other directors, including the entire Board. Stockholders and other
interested persons may send written communications to the non-employee
directors, the Chairman of the Board or any of
the other directors to the attention of the Secretary, Southwestern Energy
Company, 10000 Energy Drive, Spring, Texas 77389. The Secretary will review,
sort and summarize the communications and forward them to the intended
recipient(s) on a periodic basis, but no less frequently than every calendar
quarter.
Committees of the Board of
Directors
The Board held five scheduled meetings and
three special meetings in 2016. Each meeting was attended by all of the
directors then in office. The Board has four standing committees: the Audit
Committee, the Compensation Committee, the Nominating and Governance Committee,
and the Health, Safety, Environment and Corporate Responsibility Committee. In
addition, the Board may from time to time authorize additional standing or ad
hoc committees, as it deems appropriate. The
Board currently has an ad hoc committee that reviews technical aspects of
significant projects and transactions and an ad hoc finance committee that
monitors our capital structure, liquidity and other related matters. The
following table lists our director nominees board assignments in 2016. Jon A.
Marshall is not listed below, as he joined the Board in February
2017.
Board Member |
|
Audit * |
|
Compensation |
|
Nominating and Governance |
|
Health, Safety, Environmental and
Corporate Responsibility |
John D. Gass |
|
|
|
|
|
|
|
|
Catherine A. Kehr |
|
✓ |
|
|
|
|
|
|
Greg D. Kerley |
|
|
|
|
|
✓ |
|
✓ |
Vello A. Kuuskraa + |
|
✓ |
|
|
|
|
|
|
Kenneth R. Mourton ++ |
|
✓ |
|
|
|
✓ |
|
|
Steven L. Mueller + |
|
|
|
|
|
|
|
|
Elliott Pew |
|
|
|
✓ |
|
|
|
|
Terry W. Rathert |
|
|
|
✓ |
|
|
|
|
Alan H. Stevens |
|
|
|
|
|
✓ |
|
✓ |
William J. Way |
|
|
|
|
|
|
|
|
|
Committee Chair / Co-Chair |
* |
All members of the Audit Committee during
2016 were audit committee financial experts as defined under applicable
SEC rules, other than Mr. Kuuskraa. |
+ |
Mr. Kuuskraa and Mr. Mueller retired from
the Board at the conclusion of the 2016 Annual Meeting. |
++ |
Mr. Mourton is retiring from the Board at the conclusion
of the 2017 Annual Meeting. |
All of our standing committees are
governed by Board-approved charters. The committees evaluate their performance
and review their charters annually. The charter for each standing committee is
available on our website at www.swn.com under Corporate
Governance.
Table of Contents
|
Audit
Committee |
|
|
|
|
|
Members during
2016:
All independent Terry
W. Rathert (Chair)* Catherine A.
Kehr* Vello A.
Kuuskraa+ Kenneth R.
Mourton*++
Meetings during
2016:
Four, each attended by all serving
members
*Audit Committee Financial Expert
+Retired at the conclusion of the 2016 Annual
Meeting
++Retiring at the conclusion of the 2017 Annual
Meeting |
Each member of the
Audit Committee is financially literate and independent of the Company and
executive leadership under the standards set forth in the SEC rules, the
Corporate Governance Rules of the NYSE and the Companys corporate
governance policies. In accordance with its charter, the Audit Committee
assists the Board in its oversight of:
●the integrity of the Companys financial
statements and financial reporting process and the Company systems of
internal accounting and financial controls
●the performance of the internal audit
services functions
●the annual independent audit of the
Companys financial statements, the engagement of the independent auditors
and the evaluation of the independent auditors qualifications,
independence and performance
●the compliance by the Company with legal
and regulatory requirements, including the Companys disclosure controls
and procedures
●the evaluation of enterprise risk
issues |
|
|
|
|
Audit Committee Financial
Experts
The Board has determined that each
of the following Audit Committee members is an Audit Committee Financial Expert.
In each case, the Board made a qualitative assessment of each members knowledge
and experience, based on the following factors:
Catherine A.
Kehr |
Graduate of The Wharton School of the
University of Pennsylvania; extensive experience in the debt and equity
markets during her career with The Capital Group Companies, including as
an investment analyst and fund manager |
Kenneth R. Mourton |
Certified public accountant (inactive) |
Terry W. Rathert |
Former CFO of a publicly traded
company |
Audit Committee Activities in
2016
The committee reviewed the Companys
annual and quarterly financial reports, including our Form 10-K and Forms 10-Q.
At each of these meetings the Committee discussed the documents and received a
report from our internal audit department and our independent outside audit
firm, PricewaterhouseCoopers LLP (PwC). The Committee regularly met with
representatives of PwC outside the presence of executive leadership, and also
met with members of executive leadership individually. In addition to its financial responsibilities, the Committee also
performed a primary role in risk management, reviewing and discussing with
management enterprise risks and actions to mitigate these risks. The Committee
has established policies and procedures for the pre-approval of all services
provided by PwC, which are described on page 79 of this proxy statement, and the
approval of the internal audit plan as executed by the internal audit service
function.
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Table of Contents
Audit Committee
Report
During 2016, the Audit Committee of
the Board of Directors was comprised of four independent directors through the
2016 Annual Meeting and three independent directors following Mr. Kuuskraas
retirement at that time. Set forth below is the report of the Committee on its
activities with respect to Southwestern Energys financial statements for the
fiscal year ended December 31, 2016 (the audited financial
statements).
●The Committee has reviewed and
discussed the audited financials with executive leadership;
●The Committee has discussed with
PwC, Southwestern Energys independent public accounting firm, the matters
required to be discussed under applicable auditing
standards;
●The Committee has received the
written disclosures and the letter from PwC pursuant to applicable requirements
of the Public Company Accounting Oversight Board regarding PwCs communications
with the Committee concerning independence, and has discussed with PwC its
independence from the Company; and
●Based on the review and
discussions referred to above and relying thereon, the Committee recommended to
the Board of Directors that the audited financial statements be included in
Southwestern Energys Annual Report on Form 10-K for the fiscal year ended
December 31, 2016, for filing with the SEC.
Terry W. Rathert
Catherine A.
Kehr
Kenneth R. Mourton
|
Compensation
Committee |
|
|
|
|
|
Members during
2016:
All independent John D. Gass (Chair) Vello A. Kuuskraa+ Elliott Pew Terry W.
Rathert
Meetings during
2016:
Seven, each attended by all
serving members
+Retired at the conclusion of the 2016 Annual Meeting;
served as Co-Chair with Mr. Gass until that
time |
Each member of the
Compensation Committee is independent of the Company and executive
leadership under the standards set forth in the SEC rules and the
Corporate Governance Rules of the NYSE. In accordance with its charter,
the Compensation Committee:
●oversees our compensation and benefits
policies generally
●evaluates the performance of designated
senior executives, including the CEO
●oversees and recommends to the Board (or
the independent directors in the case of the CEO) for approval of the
compensation levels for executive officers
●prepares and recommends to the full Board
the inclusion of the Compensation Committee Report set forth in this proxy
statement
●reviews the Compensation Discussion and
Analysis and recommends to the full Board its inclusion in the proxy
statement
●the Committee may delegate its authority
relating to employees other than executive officers and directors as it
deems appropriate and may also delegate its authority relating to
administrative matters |
|
|
|
|
Table of Contents
Compensation Committee Activities in
2016
The Committee devoted substantial
time to its oversight of our compensation and benefits programs. The Committee
received updates on compensation trends and regulatory updates. The Committee
also reviewed the Companys compensation programs, retirement, health and
welfare plans. The Committees review of executive compensation matters and its
decisions, including changes made in response to input from our stockholders, is
discussed in the Compensation Discussion and Analysis beginning on page 43 of
this proxy statement. The Committee also undertakes steps necessary to ensure
that the compensation of our senior executives
does not encourage unnecessary or excessive risk taking, which oversight is
discussed in Compensation Risk Assessment beginning on page 35 of this proxy
statement.
As provided in our Corporate Governance
Guidelines, the Committee recommends to the Board (the independent directors in
the case of the CEO) the compensation levels for senior executives. It also
administers our incentive compensation plan.
Independent
Consultant
The Compensation Committee
engaged Meridian Compensation Partners, LLC, or Meridian, as its independent
compensation consultant for 2016 to advise it on all compensation matters
related to our executive leadership. Meridian provides no other services to the
Company. During 2016, Meridian:
●collected, organized and
presented quantitative competitive market data
for a relevant competitive peer group with
respect to executive officers target annual and
long-term compensation levels
●developed and delivered an annual
Committee briefing on legislative and regulatory
developments and trends in executive compensation
and their implications for Southwestern
Energy
●analyzed market data and
provided recommendations for non-employee
director compensation to the Nominating and
Governance Committee for approval by the
Board
The Committee believes that the advice it
receives from Meridian is objective and not influenced by any other business
relationship. The Committee and Meridian have
policies and procedures in place to preserve the objectivity and integrity of
the executive compensation advice, including:
●The Committee has the sole
authority to retain and terminate the executive
compensation consultant.
●Meridian reports to the Committee
Chair and has direct access to the Committee
without the involvement of the Companys
executive leadership.
●Though it is necessary for the
consultant to interact with executive leadership
to gather information, the Committee determines
if and how Meridians advice can be shared
with executive leadership.
●The Committee regularly meets
with Meridian in executive session, without
executive leadership present, to discuss
recommendations.
After review and consultation with
Meridian, the Committee has determined that no conflict of interest arose from
the work performed by Meridian during the year ended December 31, 2016.
Additionally, the Committee has determined that Meridian was independent during
the course of its engagement and is currently independent.
Compensation Committee Interlocks and
Insider Participation
During 2016, there
was no interlocking relationship between the Board or the Compensation Committee
and the board of directors or compensation committee of any other
company.
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Report of the Compensation
Committee
The Committee has reviewed and discussed
the Compensation Discussion and Analysis included in this proxy statement with
executive leadership and, based on that review and discussion, the Committee
recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in our annual report on Form 10-K and in this proxy
statement.
John D. Gass
Elliott Pew
Terry W.
Rathert
|
Nominating and Governance
Committee |
|
|
|
|
|
Members during
2016:
All
independent Catherine A. Kehr
(Chair) Greg D. Kerley (as of July 2016) Kenneth R. Mourton+ Alan H.
Stevens
+Retiring at the conclusion of
the 2017 Annual Meeting
Meetings during
2016:
Three, each attended by all
serving members |
Each member of the
Nominating and Governance Committee is independent of the Company and
executive leadership under the standards set forth in the SEC rules and
the Corporate Governance Rules of the NYSE. In accordance with its
charter, the purpose of the Committee is to discharge the responsibility
of the Board relating to:
●the identification of individuals
qualified to become members of the Board
●the recommendation to the Board of the
director nominees for each Annual Meeting of Stockholders
●the consideration and periodic reporting
to the Board on all matters relating to the selection, qualification and
compensation of members of the Board and candidates nominated to the
Board
●the development and recommendation to the
Board of a set of corporate governance guidelines applicable to the
Company
●the review of the overall corporate
governance structure of the Company and the recommendation of any proposed
changes regarding the Companys corporate governance
practices
|
|
|
Nominating and Governance Committee
Activities in 2016
The Committee devoted
substantial time to identifying director candidates, establishing committee
membership and overseeing the Companys corporate governance
policies.
Table of
Contents
|
Health, Safety, Environment and Corporate
Responsibility Committee |
|
|
|
|
|
Members during
2016: All
independent John D. Gass
(Chair) Greg D. Kerley* Alan H. Stevens
*Determined independent as of the first quarter of
2016
Meetings during
2016:
Four, each attended by all serving
members |
In accordance with its
charter, the purpose of the Committee is to discharge the responsibility
of the Board relating to:
●matters of health, safety and environment
(HSE) arising out of the Companys activities and operations and their
impact on employees, contractors and the communities in which the Company
operates
●current and emerging trends in political
and public policy issues that may affect the Company, its business and its
reputation and that are not in the purview of other standing committees of
the Board
|
|
|
Health, Safety, Environment and
Corporate Responsibility Activities in 2016
At each meeting, the Committee met with executive leadership for a report
on the Companys HSE performance, to discuss trends in HSE events and the
Companys plan for reducing HSE events, and for a
report on regulatory updates and other public policy developments that affect
the Companys business activities.
Succession Planning
The Board regularly reviews short- and
long-term succession plans for the CEO and other senior leadership positions. In
assessing future possible CEOs, the independent directors identify the skills,
experience and attributes they believe are required to be an effective CEO in
light of the Companys business strategies, opportunities and challenges. The
Board also ensures that directors have substantial opportunities over the course
of time to engage with possible succession candidates.
The Board also considers its own
composition and succession plans. The Nominating and Governance Committee of our
Board has been delegated the responsibility of initially identifying and
evaluating candidates for Board membership and for making recommendations to the
Board of the director nominees for each annual meeting of stockholders. The
Nominating and Governance Committee is responsible for establishing criteria for
nominees, screening candidates (in consultation with the CEO), and upon review and feedback from the remaining directors,
making a recommendation for final approval of candidates for the full Board.
After a concurrent review of all candidates by the Nominating and Governance
Committee and the CEO, various directors interview the potential candidates and
report their conclusions to the Nominating and Governance Committee, together
with a recommendation of final candidates for interview by the members of the
Nominating and Governance Committee. The Nominating and Governance Committee
then interviews the final candidates and recommends to the full Board candidates
for election based upon the results of the interview. The decision to name a new
director is made by the full Board.
Candidates are selected for their
character, judgment, business experience and specific areas of expertise, among
other relevant considerations, such as the requirements of applicable law and
listing standards.
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The Board recognizes the importance of
soliciting new candidates for membership on the Board and that the needs of the
Board, in terms of the relative experience and other qualifications of
candidates, may change over time. Candidates for membership on the Board may be
suggested by any director or stockholder, and the
Board may retain professional search firms to identify suitable candidates.
Stockholders may nominate candidates for directors by following the procedures
described below under Stockholder Nominations.
Stockholder Nominations
Our Amended and Restated Bylaws permit
stockholders to nominate directors for consideration at an annual meeting of
stockholders.
Proxy Access
Nominations
To make a proxy access
nomination, an eligible stockholder (as defined in our Amended and Restated
Bylaws) generally must deliver a qualifying notice to the Secretary at the
principal executive offices of the Company not later than the close of business
on the 120th day, nor earlier than the close of business on the 150th day, prior
to the first anniversary of the date the definitive proxy statement was first sent to stockholders in connection with
the preceding years annual meeting of stockholders and otherwise comply with
all of the requirements of the Amended and Restated Bylaws. For the 2018 Annual
Meeting, we must receive notice of the nomination for inclusion in the Companys
proxy materials no earlier than November 13 and no later than December 13,
2017.
Other Nominations
Our Amended and Restated Bylaws also allow any stockholder to
nominate a candidate for election to the Board without the nomination included
in the Companys proxy materials by delivering written notice by mail to the
Secretary at the principal executive offices of the Company generally not later
than the close of business on the 90th day, nor earlier than the close of
business on the 120 day, prior to the first anniversary of the preceding years
annual meeting. The notice must include information specified in the Amended and
Restated Bylaws. For the 2018 Annual Meeting, assuming that the Annual Meeting
is held within 25 days of May 23, 2018, we must receive notice of intention to
nominate a director no earlier than January 23 and no later than February 22,
2018. If the meeting is not held within 25 days before or after the first
anniversary of the preceding years annual meeting, we must receive notice of
your intention to nominate a director (or to introduce an item of business) no
later than the close of business on the tenth day following the day on which we
send notice of the annual meeting or otherwise publicly disclose such date,
whichever is sooner.
During the past year, no stockholder
nominated a candidate for the Companys Board pursuant to the procedures
discussed above or otherwise formally suggested a candidate to the Nominating
and Governance Committee.
The chairman of the meeting may disregard
any nomination of a candidate for director if it is not made in compliance with
the procedures in our Amended and Restated Bylaws or other requirements under
the Exchange Act. For more information on stockholder participation in the
selection of director nominees, please refer to Section 2.4 in our Amended and
Restated Bylaws, which can be found on our website at www.swn.com under Corporate
Governance.
It is the policy of the Nominating and
Governance Committee to consider properly submitted stockholder nominations for
directors as described above under Succession Planning. In evaluating such
nominations, the Nominating and Governance Committee seeks to address the
criteria set forth above under Election of DirectorsSelection Criteria for
Nominees for Directors.
Table of
Contents
Certain Transactions with Directors and
Officers
The Board has adopted a written policy
that governs the approval of transactions with related parties, including, among
others, officers, directors and their immediate family members. The related
party transaction policy applies to any potential related party transaction
other than a transaction involving less than $5,000 or involving compensation by
the Company of a related party who is a director or officer. Under the Companys
related party transaction policy, directors and officers are required to bring
any possible related party transaction to the attention of the Companys General
Counsel. The Board has determined that the Audit Committee is best suited to
review such transactions. At the first regularly scheduled Audit Committee
meeting in each calendar year, executive leadership recommends transactions to
be entered into by the Company for that calendar year with related parties,
including the proposed aggregate value of such transactions, if applicable.
After review, the Audit Committee approves or disapproves such transactions. At
each subsequently scheduled meeting, executive leadership updates the Audit
Committee as to any material change to those proposed transactions. In the event
executive leadership recommends any additional transactions subsequent to the
first calendar year meeting, such transactions may be presented to the Audit
Committee for approval or preliminarily entered into by executive leadership
subject to ratification by the Audit Committee; and if the transaction is not so
ratified, the transaction must be cancelled.
Pursuant to the policy, the Audit
Committee has reviewed and established a standing pre-approval for each of the
following types of transactions:
● |
Any employment by the Company of an
executive officer of the Company or any of its subsidiaries if: the
related compensation is required to be reported in the Companys proxy
statement under Item 402 of Regulation S-K promulgated by the SEC
regarding compensation disclosure requirements (generally applicable to
named executive officers) and is approved (or recommended to the Board
for approval) by the Companys Compensation
Committee; or the executive officer is not an immediate family member of
another executive officer or director of the Company, the related
compensation would be reported in the Companys proxy statement under Item
402 if the executive officer was a named executive officer, and the
Companys Compensation Committee approved (or recommended that the Board
approve) such compensation; |
● |
Any compensation paid to a director
if the compensation is required to be reported in the Companys proxy
statement under Item 402 of Regulation S-K; |
● |
Any transaction with another company
at which a related partys only relationship is as an employee (other than
an executive officer or director) or beneficial owner of less than ten
percent of that companys equity, if the aggregate amount involved does
not exceed the greater of $1,000,000, or two percent of that companys
total annual revenues; |
● |
Any charitable contribution, grant
or endowment by the Company to a charitable organization, foundation or
university at which a related partys only relationship is as an employee
(other than an executive officer or director), if the aggregate amount
involved does not exceed the lesser of $1,000,000, or two percent of the
charitable organizations total annual receipts; |
● |
Any transaction where the related
partys interest arises solely from the ownership of the Companys common
stock and all holders of the Companys common stock received the same
benefit on a pro rata basis (e.g., dividends); |
● |
Reimbursement or payment of expenses
of a related party who is an officer or director pursuant to the Companys
travel and business expense reimbursement
policies; |
● |
Transactions available to all
employees generally; or |
● |
Transactions in the ordinary course
of business that do not exceed $120,000 in any fiscal
year. |
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Certain
Transactions
The Company employs our
director Greg Kerleys son-in-law, James Durant, as a Senior Production
Engineer. He received total compensation of less than $200,000 in fiscal year
2016. Mr. Durant was a full-time employee of the Company before his marriage to
Mr. Kerleys daughter.
Compensation Risk Assessment
The Company believes that our compensation
policies and practices appropriately balance near-term performance improvement
with sustainable long-term value creation, consistent with our corporate
philosophy, and that they do not encourage unnecessary or excessive risk taking.
In addition to the Audit Committees oversight role in evaluating enterprise
risk issues, the Compensation Committee evaluates the design of all our
compensation policies and practices, including our incentive plans, to assess
whether they create appropriate incentives for employees to perform and to
remain at the Company and to take appropriate risks and to discourage taking
inappropriate risks. Compensation for our employees generally is structured
similarly to our executive compensation program: a base salary,
performance-based annual bonus, and, for certain senior employees, equity
incentive compensation in the form of stock options, restricted stock and/or
performance units payable in common stock or cash. The less senior the employee,
the more that pay is weighted toward annual compensation, with non-salaried,
hourly employees receiving solely wages and a comparatively smaller bonus.
Performance-based annual bonus and long-term incentives have features
paralleling those for our named executive officers and thus are designed to
encourage intelligent risk-taking and risk mitigation. Discretionary portions
reflect individual performance with business unit performance reflecting
a significant share. Especially in operating
positions, an employees performance-based compensation is tied not only to
operating metrics but also health, safety and environmental factors. Our
Compensation Committee oversees all long-term incentive awards and reviews them
to assure they do not promote excess risk-taking. We believe our balanced use of
short- and long-term incentives, mix of cash and equity incentives, metric
diversification and alignment to our business strategy, capped payouts, and
stock ownership guidelines, promote responsible decision making, attract and
retain good performers, and do not encourage unreasonable risk taking related to
the Companys business.
As a producer of natural gas, oil and
related hydrocarbons, we acknowledge that there is a certain level of risk
involved in all aspects of our activities, but our compensation is structured to
encourage levels of risk taken by our employees that are appropriate and
socially responsible, reflecting our commitment to conducting our operations in
a safe, resource-efficient manner, protecting the environment and being a good
corporate citizen of the communities in which we operate. Based on the
Compensation Committees review and assessment, the Company believes that our
compensation policies and practices are not reasonably likely to have a material
adverse effect on the Company.
Corporate Responsibility
Southwestern Energy Company is committed
to providing the energy that powers our world, today and into the future.
Creating Value+ is SWNs core goal, with a clear focus on continuous
improvement, innovation, integrity and responsibility. We seek to create value
for our shareholders while providing a safe and healthy workplace for our
people, acting as good environmental stewards and being respected members of the
communities in which we operate. Discussed below
are certain highlights of our commitments relating to clean air and water. Our
2015-2016 corporate responsibility report, which can be located by visiting Our
Commitments and the link to Corporate Responsibility on our website at
www.swn.com, provides additional insight into our operations, goals, strategy and
performance.
Table of
Contents
Air
Methane, the primary component of natural gas, is a short-lived,
high-global-warming potential greenhouse gas (GHG) when emitted. Excessive
methane leakage can partially offset the benefits of natural gas as a
lower-carbon fossil fuel. SWN is a proponent of innovative, performance-based
programs to address methane emissions from the oil and gas sector.
In 2015, our leak/loss rate was 0.184
percent of production. In early 2016, we committed to maintaining a leak/loss
rate below 0.36 percent of production. This goal aligns with the mission of the ONE Future coalition, which was co-founded by
SWN and is helping to decrease emissions across the natural gas value
chain.
The company also tracks absolute GHG
emissions and emissions intensity. Compared to 2014, our GHG emissions intensity
(i.e., per unit produced) in 2015 decreased 12 percent. Our absolute GHG
emissions in 2015 rose 21 percent for upstream operations, principally due to a
significant increase in production during that period.
Water
Fresh, clean water is a precious natural resource that is critical to
natural ecosystems and human communities. Because water is also necessary for
our operations, we developed the Energy Conserving Water initiative, or
ECH2O®, a holistic approach to water
management with four components: reduction,
innovation, conservation and protection.
The primary goal of ECH2O has
been to achieve freshwater neutral by the end
of 2016. That is, for every gallon of fresh water we use, we aim to offset or
replenish that gallon through water-quality improvement projects or treatment
technologies that return fresh water to the environment. We met this goal in our
Fayetteville Shale play in 2015 a year early and we met it company-wide in
2016.
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Director
Compensation
Directors who are not Southwestern Energy
employees were compensated in cash during 2016 for their service as a director.
For 2016, the directors elected, following the peer review performed by Meridian
Compensation Partners, the Boards independent compensation consultant, to
eliminate meeting attendance fees and committee membership fees and, in light of
the challenges facing the industry and the Company, to reduce committee chair
fees by 20%. For 2016, each non-employee director received the following
compensation:
● |
annual cash retainer of
$60,000 |
● |
annual long-term incentive
compensation with a value of $200,000, awarded in December
2015 |
● |
annual common stock award for
Chairman in the amount of $120,000 |
● |
pro rata for the portions of the
fees earned for the director terms beginning at the 2016 Annual Meeting,
as applicable: $16,000 for serving as presiding director / chairman;
$16,000 for chairing the Audit Committee; $15,000 for chairing the ad hoc
Technical Committee; $12,000 for chairing the Compensation Committee; and
$8,000 for chairing the Health, Safety, Environment and Corporate
Responsibility Committee, and the Nominating and Governance
Committee. |
We reimburse all directors for travel and
other necessary business expenses incurred in the performance of their services
for us and extend coverage to them under our directors and officers indemnity
insurance policies. Directors are also eligible to participate in our matching
gift program. The maximum gift total for a director participant in the matching
gift program is $15,000 in any calendar year. In addition, our directors have
been eligible to participate in our group health plans on the same basis as our
employees.
The total annual compensation (i.e. total
cash compensation plus long-term incentive compensation) paid to each outside
director is determined based on a peer review performed by Meridian to evaluate
the competitiveness and reasonableness of our director compensation. Our
compensation paid to each outside director in 2016 was at the median of our peer
group as determined by Meridian. The value of the total long-term incentive
compensation for 2016, which was awarded in December 2015, and allocated one
third to stock option awards and two thirds to restricted stock awards, with the
number of stock options and shares of restricted stock awarded being determined
by reference to the market value of the Companys stock.
The restricted stock awarded to the
directors in December 2015 will vest at the rate of 25% on the anniversary of
the grant date over a period of four years, except in the cases of Messrs.
Mourton and Stevens, whose shares are subject to immediate full vesting if they
should elect to retire from the Board of Directors as they meet the age and
service requirement. All of the restricted stock grants will immediately fully
vest upon a change in control or the death or disability of a director. The
stock options awarded to the directors will vest at the rate of 33 1/3% on each
anniversary of the grant date over a period of three years, except in the cases
of Messrs. Mourton and Stevens, whose options are subject to immediate full
vesting if they should elect to retire from the Board of Directors. All of the
stock option grants will immediately fully vest upon a change in control or
the death or disability of a director. In 2016 the Chairman was awarded $120,000
of restricted stock to be issued in 25% increments each quarter from the date of
the 2016 annual meeting. The Chairman received awards on July 1, 2016 and
October 1, 2016, with 100% immediate vesting.
Table of Contents
Total Director Compensation for Year Ended
December 31, 2016
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
Name |
|
Fees Earned or Paid in Cash ($)
(1) |
|
Stock Awards ($)
(2)(3)(4) |
|
All Other Compensation ($)
(5) |
|
Total ($) |
John D. Gass |
|
72,473 |
|
|
|
25,727 |
|
98,200 |
Catherine A. Kehr |
|
64,989 |
|
44,974 |
|
14,648 |
|
124,611 |
Greg D. Kerley |
|
60,000 |
|
|
|
29,648 |
|
89,648 |
Kenneth R. Mourton |
|
60,000 |
|
|
|
4,769 |
|
64,769 |
Elliott Pew |
|
69,355 |
|
|
|
|
|
69,355 |
Terry Rathert |
|
69,978 |
|
|
|
26,000 |
|
95,978 |
Alan H. Stevens |
|
60,000 |
|
|
|
13,227 |
|
73,227 |
Vello A. Kuuskraa + |
|
25,000 |
|
|
|
12,127 |
|
37,127 |
+ |
Mr. Kuuskraa retired from
the Board at the conclusion of the 2016 Annual Meeting. |
(1) |
Included in this column are an annual
retainer fee, chairman fee and committee chairman fees. Additional details
regarding these payments can be found in the narrative above. |
(2) |
Ms. Kehr receives her compensation
for serving as the Chairman of the Board in the form of shares of our
common stock. The dollar amounts stated for the restricted stock and
options reflect the grant date fair value of the award as computed in
accordance with FASB ASC Topic 718. The grant date fair value for the
common stock issued to Ms. Kehr on July 1, 2016 and October 1, 2016 was
determined using the closing price of the Companys common stock on the
NYSE of $13.01 and $13.91, respectively. |
(3) |
Other than Ms. Kehrs compensation
for serving as Chairman of the Board, our directors received no stock
awards during the year ended December 31, 2016. Awards for 2016 were
granted in December 2015, and awards for 2017 will be issued on a
quarterly basis beginning April 1, 2017. |
(4) |
The aggregate number of stock option
awards and stock awards outstanding at fiscal year-end 2016 for each
director is set out in the table below: |
Name |
|
Number
of Securities Underlying Unexercised Options Unexercisable
(#) |
|
Number
of Securities Underlying Unexercised Options Exercisable
(#) |
|
Number
of Shares or Units of Stock that Have Not
Vested (#) |
John
D. Gass |
|
14,103 |
|
19,584 |
|
12,055 |
Catherine A. Kehr |
|
14,103 |
|
25,834 |
|
12,055 |
Greg
D. Kerley |
|
14,103 |
|
71,988 |
|
12,055 |
Kenneth R. Mourton |
|
14,103 |
|
28,584 |
|
12,055 |
Elliott Pew |
|
14,103 |
|
22,584 |
|
12,055 |
Terry
Rathert |
|
14,103 |
|
10,032 |
|
11,195 |
Alan
H. Stevens |
|
14,103 |
|
28,584 |
|
12,055 |
Vello
A. Kuuskraa + |
|
|
|
42,687 |
|
|
+ |
Mr. Kuuskraa retired from the Board
at the conclusion of the 2016 Annual Meeting. |
(5) |
The amounts indicated in this column
include health insurance provided by the Company for Messrs. Gass, Kerley,
Kuuskraa, Mourton and Stevens and Ms. Kehr, and amounts paid under the
Companys charitable gift matching program. The charitable gift matches
for Messrs. Gass, Kerley, Rathert and Stevens total $15,000, $15,000,
$26,000 ($11,000 paid in 2016 for 2015 contribution and $15,000 paid for
2016 contribution), and $2,500
respectively. |
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Table of Contents
Stock Ownership
Information
Share Ownership of
Officers, Directors and Nominees
The following table sets forth information
as of March 29, 2017, with respect to the beneficial ownership of the Companys
common stock by each executive officer named in the Summary Compensation Table,
whom we collectively refer to as our Named
Executive Officers, or NEOs, by each director and nominee, and by all executive
officers, directors and nominees as a group.
|
|
Amount and Nature of Beneficial
Ownership |
|
|
Name of Beneficial Owner |
|
Shares Owned Directly (1) |
|
Shares Owned 401(k) |
|
Restricted Stock Outstanding (Voting
Power) |
|
Options Exercisable |
|
Total Number of Shares of
Common Stock |
|
Percent of Class |
Named Executive
Officers: |
|
|
|
|
|
|
|
|
|
|
|
|
William J. Way |
|
201,882 |
|
|
|
296,140 |
|
453,584 |
|
951,606 |
|
* |
R. Craig Owen |
|
51,704 |
|
334 |
|
122,142 |
|
142,729 |
|
316,909 |
|
* |
Mark K. Boling |
|
406,462 |
|
|
|
83,625 |
|
218,341 |
|
708,428 |
|
* |
John C. Ale |
|
29,011 |
|
|
|
81,445 |
|
97,456 |
|
207,912 |
|
* |
John E. Bergeron, Jr. |
|
35,087 |
|
|
|
46,198 |
|
68,073 |
|
149,358 |
|
* |
Steven L. Mueller (2) |
|
333,512 |
|
|
|
|
|
882,920 |
|
1,216,432 |
|
* |
Directors and
Nominees: |
|
|
|
|
|
|
|
|
|
|
|
|
John D. Gass |
|
14,972 |
|
|
|
12,055 |
|
19,584 |
|
46,611 |
|
* |
Catherine A. Kehr |
|
56,745 |
|
|
|
12,055 |
|
25,834 |
|
94,634 |
|
* |
Greg D. Kerley |
|
376,841 |
|
|
|
12,055 |
|
71,988 |
|
460,884 |
|
* |
Jon A. Marshall (3) |
|
|
|
|
|
|
|
|
|
|
|
* |
Kenneth R. Mourton |
|
305,879 |
|
|
|
12,055 |
|
28,584 |
|
346,518 |
|
* |
Elliott Pew |
|
14,932 |
|
|
|
12,055 |
|
22,584 |
|
49,571 |
|
* |
Terry W. Rathert |
|
27,306 |
|
|
|
11,195 |
|
10,032 |
|
48,533 |
|
* |
Alan H. Stevens |
|
16,507 |
|
|
|
12,055 |
|
28,584 |
|
57,146 |
|
* |
All directors, nominees and
executive |
|
|
|
|
|
|
|
|
|
|
|
|
officers as a group (19
persons) |
|
1,980,758 |
|
8,700 |
|
884,285 |
|
2,251,857 |
|
5,125,600 |
|
1.02% |
* |
Less than one percent of
class. |
(1) |
Includes shares convertible from the
Companys depositary shares (the Depositary Shares), each representing a
1/20th interest in a share of 6.25% Series B Mandatory Convertible
Preferred Stock, $0.01 par value per share (the Series B Preferred
Stock). At any time prior to January 15, 2018, a holder of 20 Depositary
Shares may cause the conversion of one share of the Series B Preferred
Stock into a number of shares of the issuers common stock equal to the
minimum conversion rate of 37.0028, subject to adjustments for certain
fundamental changes (as defined). Thus, each Depositary Share will convert
into 1.85014 shares of common stock, subject to adjustment. On January 15,
2018, the Depositary Shares mandatorily convert to common stock at a
conversion rate ranging from 1.85014 to 2.17391 shares of common stock per
Depositary Share (or Series B Preferred Stock to common stock conversion
rate ranging from 37.0028 to 43.4782), subject to adjustment. The
conversion rate of 1.941 was used to report the shares owned in this
column. |
(2) |
Mr. Mueller resigned as our CEO
effective January 6, 2016, but remained Chairman of the Board and a
non-executive employee through the May 2016 Annual Meeting. Because Mr.
Mueller served as CEO for a portion of 2016, he is a NEO under applicable
SEC rules. |
(3) |
Mr. Marshall became a director in
February 2017 and so had not received any equity awards as of the Record
Date. |
Table of Contents
Stock Ownership Information |
|
Equity Compensation
Plans
The following table sets forth certain
information as of December 31, 2016, concerning outstanding awards under all of
the Companys equity compensation plans, the weighted average exercise price of
the outstanding options and the number of shares available for future issuance
under the plans:
Plan Category |
|
(a) Number of Shares to be
Issued Upon Exercise of Outstanding Options, Warrants
and Rights |
|
(b) Weighted-Average Exercise
Price of Outstanding Options, Warrants
and Rights |
|
(c) Number of Shares Remaining
Available for Future Issuance (2) |
Equity compensation plans approved by
stockholders (1) |
|
11,676,737 |
|
$16.69 |
|
18,704,273 |
(1) |
Consists of the Southwestern
Energy Company 2004 Stock Incentive Plan and the Southwestern Energy
Company 2013 Incentive Plan. Shares remaining available for issuance may
be issued only under the Southwestern Energy Company 2013 Incentive Plan,
which permits grants and awards in the form of stock options, shares of
restricted stock, performance units and restricted stock units, as well as
other forms of incentive awards. |
(2) |
The number of shares to be issued
upon exercise of outstanding options, warrants and rights, and the number
of shares remaining available for future issuance as of December 31, 2016
were determined by giving effect to the fungible share
ratio. |
Security Ownership of
Principal Stockholders
The following persons were known by the
Company to own beneficially more than 5% of the Companys common stock as of
December 31, 2016. Reported Percent of Class based on outstanding shares the
companys Common stock as of March 29, 2017.
|
|
|
|
|
|
|
|
|
Title of Class |
|
Name and Address of Beneficial
Owner |
|
Amount and Nature
of Beneficial Ownership |
|
|
Percent of Class |
|
Common Stock |
|
Capital Research Global Investors 333 South Hope
Street, 55th Floor Los Angeles, California 90071 |
|
54,790,560 |
(1) |
|
10.9 |
% |
Common Stock |
|
The Vanguard Group 100 Vanguard Blvd. Malvern, PA
19355 |
|
52,858,175 |
(2) |
|
10.5 |
% |
Common Stock |
|
BlackRock, Inc. 55 East 52nd Street New York, NY
10055 |
|
39,025,801 |
(3) |
|
7.8 |
% |
Common Stock |
|
SailingStone Capital Partners LLC One California
Street, 30th Floor San Francisco, California 94111 |
|
30,236,712 |
(4) |
|
6.0 |
% |
Common Stock |
|
State Street Corporation State Street Financial
Center One Lincoln Street Boston, Massachusetts 02111 |
|
29,442,623 |
(5) |
|
5.9 |
% |
Common Stock |
|
FMR LLC 245 Summer Street Boston, Massachusetts
02210 |
|
26,080,211 |
(6) |
|
5.2 |
% |
(1) |
Based on the 13G/A filed on
February 13, 2017, with the SEC with respect to Company securities held as
of December 31, 2016, Capital Research Global Investors LP had sole voting
power and sole dispositive power with respect to these
shares. |
(2) |
Based on the 13G/A filed on
February 13, 2017, with the SEC with respect to Company securities held as
of December 31, 2016. The Vanguard Group reported it is the parent holding
company or control person of the entities holding these shares and that it
had sole power to vote or to direct the vote of 774,151 shares, sole power
to dispose or to direct the disposition of 52,016,079 shares, and shared
power to dispose or to direct the disposition of 842,096
shares. |
(3) |
Based on the 13G/A filed on
January 27, 2017, with the SEC with respect to Company securities held as
of December 31, 2016, BlackRock, Inc. had sole power to vote or to direct
the vote of 34,887,377 shares and sole power to dispose or to direct the
disposition of 39,025,801 shares. |
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Table of Contents
|
Stock Ownership Information |
(4) |
Based on the 13G filed on February 10, 2017, with the
SEC with respect to Company securities held as of December 31, 2016,
Sailing Stone Capital Partners LLC had sole voting power and sole
dispositive power with respect to these shares. |
(5) |
Based on the 13G filed on February 9, 2017, with the SEC
with respect to Company securities held as of December 31, 2016, State
Street Corporation had shared voting power and shared dispositive power
with respect to these securities. |
(6) |
Based on the 13G filed on February 14, 2017, with the
SEC with respect to Company securities held as of December 31, 2016, FMR
LLC had sole power to vote or to direct the vote of 5,618,291 shares and
sole power to dispose or to direct the disposition of 26,080,211
shares. |
Stock Ownership
Guidelines
The Company maintains stock ownership
guidelines for directors and executive officers. Each director must own common
stock with a market value equal to five times the annual cash retainer that was
in effect on December 6, 2013 (the date the stock ownership guidelines were last
amended) or the date the director joined the Board, whichever date is later.
This ownership threshold must be met within five years of December 6, 2013 or
five years of the date the director joined the Board, whichever date is later.
Until such time as the director reaches his or her share ownership requirement,
the director will be required to hold 50% of the shares of common stock received
upon lapse of the restrictions upon restricted stock and upon exercise of stock
options (net of any shares utilized to pay for the exercise price of the
option). Once achieved, the required ownership threshold must be maintained as
long as the director retains his or her seat on the Board.
Stock that counts toward satisfaction of
these guidelines includes stock purchased on the open market, stock obtained
through stock option exercises, restricted stock, and stock beneficially owned
in a trust, by a spouse and/or minor children. In instances where these stock
ownership guidelines would place a severe hardship on a director, the Board will
make the final decision as to developing an alternative stock ownership
guideline for a director that reflects the intention of these guidelines and his
or her personal circumstances. As of December 31, 2016, all directors then in
office held stock in excess of the levels required in the guidelines.
Guidelines for the ownership requirements
for executive officers are discussed in the Compensation Discussion and Analysis
section beginning on page 54 of this proxy statement.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires
the Companys directors and executive officers, and persons who own more than
ten percent of the Companys common stock, to report their initial ownership of
the common stock and any subsequent changes in that ownership to the SEC and the
NYSE, and to furnish the Company with a copy of each such report.
To the Companys knowledge, based solely
on review of the copies of such reports furnished to the Company and written
representations that no other reports were required, its directors, executive
officers and more than ten percent stockholders complied with all applicable
Section 16(a) filing requirements.
Table of Contents
Proposal No. 2
Non-Binding Advisory Vote to Approve the Compensation of our Named Executive
Officers
We are asking our stockholders to approve,
on a non-binding and advisory basis, the compensation paid to our named
executive officers (NEOs) as described in the Compensation Discussion and
Analysis (CD&A) and the Executive Compensation section of this proxy
statement.
The Company believes that its executive
compensation program, which emphasizes equity awards and performance-based cash
incentives, is strongly aligned with the interests of its
stockholders.
The CD&A, beginning on page 43 of this
proxy statement, describes the Companys executive compensation program and the
decisions made by the Compensation Committee in 2016 in more detail. Highlights
of the program include the following:
● |
Salary constitutes no more
than 20% of the target compensation package of our NEOs (other than Mr.
Mueller) and the remainder is equity-based or is otherwise contingent upon
company and individual performance. |
● |
Our compensation programs
include features that we believe mitigate risk without diminishing
incentives, including: |
○ |
maximum payout that limits
annual incentive bonuses or performance units; |
○ |
mix of cash, equity and
performance-based incentives, balanced between annual and longer-term
incentive opportunities; and |
○ |
a significant stock ownership
requirement. |
● |
The equity component of
long-term incentive compensation is designed to align executive
leaderships interests with those of our stockholders, provides an
incentive for achieving our long-term performance objectives and
constitutes the major component of at-risk compensation. Each of the NEOs
is employed at-will and is expected to demonstrate exceptional personal
performance to continue serving as a member of the executive team. None of
the NEOs has an employment agreement or a severance arrangement other than
in the context of a change in control. |
● |
Our compensation
programs: |
○ |
do not permit re-pricing of
stock options without shareholder approval; |
○ |
do not permit pledging or
hedging of Company securities; and |
○ |
require recoupment of
incentives in certain circumstances to encourage responsible and
sustainable decision-making. |
Our executive compensation program,
including the changes we have made for 2017, results in part from ongoing
dialogue between representatives of our shareholders and members of the
Compensation Committee, which is described more fully in the CD&A. We are
asking shareholders to approve, on an advisory basis, the compensation of our
NEOs as described in this proxy statement by voting in favor of the following
resolution, which will be submitted for approval by shareholders at the 2017
Annual Meeting:
RESOLVED, that
the stockholders of Southwestern Energy Company approve, on an advisory basis,
the compensation of Southwestern s executive officers named in the Summary
Compensation Table as disclosed, pursuant to the SECs compensation disclosure
rules, in the Compensation Discussion and Analysis, compensation tables and
other narrative compensation disclosure in the proxy statement.
As an advisory vote, this proposal is not
binding upon the Company. However, the Compensation Committee, which is
responsible for designing and administering the Companys executive compensation
program, values the opinions expressed by stockholders in their vote on this
proposal and will consider the outcome of the vote when making future
compensation decisions for named executive officers. Unless the Board modifies
its determination on the frequency of future Say-on-Pay advisory votes, the next
Say-on-Pay advisory vote will be held at our 2018 Annual Meeting.
Recommendation of the Board |
|
|
|
The Board recommends
that the stockholders vote
FOR
approval of
the compensation of the Companys named executive
officers. |
|
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Table of Contents
Compensation
Discussion and Analysis
Southwestern Energy faced a low commodity
price environment in 2016, following a dramatic drop in commodity prices in
2015. The Board and executive leadership worked together to stabilize and
bolster the Companys short- and long-term financial health and our capital
program flexibility in light of changing price expectations. The following
represent our principal achievements in 2016.
● |
Committed to Capital
Discipline. Invested within our cash flow plus a portion of the proceeds from
our successful equity offering earmarked for this purpose, with the
remainder to debt reduction, and in only those projects that met our
rigorous economic hurdles at strip pricing. |
● |
Extended Debt
Maturities. Rearranged and extended our bank credit facilities and successfully
tendered for approximately $700 million of near-term senior notes, which
enhanced and stabilized our liquidity and eliminated the overhang of
near-term debt maturities. |
● |
Improved
Margins. Generated cash flow from operations of about $500 million, which
reflects the impact of an aggressive assault on costs and improved
drilling and completion performance. |
● |
Managed Portfolio
through Asset sales. Intelligently managed our portfolio, including disposing
of acreage we were not planning to develop until well into the next decade
and using the over $400 million of proceeds to reduce
debt. |
The compensation paid to our named
executive officers (NEOs) for 2016 reflects and rewards these and other
achievements. Our NEOs for 2016 were:
Executive |
Title in 2016 |
William J. Way |
President & Chief Executive Officer |
R. Craig Owen |
Senior Vice President & Chief Financial
Officer |
Mark K. Boling |
Executive Vice President & President V+ Development
Solutions |
John C. Ale |
Senior Vice President, General Counsel and
Secretary |
Jack E. Bergeron, Jr. |
Senior Vice President E&P Operations |
Steven L. Mueller |
Former Chairman of the Board & Former Chief Executive
Officer |
Mr. Mueller resigned as our CEO effective
January 6, 2016, but remained Chairman of the Board and a non-executive employee
through the May 2016 Annual Meeting. Mr. Way became CEO on January 6, 2016.
Because Mr. Mueller served as CEO for a portion of 2016, he is a NEO under
applicable SEC rules.
CD&A Highlights |
|
Guiding Principles and Compensation
Practices |
43 |
How We Make Compensation
Decisions |
46 |
2016 Named Executive Officer
Compensation |
48 |
2017 Executive Compensation
Updates |
55 |
Guiding Principles and
Compensation Practices
Our executive compensation program is
designed to reward NEOs for producing sustainable financial results consistent
with our strategy to attract and retain the highest quality talent, and to align
pay with the long-term interests of shareholders.
Table of Contents
Compensation Discussion and Analysis |
|
Our Formula
Our Formula and our
Guiding Compensation Principles |
|
Our
approach to executive compensation, like all things at Southwestern
Energy, is governed by our Formula |
|
For a more in depth discussion of our
Formula and its role in our decision-making, see Proxy SummaryWho We Are
above in this proxy statement.
Alignment with
Shareholders
We align the interests of the
NEOs with those of our investors by rewarding executive performance on the basis
of key financial measurements that we believe closely correlate to long-term
shareholder value. A significant driver of our NEO compensation is
performance-based criteria, including the following:
● |
long-term incentives in the form of
performance units, the value of which is determined by stock performance
relative to peers and, in the case of past awards, key operational metrics
over time |
● |
stock ownership and holding
requirements, which require our senior executives to accumulate and hold
SWN stock equal in value to a multiple of their base salary, and to hold a
portion of shares they subsequently receive until the requirement is
met |
● |
annual cash bonus, the majority of
which is based on operational metrics that should drive shareholder value
over the long term. |
Retention of Talent
SWNs ability to maximize shareholder value depends on its
ability to retain executives, and we seek to do so by using incentives that
result in longer and continued service. Key elements of compensation that
require continued service include:
● |
multi-year vesting terms on equity
incentive compensation, including restricted stock, stock options and
performance units |
● |
supplemental and non-qualified
retirement program, which allows select executives to continue to earn
retirement benefits once they reach the limits imposed by the Internal
Revenue Service |
Total Compensation
Perspective
Our executive compensation
program components are driven by the achievement of objective operation and
financial performance criteria as well as SWN stock performance, all of which
are used to encourage retention.
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Table of Contents
|
Compensation Discussion and Analysis |
Compensation
Practices
Our executive compensation
program incorporates many leading practices and is designed to reward our NEOs
for the achievement of strategic and operational goals and increases in
shareholder returns, while discouraging unnecessary or excessive risk taking. We
believe our executive compensation program supports these goals.
✓Mix of Awards. Our executive compensation program contains both cash and equity
components and is weighted heavily toward long-term equity-based
incentives, with a mix of these incentives among performance-based stock
units, stock options and restricted stock.
✓Share Ownership Guidelines. Our NEOs must hold equity of a value equivalent to
multiples of their base salaries (two times for senior vice presidents,
three times for executive vice presidents and six times for our
CEO).
✓Clawbacks. If we restate our financial statements, other than as a result of
changes to accounting rules or regulations, we may recover incentive
compensation that was paid or granted in the three-year period prior to
the restatement, regardless of whether misconduct caused the
restatement. |
✓Double-Trigger Severance. Cash severance in connection with a change in control is
paid only if an actual or constructive termination of employment also
occurs.
✓Annual Risk Assessments. The Compensation Committee analyzes risk in setting
executive compensation each year.
✓Reward Future Performance. Annual option, restricted stock and performance unit
awards vest over periods of three, four and three years, respectively, to
reward sustained company performance over time.
✓Peer Group Comparison. With the help of independent compensation consultants,
we annually analyze executive compensation relative to peer companies and
published survey data for peer
companies. |
What We Do Not Do |
|
✗No Tax Gross Ups. We eliminated the excise tax gross-up feature in all
severance agreements entered into with NEOs first employed after 2009, who
include our current CEO and general counsel.
✗No Automatic Base Salary Increases.
Our NEOs base salaries are reviewed
annually and the decisions are based on market data provided by our
independent compensation consultants. No increases were made for 2016,
other than for Mr. Way and Mr. Bergeron in connection with their
promotions in 2016. |
✗No Hedging and Pledging Company Stock.
Our policies prohibit the pledging and
hedging of our stock by our executives and directors.
✗No Repricing of Stock Options.
We do not permit the repricing of stock
options without shareholder approval.
|
Table of Contents
Compensation Discussion and Analysis |
|
How We Make Compensation
Decisions
Discretion and Judgment of the
Compensation Committee
The Compensation
Committee, consisting entirely of independent directors, is responsible for
SWNs compensation and incentive plans and programs, reviews all compensation
for SWNs executive officers, and acts as the administrator for SWNs equity
compensation plans. The Board, taking into account the recommendation of the
Compensation Committee, sets the compensation of all senior executives, but with
only independent directors acting in the case of the CEO.
Each year, the Compensation Committee
conducts an evaluation of SWNs compensation program to determine if any changes
would be appropriate. In making these determinations, the Compensation Committee
consults with its independent compensation consultant and executive leadership,
as discussed below; however, the Compensation Committee uses its own judgment in
making final decisions regarding the compensation paid to our executive
officers.
The Role of the Compensation
Consultant
Since 2013, the Compensation
Committee has engaged the services of Meridian Compensation Partners, LLC
(Meridian), an independent executive compensation consulting firm. Meridian is
known for its expertise in the E&P industry, specializing in board-level
executive pay consulting services. Meridian reports directly to the Committee,
participates in Committee meetings, reviews Committee materials, and provides
advice to the Committee upon request. Additionally, Meridian updates the
Committee on trends and issues in executive pay, comments on the competitiveness
and reasonableness of SWNs programs, and assists in the development and review
of SWNs annual bonus and long-term incentive (LTI) programs, including
commenting on performance measures and related goals. See our discussion of the
Compensation Committees assessment of Meridians independence in our discussion
of the Compensation Committees responsibilities on page 30 of this proxy
statement.
The Role of the CEO
At the Compensation Committees request,
the CEO provides an assessment of the individual performance and appropriate
compensation of the other executive officers because of his direct knowledge of
each executive officers performance and contributions. The CEO is not present
during voting or deliberations by the Committee or the independent directors
regarding his own compensation.
The Role of Peer Companies and
Benchmarking
The Compensation Committee reviews peer
group composition each year. With the assistance of Meridian, the Compensation
Committee identified a group of companies to reference as our peer group for
compensation purposes. The Committee annually reviews the competitiveness of our
executive officers compensation and assesses the overall competitiveness of our
compensation programs relative to the peer group, which is made up of companies
in the E&P industry with comparable types of operations, revenue, market
capitalization, assets and number of employees.
In 2016, we generally sought to provide total direct compensation for our NEOs
within a competitive range of our compensation peers. These companies are listed
in the table below. Individual compensation packages may vary based on
individual experience, retention, performance in the role and market conditions.
We removed Denbury Resources Inc. and Ultra Petroleum Corp. from the 2016 peer
list because of challenges each company faced to its business
prospects.
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Table of Contents
|
Compensation Discussion and Analysis |
2016 Compensation Peer
Companies |
|
The Compensation Committee selected
the following companies for the compensation peer group for
2016: |
●Antero Resources Corporation
●Cabot Oil & Gas Corporation
●Cimarex Energy Co.
●Chesapeake Energy Corporation
●Concho Resources Inc. |
●Continental Resources Inc.
●Devon Energy Corporation
●EOG Resources, Inc.
●EQT Corporation
●Newfield Exploration Company |
●Noble Energy, Inc.
●Pioneer Natural Resources Company
●Range Resources Corporation
●SM Energy Corporation |
We believe awareness of our competitors
pay practices is important to making pay decisions that allow us to attract and
retain key talent. We compare our pay practices and pay levels with a select
group of peer companies. Although market data from our peer group provides an
important tool for analysis and decision making,
we realize that overreliance on this data can result in an inappropriate pay
decision if other factors are not considered, including an individuals personal
contributions to SWN and previous experience, leadership qualities and skill
sets.
Consideration of Shareholder Engagement
Feedback and Say-on-Pay Vote Results
We
have discussions with many of our shareholders on an ongoing basis regarding
various corporate governance topics, including executive compensation. We
greatly value the feedback provided by our shareholders in these discussions. In
2016, the Compensation Committee considered input from shareholders when it
conducted a comprehensive review of SWNs executive compensation program.
Following this review, the Compensation Committee continued design changes to
align the executive compensation program more closely with market practices and
place a greater emphasis on performance-based compensation. These design changes
are discussed in more detail below in 2017 Executive Compensation
Updates.
Shareholders are provided with the
opportunity to cast an annual advisory vote on executive compensation. At the
2016 Annual Meeting, shareholders indicated their support for the compensation
of our executive officers, with over 93% of the votes cast on the say-on-pay
proposal voted for the proposal.
The Compensation Committee will continue
to consider the result of say-on-pay votes when making future compensation
decisions for the NEOs.
Table of Contents
Compensation Discussion and Analysis |
|
2016 Named Executive
Officer Compensation
Our executive compensation program
consists of three main elements:
● |
Base salary |
● |
Annual cash incentive |
● |
Long-term equity
incentive |
Our executive pay is tied to company
performance. Based on our performance, the total pay mix for our NEOs (other
than Mr. Mueller) for 2016 was as follows:
CEO Pay
Distribution |
All Other NEO Pay
Distribution |
|
|
(1) |
Represents base salaries in effect
as of December 31, 2016, actual performance-based annual bonus awards for
2016, which were paid in 2017, and the grant date value of the 2016-2018
performance awards, restricted stock and options (granted in December 2015
and January 2016). The Bonus consists of total annual bonus payments,
which include objective and discretionary components. The Other pay
consists of any changes in pension value and nonqualified deferred
compensation earnings and all other compensation, each as disclosed in
the Summary Compensation Table. |
|
|
Pay for Performance
Consistent with our pay-for-performance philosophy, a
significant portion of our NEOs total direct compensation is at risk.
Accordingly, the value that will ultimately be received directly aligns with the
Companys actual operational and financial performance. This value can differ
substantially from the grant date values required to be reported in the Summary
Compensation Table and other proxy tables. The graphic below demonstrates how
our executive compensation program, driven by the achievement of objective
performance criteria, delivers alignment with the Companys
performance.
To illustrate this strong link between CEO
compensation and Company performance, the following graphic compares 2014, 2015
and 2016 target compensation and realizable pay
as of December 31, 2016 for our CEO. Because Mr. Mueller resigned on January 6,
2016, presented below is the compensation information for Mr. Mueller for 2014
and 2015 and for our current CEO, Mr. Way, for 2016. The target bars reflect
annual base salary, target bonus opportunity and the grant date value of the
long-term incentive awards. The estimated realizable bars reflect annual base
salary, actual bonus paid, in the money value of stock options, value of
time-based restricted stock and an estimated value of performance awards as of
December 31, 2016.
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|
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CEO Realizable Pay
(1) |
|
|
(1) |
The information in this graphic
presents the compensation information of our former CEO, Mr. Mueller, for
2014 and 2015 and the compensation information of our current CEO, Mr.
Way, for 2016. |
(2) |
The annual incentive awards
present a target payout based on the CEOs annual salary, and the
long-term incentive awards present the grant date fair value of the awards
for 2014, 2015 and 2016. |
(3) |
The amounts for the long-term
incentive awards indicated as estimated realizable reflect the intrinsic
value of long-term incentive awards based on the Companys closing stock
price of $10.82 on December 31, 2016. For stock options, the option
exercise prices exceeded the closing stock price as of such date for the
2014 awards and therefore no intrinsic value is reflected. The performance
unit awards for 2014 reflect the amount paid in March 2017 and the
performance unit awards for 2015 and 2016 are reflected at an estimated
payout as of December 31, 2016. |
Cash Compensation Elements and
Awards
Base
Salary
Salaries of the CEO and the
other NEOs are reviewed annually, along with those of all other senior officers.
The Compensation Committee may review salaries at the time of a promotion, other
changes in responsibilities, or a significant change in market conditions.
Differences in salary for each NEO reflect differences in individual
responsibility, experience, and competitive pay levels for similar positions in
our peer group.
At the Compensation Committees December
2015 meeting, the Committee decided to freeze salaries for 2016 for all of our
employees, including our NEOs. Mr. Ways and Mr. Bergerons salaries were
increased on account of their respective promotions in 2016.
Name |
|
2016 Base Salary |
|
Percentage Increase from 2015 Base
Salary |
William J. Way |
|
$800,000 |
|
18.5% |
R. Craig Owen |
|
460,000 |
|
|
Mark K. Boling |
|
520,000 |
|
|
John C. Ale |
|
445,000 |
|
|
Jack E. Bergeron, Jr. |
|
400,000 |
|
8.4% |
Steven L. Mueller |
|
935,000 |
|
|
Table of Contents
Compensation Discussion and Analysis |
|
Annual Cash
Incentive
The Compensation Committee
approves, on an annual basis, a performance-based cash incentive opportunity for
our executive officers based on the achievement of annual financial, operating
and safety performance goals. Our annual incentive plan is an umbrella plan
intended to satisfy the performance-based requirements of Section 162(m) of the
Internal Revenue Code (the Code). This year, and in the past, the Committee
established a bonus pool funded at maximum for our NEOs and certain other
executive officers, which pool is available for award to such officers if our
target cash flow from operations is achieved. Actual awards are determined by
the Compensation Committee using their negative discretion, based on achievement
of the annual performance goals.
Annual bonuses are designed to encourage
the achievement of annual performance goals. Targets for each of our performance
metrics are set to be challenging and to produce results that lead to increased
shareholder value and are determined at the beginning of each annual
performance cycle. The Compensation Committee reviews
the metrics each year to ensure they link performance to SWNs long-term goals
and establishes targets that appropriately incentivize executive leadership to
achieve operational success.
Because market compensation practices,
including incentive opportunity, differ by job, our target bonus opportunities
as a percentage of base salary vary for our NEOs. As a starting point for
evaluating annual incentive awards, the Committee considered performance results
under the metrics established for the 2016 annual incentive plan, a program
maintained for a broad portion of the employee population and for our NEOs.
Importantly, after the Board approved a supplemental capital budget for the
company in June 2016, the Compensation Committee increased the Threshold, Target
and Maximum performance levels for discretionary cash flow and production to
those listed below, to reflect the increased planned capital
spending.
The 2016 performance targets for our NEOs
(other than Mr. Mueller) and actual performance results were as
follows:
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Compensation Discussion and Analysis |
As shown in the table above, our 2016
financial and operating results each exceeded the maximum thresholds established
by our Compensation Committee and our 2016 safety results fell between the
target and maximum thresholds established by the Committee, resulting in an
objective component payout for each of our NEOs of approximately 146%. At
target, the objective component would constitute 60% of our NEOs annual cash
incentive. For these NEOs (other than Mr. Mueller) in 2016, due to company
performance against the metrics with aggregate result near the maximum, the
objective component could constitute approximately 75% of the total annual cash
incentive awards.
For each NEO (other than Mr. Mueller), the
Committee also determined the size of the discretionary component of the annual
cash incentive, which together with the objective component, comprise the total
individual award levels. The Committee exercised its discretion to award
individual NEOs based, in part, on the relative performance, contribution and
potential of each NEO, taking into account the NEOs level of experience and
overall value to the Company. At target, the discretionary component would
constitute 40% of these NEOs annual cash incentive. For our NEOs in 2016, due
to company performance against the metrics with aggregate result near the
maximum, the objective component could constitute approximately 25% of the total
annual cash incentive awards.
The table below shows the actual annual
incentive award payouts earned.
Name |
|
Base Salary |
|
Target in $ |
|
Target (% of Salary) |
|
Objective Component |
|
Discretionary Component |
|
Total |
|
% of Target |
William J. Way |
|
$800,000 |
|
$1,008,000 |
|
126% |
|
$1,095,033 |
|
$404,967 |
|
$1,500,000 |
|
148.8% |
R. Craig Owen |
|
460,000 |
|
517,500 |
|
112.5% |
|
561,382 |
|
214,868 |
|
776,250 |
|
150.0% |
Mark K. Boling |
|
520,000 |
|
608,400 |
|
117% |
|
659,990 |
|
140,010 |
|
800,000 |
|
131.5% |
John C. Ale |
|
445,000 |
|
500,625 |
|
112.5% |
|
543,076 |
|
182,824 |
|
725,900 |
|
145.0% |
John E. Bergeron, Jr. |
|
400,000 |
|
360,000 |
|
90% |
|
381,215 |
|
128,285 |
|
509,500 |
|
141.5% |
Steven L. Mueller (1) |
|
935,000 |
|
1,262,250 |
|
135% |
|
|
|
341,649 |
|
341,649 |
|
27.1% |
(1) |
Mr. Mueller received a discretionary bonus in May 2016,
as provided in his Retirement Agreement, in recognition of his successful
transition of CEO responsibility to Mr. Way, based upon the recommendation
of the Compensation Committee and the approval of the independent members
of the Board. The amount is equal to 100% of his salary for the
period. |
As discussed below in 2017 Executive
Compensation Updates, the Compensation Committee has adopted substantially
similar metrics for the 2017 annual bonus incentives.
Long-Term Equity Elements and
Awards
Our executive compensation program
emphasizes long-term shareholder value creation through the use of equity awards
in the form of restricted stock, options and performance units. The Compensation
Committee has discretion to approve awards with different vesting conditions as
it deems necessary to meet the objectives of our executive compensation
program.
In December 2015, the Compensation
Committee granted long-term incentive awards to our NEOs in ratios and terms set
forth below, which awards are reflected as compensation for the year ended
December 31, 2015 in the Summary Compensation Table on page 56.
Award Type |
|
Weight |
|
Terms |
|
Metrics |
Stock options |
|
25% |
|
Ratable vesting over three years |
|
Service-based |
Restricted stock |
|
25% |
|
Ratable vesting over four years |
|
Service-based |
Performance units |
|
50% |
|
Ratable vesting over three years, settled in stock or
cash following end of three-year performance period |
|
Performance-based: Relative
TSR |
Table of Contents
Compensation Discussion and Analysis |
|
The performance units granted to our NEOs
vest according to the vesting schedules described above, depending on SWNs
total shareholder return relative to other companies in our performance peer
group described below (Relative TSR). The Compensation Committee chose
Relative TSR as a straightforward and objective metric for SWNs shareholders to
evaluate our performance against the performance of our peers and to align with
shareholders interests.
We measure Relative TSR for a three-year
performance period. An averaging period is used to determine the beginning and
ending stock values used to calculate Relative TSR for the performance period.
This mitigates the impact on the long-term Relative TSR results of one-day or
short-term stock price fluctuations at the beginning or end of the performance
period. The beginning stock price value is calculated using each companys
average closing stock price for the 20 consecutive trading days immediately
prior to the beginning of the performance period. The ending stock price value is calculated using each companys average
closing price for the 20 consecutive trading days ending on the last day of the
performance period. If the ending value is lower than the beginning value, a
negative TSR results and vice versa. The change in value from the beginning to
the end of the period is divided by the beginning value. That percentage
compared to the TSR of our performance peers, ranked by percentile, determines
the number of performance units that vest for each performance period. In the
event of a negative TSR, the performance units will not payout in excess of
target, regardless of the percentile ranking. Upon vesting, performance units
convert to SWN common stock or cash.
The Compensation Committee, based on input
from Meridian, designated the group of companies used to determine Relative TSR.
The companies included in this performance peer group selected on the basis of
assets, revenue, market cap and mix of assets reflect a broad cross-section of
the industry.
2016-2018 Performance Peers |
|
The Committee established the following
group of peer companies for measuring the performance units for the period
of 2016 - 2018: |
●Anadarko Petroleum Corporation
●Apache Corporation
●Cabot Oil & Gas Corporation*
●Chesapeake Corporation
●Cimarex Energy Co.*
●Concho Resources Inc.*
●Continental Resources Inc.*
●Devon Energy Corporation*
●EOG Resources, Inc.* |
●EQT Corporation
●Newfield Exploration Company*
●Noble Energy, Inc.*
●Pioneer Natural Resources Company*
●QEP Resources, Inc.
●Range Resources Corporation*
●SM Energy Corporation*
●Whiting Petroleum Corporation
●WPX Energy, Inc. |
*Represents a company also used for executive pay market
evaluation or comparison purposes. |
Shift in Timing of Grant of Long-Term
Equity Awards
Historically, our company granted
long-term incentives in December, including performance units for which the
performance period would be the following three calendar years. In 2016, the
Committee determined to change the timing of grants so that they occur in
February, with the performance period for performance units being the three
calendar years including the year of grant. Changing the timing of these awards
permits more time for:
●the CEO to include a more
complete picture of the other NEOs performance in his recommendations to the
Committee
●Meridian to aggregate and to
analyze peer compensation decisions for the full calendar
year
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This change means that NEOs received no
grants of long-term incentive awards during 2016, other than Mr. Way, who
received a grant in connection with his promotion to CEO in January 2016. The
table below summarizes the value of the long-term
incentives granted to Mr. Way in January 2016, utilizing the Black-Scholes
valuation for stock options, the grant date price for restricted stock and the
target value of the performance units.
Name |
|
Options |
|
Restricted Stock |
|
Performance Units |
|
Total |
William J. Way |
|
$500,002 |
|
$500,004 |
|
1,101,172 |
|
2,101,178 |
For a general discussion of the grants
made to the CEO and the other NEOs in February 2017, see below 2017 Executive
Compensation Updates.
Health, Welfare, Retirement and Other
Benefits
We offer competitive health, welfare and
retirement programs for our eligible employees. Our health and welfare programs
include medical, pharmacy, dental, life insurance and disability. We also offer
a limited charitable gift matching program. The life insurance and disability
programs provide higher benefit amounts for our NEOs due to their higher base
salaries. Our executives have disability coverage that applies if they are
unable to perform in their occupation. In addition, disability benefits for our
officers are capped at $16,000 per month for long-term disability and 70% of
base pay for short-term disability.
We offer retirement programs that are
intended to supplement our employees social security benefits and personal
savings. The programs include:
●the Southwestern Energy Company
401(k) Savings Plan, or the 401(k) Plan
●a defined benefit plan, or the
Pension Plan
●a supplemental retirement plan,
or the SERP
●a non-qualified deferred
compensation plan, or the Non-Qualified Retirement Plan
401(k)
The 401(k) Plan,
which is available to all employees, including our NEOs, allows a participant to
elect to contribute a percentage of his or her eligible compensation, generally
salary and wages, to an investment trust. Employee contributions are matched by us 100% for the first 3% of the
employees eligible compensation and 50% for the
next 3% and such matching contributions immediately vest. The 401(k) Plan
provides a number of different investment options, including our common stock,
for which a participant has sole discretion in determining the allocation of
their and our contributions among the investment options.
Perquisites,
Allowances and Other Benefits
The type
and the value of perquisites for our NEOs are reviewed and approved by the
Compensation Committee as part of its compensation decision-making. In 2016, the
primary perquisites for our NEOs are the payment of a $7,380 annual car
allowance, estate and financial planning expenses for each NEO up to $18,500 per
year, the annual premium for an executive medical plan that covers all
out-of-pocket expenses and an annual complete personal physical exam. We
reimburse our NEOs for expenses incurred with respect to estate and financial
planning because we believe the utilization of experts will reduce the amount of
time our executives will have to devote to those matters while also maximizing
the net value of the compensation we provide.
We permit our NEOs and members of
executive leadership to use our corporate aircraft for business-associated
personal use on limited occasions. This use typically consists of permitting
family members to accompany the executive when traveling for business and is
limited to situations where the presence of the family member will not conflict
with the business purpose of the travel. Also, we may permit personal use of the
aircraft in very limited situations where, absent such use, the executives work
obligations create a significant and inappropriate imposition on personal plans
or obligations. The cost to us of this benefit, if used by a NEO, is reflected
in All Other Compensation in the Summary Compensation Table.
Table of Contents
Compensation Discussion and Analysis |
|
Stock Ownership
Guidelines
To support the commitment to
significant stock ownership by NEOs, the Companys common stock ownership
guidelines are as follows:
● |
CEO six times base
salary |
● |
Executive vice presidents
three times base salary |
● |
Senior vice presidents two
times base salary |
The guidelines must be satisfied within
three years after the date of hire, change in job title, or increase in salary,
and during such period, an executive officer must hold at least one-half of the
shares of the Companys common stock received
through equity-based awards (net of taxes) from the Company until the officer
meets his or her ownership requirement.
As of December 31, 2016, all our NEOs
still employed with the Company held stock in excess of the levels required in
the guidelines. Our NEOs have historically maintained share ownership levels
well above our guidelines.
For additional detail on the stock owned
by our named executive officers, please refer to the Share Ownership of
Officers, Directors and Nominees table on page 39.
Anti-Hedging and Anti-Pledging
Policies
All directors and employees,
including the NEOs, their spouses and members of their households, are
prohibited from hedging the economic risk of ownership of our stock.
Specifically, the prohibitions relate to short selling and buying or selling
puts, calls or options and engaging in transactions involving our securities
when in possession of material, non-public information or during certain
designated black-out periods.
All directors and officers with the title
of vice president or above, along with their spouses and members of their
households, are prohibited from pledging shares of our common stock. We are
aware of no existing pledging arrangements by any of our officers or
directors.
Policy for Recovery of Compensation
(Clawback Policy)
The Company requires
NEOs and senior vice presidents or above to reimburse any incentive awards if it
is determined such awards were based on financial results that became subject of
a material restatement (other than due to changes in accounting policy) or were
payable due to fraud, negligence, or intentional misconduct by such officer. In addition, bonuses, incentives or performance-based
pay are subject to reimbursement, and the Board may cancel restricted stock
awards and outstanding stock options and seek reimbursement of any gains
realized on the exercise of stock options attributable to such
awards.
Tax Deductibility of
Compensation
Section 162(m) of the Code
imposes a $1 million limit on the amount that a public company may deduct from
compensation paid to the companys CEO or any other named executive officer
other than the Chief Financial Officer. This limitation does not apply to
compensation that meets the performance-based requirement (including, among
other requirements, that the compensation be paid only if the performance meets
pre-established objective goals based on performance criteria approved by
shareholders). Our executive compensation program strongly emphasizes
performance-based compensation, thus minimizing the consequences of this
limitation.
However, the Committee retains full
discretion to award compensation packages that will best attract, retain, and
reward executive officers. Historically, we have, and may in the future continue
to, award compensation that is not fully deductible under Section 162(m) if the
Committee believes it will contribute to the achievement of our business
objectives.
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2017 Executive
Compensation Updates
Historically, our Compensation Committee
and Board met in December to review and approve any changes in base salaries and
to grant long-term incentive awards for executive officers for the upcoming
year. For the reasons described above in
Long-Term Equity Elements and AwardsShift in Timing of Grant of Long-Term
Equity Awards, the Compensation Committee determined to align all compensation
decisions in February, beginning in 2017.
The following is a brief summary of the
compensation matters approved in February 2017:
●Base Salaries. Following the freeze in base salaries for 2015, adopted annual
salary increases for executive leadership on average of approximately 2.5%,
consistent with the average increases for the salaries of the remaining
employees of the Company
●Annual Bonus
Awards.
○Adopted substantially similar
performance metrics for the 2017 annual cash incentive awards (though with
different minimum threshold and maximum levels), continuing the focus on balance
sheet fundamentals, improving cash margin, production, and health, safety and
environmental performance, with minor adjustments to the weightings of the
metrics
○Reduced target levels by an
average of approximately 14% for NEOs, compared to 2016 target levels, in an
effort to increase the relative proportion of long-term incentives in our
executives compensation
○To match more closely the bonus
structure of many of the Companys peers, increased the maximum payout to 200%
from 150%, with correspondingly more challenging stretch goals compared to
2016
●Long-Term Incentive
Awards.
○Continued to shift a greater
percentage of total target compensation to equity-based awards in 2017, away
from cash compensation
○For the 2017-2019 LTI awards
(granted in February 2017):
Continued same mix of awards: 25% options, 25% restricted
stock and 50% performance units
For the performance units, approved relative TSR
as the single metric, with a cap in the event of a negative total shareholder
return over the 2017-2019 performance period (the TSR metric would not payout in
excess of target); same metric and structure as the 2016-2018 performance
units
Table of Contents
Summary Compensation
Table
The following Summary Compensation Table
shows information about the compensation received by our CEO, retired CEO, CFO
and each of our three other most highly compensated executive officers for
services rendered in all capacities during the 2016, 2015 and 2014 fiscal
years.
Summary
Compensation Table 2016 |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
(g) |
|
(h) |
|
(i) |
|
(j) |
Name and Principal Position |
|
Year |
|
Salary ($) |
|
Bonus ($)
(3) |
|
Stock Awards ($)
(4) |
|
Option Awards ($)
(4) |
|
Non-Equity Incentive
Plan Compensation ($) (5) |
|
Change in Pension Value
and Nonqualified Deferred Compensation Earnings ($) (6) |
|
All
Other Compensation ($) (7) |
|
Total ($) |
William J.
Way President and Chief
Executive Officer |
|
2016 |
|
796,635 |
|
404,967 |
|
1,601,176 |
|
500,002 |
|
1,095,033 |
|
57,868 |
|
61,386 |
|
4,517,065 |
|
2015 |
|
675,000 |
|
172,724 |
|
2,026,852 |
|
629,429 |
|
632,476 |
|
49,126 |
|
59,922 |
|
4,245,529 |
|
2014 |
|
650,000 |
|
557,165 |
|
2,616,646 |
|
1,104,150 |
|
1,806,202 |
|
43,515 |
|
55,175 |
|
6,832,853 |
R. Craig
Owen Senior Vice President and Chief Financial Officer |
|
2016 |
|
460,000 |
|
214,868 |
|
|
|
|
|
561,382 |
|
37,876 |
|
43,979 |
|
1,318,105 |
|
2015 |
|
460,000 |
|
365,264 |
|
1,524,032 |
|
645,659 |
|
389,012 |
|
36,686 |
|
52,349 |
|
3,473,002 |
|
2014 |
|
435,000 |
|
211,248 |
|
1,606,358 |
|
478,951 |
|
543,907 |
|
32,247 |
|
44,561 |
|
3,352,272 |
Mark K.
Boling Executive Vice President and President V+
Development Solutions |
|
2016 |
|
520,000 |
|
140,010 |
|
|
|
|
|
659,990 |
|
56,308 |
|
44,083 |
|
1,420,391 |
|
2015 |
|
520,000 |
|
134,909 |
|
1,274,049 |
|
395,657 |
|
445,767 |
|
54,214 |
|
46,060 |
|
2,870,656 |
|
2014 |
|
500,000 |
|
204,750 |
|
1,646,769 |
|
815,427 |
|
999,111 |
|
48,923 |
|
65,871 |
|
4,280,851 |
John C. Ale (1) Senior Vice
President, General Counsel and Secretary |
|
2016 |
|
445,000 |
|
182,824 |
|
|
|
|
|
543,076 |
|
29,982 |
|
44,794 |
|
1,245,676 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John E. Bergeron, Jr.
(1) Senior Vice President, E&P Operations |
|
2016 |
|
389,269 |
|
128,285 |
|
|
|
|
|
381,215 |
|
34,102 |
|
35,872 |
|
968,743 |
|
Steven L. Mueller
(2) Retired Chief Executive Officer and Chairman |
|
2016 |
|
419,401 |
|
341,635 |
|
|
|
|
|
|
|
52,932 |
|
324,080 |
|
1,138,049 |
|
2015 |
|
935,000 |
|
|
|
3,474,625 |
|
1,079,021 |
|
989,312 |
|
78,535 |
|
90,893 |
|
6,647,385 |
|
2014 |
|
900,000 |
|
1,284,480 |
|
4,485,679 |
|
1,336,474 |
|
3,273,682 |
|
70,150 |
|
103,416 |
|
11,453,881 |
(1) |
Neither Mr. Ale nor Mr. Bergeron
was a named executive officer of the Company in 2014 and
2015. |
(2) |
As of January 6, 2016, Mr.
Mueller resigned from his position of CEO, and the Board of Directors
promoted Mr. Way to CEO. Mr. Ways annual salary for 2016 was increased to
$800,000. Mr. Mueller continued as a non-executive employee and Chairman
of the Board through the 2016 Annual Meeting. |
(3) |
The amounts stated in this column
constitute the discretionary portion of the annual incentive cash awards
made to each Named Executive Officer under the annual incentive bonus
program based on the Compensation Committees evaluation of each NEOs
performance. The portion of each bonus based upon non-discretionary
performance criteria is included under the column heading Non-Equity
Incentive Plan Compensation. Additional details about the annual
incentive awards are provided under the heading Compensation Discussion
and Analysis 2016 Named Executive Officer Compensation-Annual Cash
Incentive. |
(4) |
No long-term incentive awards
were granted to any Named Executive Officer in 2016 pursuant to the
amended 2013 Plan, other than the restricted stock, options and
performance units awarded to Mr. Way upon his promotion to CEO in January
2016. In the CD&A, under the discussion of Long-Term Equity Awards,
see Shift in Timing of Grant of Long-Term Equity Awards on page 52 for a
further discussion of the timing of the long-term incentive
awards. |
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Table of Contents
The dollar
value stated for the restricted stock and performance units in column (e) and
options in column (f) reflects the number of shares/units granted in 2016
multiplied by the grant date fair market value, computed in accordance with FASB
ASC Topic 718. The assumptions and data utilized in the calculation of these
amounts for 2016 awards are set forth below:
Restricted Stock: The grant date fair
value for the restricted stock granted on January 6, 2016 represents the closing
price of the Companys stock on the NYSE of $8.60 per share.
Options: The grant date
fair value of each option is estimated using the Black-Scholes option pricing
model. The assumptions listed below were used to calculate the total grant date
fair value listed in column (f):
Grant Date |
|
Risk Free Rate |
|
Dividend Yield |
|
Expected Life |
|
Volatility |
|
Black-Scholes Value |
January 6, 2016 |
|
1.44% |
|
|
|
4.94 |
|
40.97% |
|
$3.22 |
Performance Units: The performance
units include a market condition based on Relative Total Shareholder Return
(TSR). The fair value of the TSR market condition of the performance units is
based on a Monte Carlo model and is amortized to compensation expense on a
straight-line basis over the vesting period of the award. Calculated using the
valuation detailed above and the closing price of the Companys common stock at
the grant date, the grant date fair value per performance unit was determined to
be $9.47. The grant date fair value for the performance units in column (e)
reflects the value assuming target level performance (or 100%). The table below
provides the estimated value of the 2016 2018 performance units at the
threshold, target and maximum levels based on the FASB ASC Topic 718 value of
$9.47 per unit:
Name |
|
Value at Threshold (50%) |
|
Value at Target (100%) (Reported in Column
(e) Above) |
|
Value at Maximum (200%) |
William J. Way |
|
$550,586 |
|
$1,101,172 |
|
$2,202,343 |
Additional information regarding
restricted stock, performance units and option awards made for 2016 can be found
below in the table entitled Grants of Plan-Based Awards.
(5) |
The amounts stated in this column
represent the portion of the annual incentive bonus based upon performance
measures as discussed above. |
(6) |
The amounts stated in this column
represent the aggregate increase in actuarial value for each NEO for the
period from December 31, 2015 through December 31, 2016 under both the
Pension Plan and the SERP. As discussed in the Pension Benefits table
below, executives do not earn or accrue above-market or preferential
earnings on their accounts under the Non-Qualified Retirement Plan. The
Pension Plan, the SERP and the Non-Qualified Retirement Plan are described
in more detail below. |
(7) |
The amounts stated in this column
include Company matching funds for the 401(k) and Non-Qualified Retirement
Plans, life insurance premiums, car allowance, financial and estate
planning reimbursements, premiums paid for supplemental medical insurance
and annual physicals, personal use of corporate aircraft, and retirement
compensation paid to Mr. Mueller. |
All Other Compensation
2016
Name |
|
401(k)
and Nonqualified Matching ($) |
|
Life Insurance ($) |
|
Car Allowance ($) |
|
Financial and
Estate Planning ($) |
|
Supplemental Medical Insurance and
Annual Physical ($) |
|
Personal and Spousal Travel ($) |
|
Retirement Compensation ($) |
|
Total ($) |
William J. Way |
|
35,849 |
|
2,970 |
|
7,380 |
|
1,435 |
|
11,244 |
|
2,508 |
|
|
|
61,386 |
R. Craig Owen |
|
11,925 |
|
1,822 |
|
7,380 |
|
10,000 |
|
12,852 |
|
|
|
|
|
43,979 |
Mark K. Boling |
|
23,400 |
|
2,059 |
|
7,380 |
|
|
|
11,244 |
|
|
|
|
|
44,083 |
John C. Ale |
|
20,025 |
|
1,762 |
|
7,380 |
|
8,103 |
|
7,524 |
|
|
|
|
|
44,794 |
John E. Bergeron, Jr. |
|
17,517 |
|
1,584 |
|
7,380 |
|
|
|
9,391 |
|
|
|
|
|
35,872 |
Steven L. Mueller |
|
18,873 |
|
2,970 |
|
2,895 |
|
|
|
7,524 |
|
4,126 |
|
287,692 |
|
324,080 |
Table of Contents
Grants of Plan-Based
Awards
This table reflects our annual cash
incentive awards for 2017 and long-term incentive awards issued in
2016.
Grants of
Plan-Based Awards 2016 |
(a) |
|
(b) |
|
|
|
(c) |
|
(d) |
|
(e) |
|
|
|
(f) |
|
(g) |
|
(h) |
|
(i) |
|
(j) |
|
(k) |
|
(l) |
Name |
|
Grant Date (1) |
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards |
|
Estimated Future Payouts Under Equity
Incentive Plan Awards |
|
All
Other Stock Awards: Number of Shares of Stock or
Units (#) |
|
All Other Option Awards: Number
of Securities Underlying Options (#) |
|
Exercise or Base Price
of Option Awards ($/sh) (2) |
|
Grant Date Fair Value of Stock and
Option Awards ($) (3) |
|
|
|
Threshold ($) |
|
Target ($) |
|
Maximum ($) |
|
Units (#) |
|
Threshold (#) |
|
Target (#) |
|
Maximum (#) |
|
|
|
|
William J. Way |
|
1/26/2016 |
|
(4) |
|
|
|
|
|
|
|
|
|
58,140 |
|
116,280 |
|
232,560 |
|
|
|
|
|
|
|
1,101,172 |
|
|
1/26/2016 |
|
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,140 |
|
|
|
|
|
500,004 |
|
|
1/26/2016 |
|
(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155,280 |
|
8.60 |
|
500,002 |
|
|
|
|
(7) |
|
550,000 |
|
1,100,000 |
|
2,200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Craig Owen |
|
|
|
(7) |
|
242,500 |
|
485,000 |
|
970,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark K. Boling |
|
|
|
(7) |
|
174,250 |
|
348,500 |
|
697,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John C. Ale |
|
|
|
(7) |
|
182,440 |
|
364,880 |
|
729,760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John E. Bergeron, Jr. |
|
|
|
(7) |
|
174,250 |
|
348,500 |
|
697,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven L. Mueller |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
In March 2016, the Company
decided to make LTI grants in February rather than December to allow the
Compensation Committee additional time each year to gather information and
to determine grants at the same time as annual salary and bonuses are
determined. This resulted in no LTI grants during 2016, other than to Mr.
Way in connection with his promotion to CEO that was split among
restricted stock, options and performance units. |
(2) |
All stock options granted in 2016
have an exercise price equal to the closing sale price of the Companys
common stock on the date of grant, as reported on the NYSE. |
(3) |
The dollar amounts stated for the
restricted stock, options, and performance units reflect the grant date
fair value of the award as computed in accordance with FASB ASC Topic 718.
The assumptions utilized in the calculation of these amounts are described
under Footnote 4 of the Summary Compensation Table. |
(4) |
The performance units were issued
under the amended 2013 Plan. Each performance unit has a threshold (50%),
target (100%), and maximum (200%) payout amount based on the attainment of
certain performance objectives. The performance units awarded in 2016 will
vest ratably over a period of three years from the date of grant, and
payout occurs in stock at the end of the three-year period. |
(5) |
The amount reflects the number of
shares of restricted stock granted to Mr. Way under the amended 2013 Plan.
The shares of restricted stock vest ratably over a period of four years
from the date of grant, or immediately upon death, disability, normal
retirement or a change in control. |
(6) |
The stock options were granted
under the amended 2013 Plan. All options vest and become exercisable
ratably over three years beginning one year from the date of grant or
immediately upon death, disability, normal retirement or a change in
control. Options expire seven years from the date of grant, but may
expire earlier upon termination of employment. |
(7) |
Pursuant to the annual incentive
bonus program, the Compensation Committee determined the annual target
bonus level for each NEO for the 2017 fiscal year on February 21, 2017.
The incentive bonus awards are paid annually based on the attainment of
corporate organization performance measures and the individual performance
of the NEO, and are calculated as a percentage amount of each NEOs annual
salary. Amounts shown in columns (c), (d) and (e) include both the
corporate organization performance component and the individual
performance component of the NEOs annual incentive award. The incentive
bonus awards are discussed in further detail under the heading
Compensation Discussion and Analysis 2016 Named Executive Officer
Compensation Annual Cash Incentive. |
58 |
|
WWW.SWNANNUALMEETING.COM |
Table of Contents
Outstanding Equity Awards
at Fiscal Year-End
The table reflects stock option,
restricted stock and performance unit awards granted to our NEOs under our 2004
and 2013 incentive plans that were outstanding as of December 31,
2016.
Outstanding Equity Awards at 2016
Year-End |
(a) |
|
(b) |
|
(c) |
|
|
|
(d) |
|
(e) |
|
(f) |
|
(g) |
|
|
|
(h) |
|
(i) |
|
|
|
(j) |
|
|
Option Awards |
|
Stock Awards |
Name |
|
Number
of Securities Underlying Unexercised Options
(#) Exercisable |
|
Number
of Securities Underlying Unexercised Options
(#) Unexercisable |
|
|
|
Equity Incentive Plan Awards: Number
of Securities Underlying Unexercised Unearned
Options (#) |
|
Option Exercise Price ($) |
|
Option Expiration Date |
|
Number
of Shares or Units of Stock that Have
Not Vested (#) |
|
|
|
Market Value of Shares or Units of Stock
that Have Not Vested ($) (1) |
|
Equity Incentive Plan Awards: Number
of Unearned Shares, Units or Other Rights That Have
Not Vested (2) |
|
|
|
Equity Incentive Plan Awards: Market or Payout
Value of Unearned Shares, Units or Other Rights That Have
Not Vested ($) (2) |
William J. Way |
|
95,983 |
|
|
|
|
|
|
|
33.33 |
|
10/3/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,290 |
|
|
|
|
|
|
|
36.87 |
|
12/8/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,550 |
|
|
|
|
|
|
|
34.50 |
|
12/6/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,700 |
|
|
|
|
|
|
|
38.97 |
|
12/5/2020 |
|
5,205 |
|
(3) |
|
56,318 |
|
|
|
|
|
|
|
|
14,330 |
|
7,165 |
|
(4) |
|
|
|
46.55 |
|
5/6/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,334 |
|
27,167 |
|
(5) |
|
|
|
30.59 |
|
12/4/2021 |
|
12,950 |
|
(6) |
|
140,119 |
|
25,900 |
|
(7) |
|
280,238 |
|
|
79,473 |
|
158,947 |
|
(8) |
|
|
|
7.74 |
|
12/4/2022 |
|
60,990 |
|
(9) |
|
659,912 |
|
325,280 |
|
(10) |
|
3,519,530 |
|
|
|
|
155,280 |
|
(11) |
|
|
|
8.60 |
|
1/26/2023 |
|
58,140 |
|
(12) |
|
629,075 |
|
232,560 |
|
(13) |
|
2,516,299 |
R. Craig Owen |
|
2,600 |
|
|
|
|
|
|
|
36.22 |
|
12/9/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,090 |
|
|
|
|
|
|
|
36.87 |
|
12/8/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,450 |
|
|
|
|
|
|
|
34.50 |
|
12/6/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,580 |
|
|
|
|
|
|
|
38.97 |
|
12/5/2020 |
|
3,358 |
|
(3) |
|
36,334 |
|
|
|
|
|
|
|
|
33,400 |
|
16,700 |
|
(5) |
|
|
|
30.59 |
|
12/4/2021 |
|
7,950 |
|
(6) |
|
86,019 |
|
15,900 |
|
(7) |
|
172,038 |
|
|
20,153 |
|
10,077 |
|
(14) |
|
|
|
26.35 |
|
2/26/2022 |
|
7,116 |
|
(15) |
|
76,995 |
|
|
|
|
|
|
|
|
12,456 |
|
99,914 |
|
(8) |
|
|
|
7.74 |
|
12/4/2022 |
|
38,340 |
|
(9) |
|
414,839 |
|
204,460 |
|
(10) |
|
2,212,257 |
Mark K. Boling |
|
19,080 |
|
|
|
|
|
|
|
36.22 |
|
12/9/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,880 |
|
|
|
|
|
|
|
36.87 |
|
12/8/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,320 |
|
|
|
|
|
|
|
34.50 |
|
12/6/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,410 |
|
|
|
|
|
|
|
38.97 |
|
12/5/2020 |
|
3,525 |
|
(3) |
|
38,141 |
|
|
|
|
|
|
|
|
14,330 |
|
7,165 |
|
(4) |
|
|
|
46.55 |
|
5/6/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,200 |
|
17,100 |
|
(5) |
|
|
|
30.59 |
|
12/4/2021 |
|
8,150 |
|
(6) |
|
88,183 |
|
16,300 |
|
(7) |
|
176,366 |
|
|
49,956 |
|
99,914 |
|
(8) |
|
|
|
7.74 |
|
12/4/2022 |
|
38,340 |
|
(9) |
|
414,839 |
|
204,460 |
|
(10) |
|
2,212,257 |
John C. Ale |
|
23,780 |
|
|
|
|
|
|
|
38.97 |
|
12/5/2020 |
|
2,183 |
|
(3) |
|
23,620 |
|
|
|
|
|
|
|
|
21,733 |
|
10,867 |
|
(5) |
|
|
|
30.59 |
|
12/4/2021 |
|
5,200 |
|
(6) |
|
56,264 |
|
10,350 |
|
(7) |
|
111,987 |
|
|
20,153 |
|
10,077 |
|
(14) |
|
|
|
26.35 |
|
2/26/2022 |
|
7,116 |
|
(15) |
|
76,995 |
|
|
|
|
|
|
|
|
31,790 |
|
63,580 |
|
(8) |
|
|
|
7.74 |
|
12/4/2022 |
|
24,398 |
|
(9) |
|
263,986 |
|
130,120 |
|
(10) |
|
1,407,898 |
John E. Bergeron,
Jr. |
|
6,510 |
|
|
|
|
|
|
|
36.22 |
|
12/9/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,780 |
|
|
|
|
|
|
|
36.87 |
|
12/8/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,640 |
|
|
|
|
|
|
|
34.50 |
|
12/6/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,640 |
|
|
|
|
|
|
|
38.97 |
|
12/5/2020 |
|
1,345 |
|
(3) |
|
14,553 |
|
|
|
|
|
|
|
|
13,200 |
|
6,600 |
|
(5) |
|
|
|
30.59 |
|
12/4/2021 |
|
3,150 |
|
(6) |
|
34,083 |
|
6,300 |
|
(7) |
|
68,166 |
|
|
19,303 |
|
38,607 |
|
(8) |
|
|
|
7.74 |
|
12/4/2022 |
|
14,813 |
|
(9) |
|
160,277 |
|
79,000 |
|
(10) |
|
854,780 |
Table of Contents
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
(g) |
|
(h) |
|
(i) |
|
|
|
(j) |
|
|
Option Awards |
|
Stock Awards |
Name |
|
Number
of Securities Underlying Unexercised Options
(#) Exercisable |
|
Number of Securities Underlying Unexercised Options
(#) Unexercisable |
|
Equity Incentive Plan Awards: Number
of Securities Underlying Unexercised Unearned
Options (#) |
|
Option Exercise Price ($) |
|
Option Expiration Date |
|
Number of Shares or Units of Stock that Have
Not Vested (#) |
|
Market Value of Shares or Units of Stock that
Have Not Vested ($) (1) |
|
Equity Incentive Plan Awards: Number
of Unearned Shares, Units or Other Rights That Have
Not Vested (2) |
|
|
|
Equity Incentive Plan Awards: Market
or Payout Value of Unearned Shares, Units or Other Rights
That Have Not Vested ($) (2) |
Steven L. Mueller
(16) |
|
74,590 |
|
|
|
|
|
36.22 |
|
12/9/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
78,890 |
|
|
|
|
|
36.87 |
|
12/8/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
89,020 |
|
|
|
|
|
34.50 |
|
12/6/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
91,900 |
|
|
|
|
|
38.97 |
|
12/5/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
139,800 |
|
|
|
|
|
30.59 |
|
12/4/2021 |
|
|
|
|
|
44,400 |
|
(7) |
|
480,408 |
|
|
408,720 |
|
|
|
|
|
7.74 |
|
12/4/2022 |
|
|
|
|
|
557,620 |
|
(10) |
|
6,033,448 |
(1) |
The market value of the unvested
shares of restricted stock was calculated using the NYSE closing stock
price on December 31, 2016 of $10.82 per share. |
(2) |
The number of performance units
granted in 2014 that would have been earned based on actual results for
the period commencing on the first day of the applicable performance
period and ending on December 31, 2016 (rather than the end of the actual
performance period) was below the threshold level of performance.
Consequently, amounts shown are based on achievement at threshold
performance under the performance unit awards. The number of performance
units granted in 2015 and 2016 that would have been earned based on actual
results for the period commencing on the first day of the applicable
performance period and ending on December 31, 2016 (rather than the end of
the actual performance period) was above the target level of performance,
but below the maximum level of performance. Consequently, amounts shown
are based on achievement of maximum performance under the performance unit
awards. The market value of such performance units shown in column (i) was
calculated using the NYSE closing stock price on December 31, 2016 of
$10.82 per share. |
(3) |
Restricted stock granted on
December 5, 2013 under the amended 2013 Plan vests at the rate of 25% per
year, with a remaining vesting date of December 5, 2017, or immediately
upon death, disability, normal retirement or a change in
control. |
(4) |
Stock Options granted May 6, 2014
under the amended 2013 Plan vest and become exercisable at the rate of 33
1/3% per year, with a remaining vesting date of May 6, 2017, or
immediately upon death, disability, normal retirement or a change in
control. |
(5) |
Stock options granted on December
4, 2014 under the amended 2013 Plan vest and become exercisable at the
rate of 33 1/3% per year, with a remaining vesting date of December 4,
2017, or immediately upon death, disability, normal retirement or a
change in control. |
(6) |
Restricted stock granted on
December 4, 2014 under the amended 2013 Plan vests at the rate of 25% per
year, with remaining vesting dates of December 4, 2017, and December 4,
2018, or immediately upon death, disability, normal retirement or a
change in control. |
(7) |
Performance units granted on
December 4, 2014 under the amended 2013 Plan time-vest at the rate of 33
1/3% per year, with a remaining time-vesting date of December 4, 2017,
and total payout determined at the end of the three-year performance
period. |
(8) |
Stock options granted on December
4, 2015 under the amended 2013 Plan vest and become exercisable at the
rate of 33 1/3% per year, with remaining vesting dates of December 4,
2017, and December 4, 2018, or immediately upon death, disability, normal
retirement or a change in control. |
(9) |
Restricted stock granted on
December 4, 2015 under the amended 2013 Plan vests at the rate of 25% per
year, with remaining vesting dates of December 4, 2017, December 4, 2018,
and December 4, 2019, or immediately upon death, disability, normal
retirement or a change in control. |
(10) |
Performance units granted on
December 4, 2015 under the amended 2013 Plan time-vest at the rate of 33
1/3% per year, with remaining time-vesting dates of December 4, 2017 and
December 4, 2018, and total payout determined at the end of the three-year
performance period. |
(11) |
Stock options granted on January
26, 2016 under the amended 2013 Plan vest and become exercisable at the
rate of 33 1/3% per year, with remaining vesting dates of January 26,
2017, January 26, 2018 and January 26, 2019, or immediately upon death,
disability, normal retirement or a change in control. |
(12) |
Restricted stock granted on
January 26, 2016 under the amended 2013 Plan vests at the rate of 25% per
year, with remaining vesting dates of January 26, 2017, January 26, 2018,
January 26, 2019, and January 26, 2020, or immediately upon death,
disability, normal retirement or a change in control. |
(13) |
Performance units granted on
January 26, 2016 under the amended 2013 Plan time-vest at the rate of 33
1/3% per year, with remaining time-vesting dates of January 26, 2017,
January 26, 2018, and January 26, 2019, and total payout determined at the
end of the three-year performance period. |
(14) |
Stock options granted on February
26, 2015 under the amended 2013 Plan vest and become exercisable at the
rate of 33 1/3% per year, with remaining vesting dates of February 26,
2017 and February 26, 2018, or immediately upon death, disability, normal
retirement or a change in control. |
(15) |
Restricted stock granted on
February 26, 2015 under the amended 2013 Plan vests at the rate of 25% per
year, with remaining vesting dates of February 26, 2017, February 26,
2018, and February 26, 2019, or immediately upon death, disability, normal
retirement or a change in control. |
(16) |
Pursuant to the Retirement
Agreement and Amendment to Award Agreements, upon Mr. Muellers retirement
on May 17, 2016, all unvested shares of restricted stock and options were
accelerated and fully vested as of the retirement date. The 2014 and 2015
performance units will remain outstanding and continue to vest under the
original terms of the awards. |
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Option Exercises and Stock
Vested
The table below contains information for
the fiscal year ended December 31, 2016 concerning options exercised and the
vesting of previously granted shares of restricted stock for the NEOs. The value
of the restricted stock upon vesting is based on the closing price of our stock
on the date of vesting.
Option Exercises and Stock Vested
2016
|
|
Option Awards |
|
Stock Awards |
Name |
|
Number of Shares Acquired on
Exercise (#) |
|
Value Realized on Exercise ($)
(1) |
|
Number of Shares Acquired on
Vesting (#) |
|
Value Realized on Vesting ($)
(2) |
William J. Way |
|
|
|
|
|
54,189 |
|
626,107 |
R.
Craig Owen |
|
37,500 |
|
$167,993 |
|
10,209 |
|
110,461 |
Mark K. Boling |
|
|
|
|
|
35,451 |
|
409,490 |
John C. Ale |
|
|
|
|
|
21,921 |
|
238,988 |
John E. Bergeron, Jr. |
|
|
|
|
|
12,886 |
|
148,325 |
Steven L. Mueller (3) |
|
|
|
|
|
205,166 |
|
2,508,703 |
(1) |
Reflects the
difference between the market value of the shares at the exercise date and
the option exercise price multiplied by the number of shares acquired on
exercise. |
(2) |
Reflects the aggregate
dollar value realized upon vesting of restricted stock and performance
units based upon the closing price of the stock on the vesting date. In
the event that the vesting date occurred on a weekend day or holiday, the
value realized was determined by the closing price of the stock on the
prior business day closing. |
(3) |
Pursuant to the
Retirement Agreement and Amendment to Award Agreements, upon Mr. Muellers
retirement on May 17, 2016, all unvested shares of restricted stock and
options were accelerated and fully vested as of the retirement
date. |
Pension
Benefits
All employees, including NEOs, are
generally eligible to participate on the same basis in the Pension Plan. The
purpose of the Pension Plan is to provide participants with benefits when they
separate from employment through termination, retirement, death or disability.
The Code limits both the amount of compensation that may be used for purposes of
calculating a participants benefit under our Pension Plan and the maximum
annual benefit payable to a participant under the Pension Plan. For the 2016
plan year, (i) a participants compensation in excess of $265,000 is disregarded
for purposes of determining average compensation and (ii) the maximum annual
Pension Plan benefit permitted under the Code was $210,000. Until December 31,
1997, our Pension Plan had benefits payable based upon average final
compensation and years of service. Effective January 1, 1998, we amended our
Pension Plan to become a cash balance plan on a prospective basis. A cash
balance plan provides benefits based upon a fixed percentage of an employees
annual compensation. Eligible officers and employees who were participants in
the Pension Plan as of January 1, 1998 are entitled to annual benefits payable upon retirement based upon years of
service through December 31, 1997 and average compensation during the five years
of highest pay in the last ten years of service before termination.
Under the cash balance provisions of our
Pension Plan, each participant has, for recordkeeping purposes only, a
hypothetical account to which credits are allocated annually based upon a
percentage of the participants base salary. The applicable percentage is equal
to 6% plus an additional percentage for participants in the Pension Plan as of
January 1, 1998. The additional percentage is based upon a participants age and
is designed to approximate any lost benefits due to the change to a cash balance
plan. All employee balances in the cash balance account also earn a fixed rate
of interest that is credited annually. The interest rate for a particular year
is the annual rate of interest of the 30-year U.S. Treasury securities for
November of the prior year with a minimum of 6%. Interest is credited as long as
the participant maintains a balance in the Pension Plan.
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The Southwestern Energy Company
Supplemental Retirement Plan (the SERP) allows certain highly-compensated
employees to continue to earn pension benefits for retirement once they reach
the limits imposed by the Internal Revenue Service. Executives do not earn or
accrue above-market or preferential earnings on their SERP accounts. The SERP
provides benefits equal to the amount that would be payable under the Pension
Plan in the absence of certain limitations of the Code, less the amount actually
paid under the Pension Plan. In the event of a change in control as discussed
below under Severance and Other Change in Control Benefits, the benefits of a
NEO under the SERP would be determined as if the
participant had credit for three additional years of service. The credit of
three additional years of service is designed to ensure that the pension
benefits in the event of a change in control are consistent with the other
change-in-control arrangements between us and the NEOs.
Employees are required to complete at
least 1,000 hours of service per year and are vested in the Pension Plan and
SERP after three years. At retirement or termination of employment, the present
value accumulated benefit credited to a participant is payable to the
participant in the form of a lump sum or in lifetime monthly
payments.
Pension
Benefits - 2016 |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
Name |
|
Plan Name |
|
Number of Years
Credited Service (#) |
|
Present Value of
Accumulated Benefit ($) (1) |
|
Payments During Last Fiscal
Year ($) |
William J. Way (2) |
|
Southwestern Energy Company Pension Plan |
|
5 |
|
87,442 |
|
|
|
|
Southwestern Energy Company Supplemental Retirement
Plan |
|
5 |
|
129,218 |
|
|
R.
Craig Owen |
|
Southwestern Energy Company Pension Plan |
|
8 |
|
150,069 |
|
|
|
|
Southwestern Energy Company Supplemental Retirement
Plan |
|
8 |
|
51,942 |
|
|
Mark
K. Boling (3) |
|
Southwestern Energy Company Pension Plan |
|
15 |
|
319,906 |
|
|
|
|
Southwestern Energy Company Supplemental Retirement
Plan |
|
15 |
|
141,023 |
|
|
John
C. Ale |
|
Southwestern Energy Company Pension Plan |
|
3 |
|
50,282 |
|
|
|
|
Southwestern Energy Company Supplemental Retirement
Plan |
|
3 |
|
31,870 |
|
|
John
E. Bergeron, Jr. (4) |
|
Southwestern Energy Company Pension Plan |
|
9 |
|
172,064 |
|
|
|
|
Southwestern Energy Company Supplemental Retirement
Plan |
|
9 |
|
29,464 |
|
|
Steven
L. Mueller (5) |
|
Southwestern Energy Company Pension Plan |
|
8 |
|
168,559 |
|
287,958 |
|
|
Southwestern Energy Company Supplemental Retirement
Plan |
|
8 |
|
282,258 |
|
|
(1) |
The change in the actuarial
present value of the NEOs accumulated benefit from the prior year is
included in Column h of the Summary Compensation Table and calculated
using a discount rate of 4.20% and the Society of Actuaries RP-2016
Mortality Tables Report for healthy males and females projected
generationally using scale MP-2016. |
(2) |
Mr. Way is eligible for early
retirement. Early retirement benefits from the Pension Plan and the
Supplemental Retirement Plan payable as a single sum are $87,442 and
$129,218, respectively. |
(3) |
Mr. Boling is eligible for early
retirement. Early retirement benefits from the Pension Plan and the
Supplemental Retirement Plan payable as a single sum are $319,906 and
$141,023, respectively. |
(4) |
Mr. Bergeron is eligible for
early retirement. Early retirement benefits from the Pension Plan and the
Supplemental Retirement Plan payable as a single sum are $172,064 and
$29,464, respectively. |
(5) |
Mr. Mueller retired from service
on May 17, 2016. The present value of the accumulated benefits is based on
the participants actual benefit election at retirement including a Joint
and 100% Survivor annuity of $814 per month from the Qualified Plan. The
$287,958 in payments during the last fiscal year are comprised of $5,700
from the Qualified Plan and $282,258 from the Supplemental
Plan. |
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Non-Qualified Deferred
Compensation
Our NEOs and other highly compensated
employees are also eligible to participate in the Non-Qualified Retirement Plan,
which allows any participant to defer income and receive a match on the same
basis as the 401(k) Plan, subject to the same total cap as for all employees. In
addition, participants can defer all or a portion of their annual incentive
payments until termination of employment under the Non-Qualified Retirement
Plan. Salary amounts that are deferred under the Non-Qualified Retirement Plan
are not included under the Pension Plan or the SERP but a credit is given to the
participant under the Non-Qualified Retirement Plan to address the loss in
pension benefits. The Non-Qualified Retirement Plan is not funded and
participants are our general creditors. All
amounts deferred in the Non-Qualified Retirement Plan increase or decrease based
on the investment results of the executives requested investment alternatives
and executives do not earn or accrue above-market or preferential earnings on
their accounts. Plan distributions after employment ends are paid out of our
funds rather than from a dedicated investment portfolio.
The table below sets forth information
regarding the contributions, earnings and withdrawals/distributions during 2016
and the balance at year-end 2016 under the Non-Qualified Retirement Plan for
each of the NEOs.
Non-Qualified Deferred Compensation
2016
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
Name |
|
Executive Contributions in
Last Fiscal Year ($) |
|
Registrant Contributions
in Last Fiscal Year ($) (1) |
|
Aggregate Earnings in Last
Fiscal Year ($) |
|
Aggregate Withdrawals/ Distributions ($) |
|
Aggregate Balance at Last Fiscal Year-End ($)
(2) |
William J. Way |
|
31,865 |
|
23,924 |
|
15,790 |
|
|
|
261,240 |
R.
Craig Owen |
|
|
|
|
|
15,923 |
|
|
|
213,118 |
Mark K. Boling |
|
26,000 |
|
11,475 |
|
86,527 |
|
|
|
1,431,667 |
John C. Ale |
|
13,350 |
|
8,100 |
|
357 |
|
|
|
64,298 |
John E. Bergeron, Jr. |
|
7,785 |
|
5,592 |
|
55,822 |
|
|
|
660,571 |
Steven L. Mueller |
|
16,776 |
|
6,948 |
|
76,418 |
|
|
|
734,184 |
(1) |
Amount included in Column i of
the Summary Compensation Table. |
(2) |
Represents the Non-Qualified
Retirement Plan account balances at the end of 2016 for each of our NEOs.
The total amounts previously reported as compensation for each NEO in the
Summary Compensation Table in previous years are as
follows: |
|
Name |
Aggregate Amounts Previously
Reported |
|
William J. Way |
167,894 |
|
R. Craig Owen |
119,706 |
|
Mark K. Boling |
353,538 |
|
Steven L. Mueller |
418,285 |
Severance and Other Change in Control
Benefits
We do not have employment agreements with
any of the named executive officers, but we have entered into a severance
agreement with each officer that provides certain additional compensation if,
within three years after a change in control, his employment is involuntarily
terminated other than for cause or if the executive voluntarily terminates
employment for good reason, as defined in the respective severance
agreement.
The change-in-control severance payment
for Messrs. Boling and Way is equal to the product of 2.99 and the sum of base
salary as of the executives termination date plus the maximum bonus opportunity
available to the executive under the annual incentive bonus program. The
severance payment for Mr. Owen, Mr. Ale and Mr. Bergeron is equal to the product
of 2.0 and the sum of base salary as of the executives termination date plus
the maximum bonus opportunity available to the
Table of
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executive under the annual incentive bonus
program. For our NEOs who were employed with us prior to 2010, we agreed to make
additional payments for any excise taxes imposed as a result of the change in
control benefits. In addition, each executive will be entitled to continued
participation in certain health and welfare benefits from the date of the
termination of employment until the earliest of (a) the expiration of three
years, (b) death or (c) the date he or she is afforded a comparable benefit at
comparable cost by a subsequent employer. Also, each executive will be credited
with three additional years of service for pension benefit purposes upon a
change in control and will continue to have coverage under our Directors and
Officers insurance policies for a period of up to four years.
Our long-term incentive plans and stock
option agreements provide that all outstanding stock options and all rights
become exercisable immediately upon a change in control. The plans also
provide that all performance units and shares of restricted stock that have not
previously vested or been cancelled or forfeited shall vest immediately upon a
change in control. Our annual incentive bonus program provides that upon a
participants termination of employment under certain conditions on or after a
change in control all determined but unpaid incentive awards shall
be paid immediately and any undetermined awards
shall be determined and paid based on projected performance factors calculated
in accordance with the plan.
The table below sets forth the estimated
current value of payments and benefits to each of our NEOs upon a change in
control, involuntary or voluntary termination, involuntary termination following
a change in control (Change in Control Termination), retirement, death and
disability of our NEOs, assuming that the triggering events occurred on December
31, 2016. For all our NEOs, the amounts shown do not include: (i) benefits
earned during the term of our NEOs employment that are available to all
salaried employees, such as accrued vacation, and (ii) benefits previously
accrued under the SERP (without enhanced benefits due to termination),
Nonqualified Retirement Plan and 401(k) Plan. For information on the accrued
amounts payable under the SERP and under the Nonqualified Retirement Plan, see
above under Pension Benefits and Nonqualified Deferred Compensation The
actual amounts of payments and benefits that would be provided can only be
determined at the time of a change in control and/or the NEOs separation from
Southwestern Energy Company.
Name and Trigger |
|
Severance or
Multiple of Salary and Annual Incentive Bonus ($) (1) |
|
Current Year
Annual Incentive Bonus ($) |
|
Valuation
of Equity and Performance Awards Vesting Acceleration Assuming Cash-Out ($)
(2) |
|
Enhancement Value of Pension Benefits ($)
(3) |
|
Value of Health
and Welfare Benefits Equivalent Payment ($) |
|
280G Tax Gross-Up ($) (4) |
|
|
Total Value ($) |
William J. Way |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control |
|
|
|
1,095,033 |
|
5,898,096 |
|
144,000 |
|
|
|
|
|
|
7,137,129 |
Change in Control Termination |
|
$7,920,880 |
|
|
|
5,898,096 |
|
144,000 |
|
89,523 |
|
|
(5) |
|
14,052,494 |
Involuntary Termination |
|
|
|
1,095,033 |
|
960,239 |
|
|
|
|
|
|
|
|
2,055,272 |
Normal Retirement, Death or Disability |
|
|
|
1,095,033 |
|
5,898,096 |
|
|
|
|
|
|
|
|
6,993,129 |
R.
Craig Owen |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control |
|
|
|
561,382 |
|
1,880,295 |
|
82,800 |
|
|
|
|
|
|
2,524,477 |
Change in Control Termination |
|
2,990,000 |
|
|
|
1,880,295 |
|
82,800 |
|
86,769 |
|
1,934,724 |
|
|
6,974,588 |
Involuntary Termination |
|
|
|
561,382 |
|
598,094 |
|
|
|
|
|
|
|
|
1,159,476 |
Normal Retirement, Death or Disability |
|
|
|
561,382 |
|
1,880,295 |
|
|
|
|
|
|
|
|
2,441,677 |
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Table of
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Name and Trigger |
|
Severance or Multiple of Salary and
Annual Incentive Bonus ($) (1) |
|
Current Year
Annual Incentive Bonus ($) |
|
Valuation
of Equity and Performance Awards Vesting Acceleration Assuming Cash-Out ($)
(2) |
|
Enhancement Value of Pension Benefits ($)
(3) |
|
Value of Health
and Welfare Benefits Equivalent Payment ($) |
|
280G
Tax Gross-Up ($) (4) |
|
|
Total Value ($) |
Mark K. Boling |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
Control |
|
|
|
659,990 |
|
1,892,922 |
|
93,600 |
|
|
|
|
|
|
2,646,512 |
Change in
Control Termination |
|
4,891,874 |
|
|
|
1,892,922 |
|
93,600 |
|
87,480 |
|
2,356,325 |
|
|
9,322,201 |
Involuntary
Termination |
|
|
|
659,990 |
|
603,864 |
|
|
|
|
|
|
|
|
1,263,854 |
Normal
Retirement, Death or Disability |
|
|
|
659,990 |
|
1,892,922 |
|
|
|
|
|
|
|
|
2,552,912 |
John C. Ale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
Control |
|
|
|
543,076 |
|
1,544,614 |
|
80,100 |
|
|
|
|
|
|
2,167,791 |
Change in
Control Termination |
|
2,892,500 |
|
|
|
1,544,614 |
|
80,100 |
|
63,666 |
|
|
(5) |
|
4,580,875 |
Involuntary
Termination |
|
|
|
543,076 |
|
383,966 |
|
|
|
|
|
|
|
|
927,042 |
Normal
Retirement, Death or Disability |
|
|
|
543,076 |
|
1,544,614 |
|
|
|
|
|
|
|
|
2,087,690 |
John E. Bergeron, Jr. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
Control |
|
|
|
381,215 |
|
891,544 |
|
72,000 |
|
|
|
|
|
|
1,344,759 |
Change in
Control Termination |
|
2,240,000 |
|
|
|
891,544 |
|
72,000 |
|
76,800 |
|
1,107,791 |
|
|
4,388,135 |
Involuntary
Termination |
|
|
|
381,215 |
|
233,351 |
|
|
|
|
|
|
|
|
614,566 |
Normal
Retirement, Death or Disability |
|
|
|
381,215 |
|
891,544 |
|
|
|
|
|
|
|
|
1,272,759 |
Steven L. Mueller (6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal
Retirement |
|
287,692 |
|
341,635 |
|
5,044,519 |
|
|
|
|
|
|
|
|
5,673,846 |
(1) |
Upon termination following a
change in control, each participant would be paid an annualized bonus
based on target-level performance for any performance period that includes
the date of the change in control and severance equal to 2.99 times for
Messrs. Way and Boling, and 2.0 times for Messrs. Owen, Ale and Bergeron,
the sum of the executives annual base salary and maximum bonus
opportunity. |
(2) |
In the event of a change in
control regardless of termination, the unvested portion of previously
granted performance units will be accelerated and paid. In the event of
involuntary termination, death, disability or retirement, the unvested
performance units will be paid on a vested or pro rata basis pursuant to
the overall level of achievement under the original terms and conditions
of the grants at the time that payment is due and required to be made
under the Plan. The value of the performance units for all scenarios in
this column are calculated by assuming the target number of units
awarded. |
|
In
the event of a change in control, change in control termination, normal
retirement at age 65, death or disability all unvested outstanding stock
options and shares of restricted stock will become fully
vested. |
|
Stock options. The values
represent the excess of the value of the underlying shares of Company
common stock on December 31, 2016, or $10.82 per share, over the exercise
price for those option shares, using the $10.82 per share Company closing
price on December 31, 2016.
Restricted Stock. The
values represent the value of the restricted stock for which vesting would
have been accelerated, based on a $10.82 per share Company closing price
on December 31, 2016. |
(3) |
Amounts show the enhancements, if any, provided for in
the SERP for each NEO in connection with the various termination scenarios
above the present value of SERP benefit upon retirement. |
(4) |
The tax gross-up amount is an estimate of what would be
reimbursed to the NEO (with the exception of Mr. Way and Mr. Ale) for the
so-called parachute payment tax of Section 280G of the Code. The
provisions of Section 280G of the Internal Revenue Code are complex and
the resulting tax is heavily fact-dependent. Proper tax planning may be
available to reduce or eliminate the amounts owed in the event of a
change in control. |
(5) |
Mr. Ways and Mr. Ales respective Severance Agreements
do not provide for the payment of a tax gross-up. |
(6) |
Mr. Mueller retired from the Company May 17,
2016. |
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Proposal No. 3 Non-Binding Advisory Vote
on the Frequency of Future Say-on-Pay Votes
As described in Proposal No. 2 above, the
Companys stockholders are being provided the opportunity to cast an advisory
vote on the Companys executive compensation program. The advisory vote on
executive compensation described in Proposal No. 2 above is referred to as a
Say-on-Pay vote and has been sought annually from our stockholders beginning
with our 2011 Annual Meeting.
As required by Section 14A of the Exchange
Act of 1934, as amended, we are required to seek our shareholders vote on the
frequency of Say-on-Pay votes no less than once every six years. At our 2011
Annual Meeting, the most recent vote on frequency, our stockholders voted to
hold annual Say-on-Pay votes.
We are providing stockholders with the
following options to select the frequency of our future Say-on-Pay votes: every
one year, every two years or every three years, or abstaining. The Board
believes that Say-on-Pay votes should be conducted every year to allow
stockholders to annually express their views on the Companys executive
compensation program and to provide the Board and the Compensation Committee the
opportunity to evaluate compensation decisions in
light of yearly feedback from stockholders. The Board also believes that current
best corporate practices and governance trends favor an annual advisory
Say-on-Pay vote.
Consequently, the Board has determined to
recommend that future Say-on-Pay votes occur every year until the next advisory
vote on the frequency of future Say-on-Pay votes. Stockholders are not being
asked to approve or disapprove the Boards recommendation, but rather to
indicate their choice among the following frequency options: one year, two years
or three years, or abstain from voting.
As an advisory vote, this proposal is not
binding upon the Board, the Company or the Compensation Committee. However, the
Board values the opinions expressed by stockholders and will take into account
the outcome of the vote when considering the frequency of future Say-on-Pay
votes. Unless the Board modifies its determination on the frequency of future
Say-on-Pay advisory votes, the next vote on the frequency of Say-on-Pay advisory
votes will be held at our 2023 Annual Meeting.
Recommendation of the Board |
|
|
|
The Board recommends
that the stockholders select ONE
YEAR for the frequency of future Say-on-Pay votes.
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Proposal No. 4 Approve Amendment to 2013
Incentive Plan
The Board of Directors is asking
shareholders to approve an amendment to the Southwestern Energy Company 2013
Incentive Plan (as previously amended, the 2013 Plan) to increase the number
of shares of our common stock that we are authorized to issue or award under the
2013 Plan (the Second Amendment and together with the 2013 Plan, the Amended
2013 Plan). A copy of the Second Amendment is attached as Annex A.
If approved by our shareholders, the
Second Amendment will become effective on the date of the 2017 Annual
Meeting.
Shareholder
Approval
Stockholder approval of the
Second Amendment is necessary for the Company to satisfy the terms of the 2013
Plan, to meet the stockholder approval requirements of the New York Stock
Exchange and to satisfy the stockholder approval requirement under Section 422
of the Code so that the Compensation Committee has the discretion to grant incentive stock options, or ISOs. If the Second
Amendment is not approved by shareholders, the Second Amendment will not become
effective, and the 2013 Plan, without giving effect to the Second Amendment,
will remain in effect. This would limit our ability to grant stock-settled
awards in the future.
Effect of Amendment
As of March 29, 2017, awards covering a
total of 28,617,531 shares were subject to outstanding awards under the 2013
Plan, meaning only 1,465,996 shares remained available for future grants of
awards under the 2013 Plan (after giving effect to the fungible share ratio
described below with respect to awards previously granted). The Second Amendment
would increase the number of shares available for issuance under the 2013 Plan
by 18,850,000 shares. As a result, the Amended 2013 Plan, if the Second
Amendment is approved, would authorize the issuance of an aggregate of
52,700,000 shares of our common stock.
We are asking our stockholders to approve
the Second Amendment because we believe the availability of an adequate reserve
of shares under the 2013 Plan is important to our
continued growth and success. The purpose of the 2013 Plan is to assist us in
attracting, motivating and retaining selected individuals who will serve as our
employees and directors, whose judgment, interest and special effort is critical
to the successful conduct of our operations. We believe that the equity-based
awards to be issued under the 2013 Plan will motivate recipients to offer their
maximum effort to the Company and help focus them on the creation of long-term
value consistent with the interests of our stockholders. We believe that grants
of equity incentive awards are necessary to enable us to continue to attract and
retain top talent; if the Second Amendment is not approved, we believe our
recruitment and retention capabilities will be adversely affected.
Recommendation of the Board |
|
|
|
The Board recommends
that the stockholders vote FOR the Second Amendment to the Southwestern Energy
Company 2013 Incentive Plan. |
|
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Proposal No. 4 Amendment to 2013 Incentive Plan |
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Continuation of Key Plan
Provisions
The Second Amendment leaves intact the
following in the 2013 Plan:
● |
Strict Change of Control
Definition. No change of control would be
triggered by mere shareholder approval of a business combination or
similar corporate transaction, but only upon consummation of such a
transaction, and no change of control would be triggered unless the
incumbent members of the Board fail to constitute at least a majority of
the Board (excluding the election of any such individual whose nomination
or election was approved by a majority of the then-incumbent
Board). |
● |
No Repricing without Shareholder
Approval. The price of any option may not
be altered or repriced, whether through amendment, exchange, cancellation
and replacement, or any other means, without shareholder
approval. |
● |
No Discounted Awards. Stock options and stock appreciation rights must be
granted at not less than 100% of the fair market value on the date of
grant. |
● |
162(m) Compliant Plan. The structure of the Amended 2013 Plan enables the
Compensation Committee, in its discretion, to grant awards that meet the
requirements of performance-based compensation under Section
162(m). |
● |
Robust Forfeiture
Provisions. Forfeiture provisions enable
the Compensation Committee to cancel awards and/or to require payback of
any gains/awards which are tainted by misconduct of the
participant. |
● |
No Liberal Share
Counting. Liberal share counting is not
permitted. |
● |
Sensible Potential Stockholder
Dilution. The overall, maximum cumulative
potential dilution to stockholders of current outstanding awards and the
shares made available for grant under the Amended 2013 Plan is
approximately 7.22% of common shares outstanding (assuming all remaining
shares available for grant are granted as full value awards). Further, the
annual rate at which we grant equity from existing plans has been
reasonable (1.13% of common shares outstanding on a three-year average
basis as of December 31, 2016). |
● |
Director Compensation
Limits. Director compensation limits are in
place that may not be increased without shareholder
approval. |
● |
Independent
Administration. It is administered by a
committee of independent directors. |
2013 Plan Overview
The 2013 Plan was initially approved by
shareholders at our 2013 Annual Meeting. Of the 20,500,000 shares of our common
stock originally reserved for issuance under the 2013 Plan, the maximum number
of shares of common stock that could have been issued in connection with awards
of stock options (including ISOs) or stock appreciation rights was not to exceed
10,250,000 shares and the maximum number of shares of common stock that could
have been issued in connection with other awards was not to exceed 10,250,000
shares. At our 2016 annual meeting, our shareholders approved an amendment to
the 2013 Plan that, among other revisions, increased the number of shares of our
common stock available for issuance thereunder to 33,850,000 shares and adopted
a fungible share ratio.
Long-Term Incentive Annual
Awards
On February 21, 2017, the
Compensation Committee of the Board of Directors approved grants of 4,546,350
shares of restricted stock, 1,196,860 performance units and 1,321,950 stock
options to a total of 892 employees (without giving effect to the fungible share
ratio). These grants were designed to compensate our employees and non-employee directors in a manner that promotes long-term
performance, encourages retention and is consistent with our competitors, for
whom equity grants are customary and widespread practice, and to align the
employees interests with those of our shareholders.
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Proposal No. 4 Amendment to 2013 Incentive
Plan |
Shares Available and Outstanding Equity
Awards
As of March 29, 2017, a total of
approximately 1,465,996 shares of common stock remained available for issuance
under the 2013 Plan, assuming maximum payout of outstanding performance units
and giving effect to the fungible share ratio discussed below. With respect to
our performance unit awards, although the number of shares required for each
performance unit grant varies based on a number of factors, including our share
price at the time of the grant and the size of individual grants awarded, we
do not believe that we have sufficient common
shares available under the 2013 Plan for restricted stock and performance unit
award grants beyond the 2017 grants described above. We believe that making
additional shares available for award grants in future years is necessary to
provide incentive opportunities to our officers, directors and employees and to
align their interests with the interests of our shareholders.
The following table provides certain
additional information regarding our outstanding and available equity under the
2013 Plan:
|
As
of March 29, 2017 |
|
Total Stock Options Outstanding |
5,129,134 |
|
Total Restricted Stock Awards Outstanding |
8,847,069 |
|
Total Performance Units Outstanding (assuming Maximum
performance) |
5,711,326 |
|
Total Common Stock Outstanding |
502,526,469 |
|
Weighted-Average Exercise Price of Stock Options
Outstanding |
15.74 |
|
Weighted-Average Remaining Duration of Stock Options
Outstanding |
5.61 |
|
Total for Grant under the 2013 Plan |
1,465,996 |
(1) |
(1) |
After giving effect to the
fungible share ratio of 2.3 for all full value awards as described below
with respect to awards previously granted. Performance Units outstanding
assume maximum payout of 200% (fungible share ratio of
4.6). |
Material Terms of the Amended 2013
Plan
The principal features of the proposed
Amended 2013 Plan are summarized below. This summary is qualified in its
entirety by reference to the full text of the Second Amendment attached as Annex
A to this proxy statement and a conformed copy of the Southwestern Energy
Company 2013 Incentive Plan, as amended, attached
as Annex B to the Companys proxy statement for the annual meeting of
stockholders held on May 17, 2016. Other than the limited amendment described
above, we are not making any changes to the 2013 Plan.
Purpose
The purpose of the Amended 2013 Plan is to promote the interests of the
Company and its stockholders by providing the employees and eligible
non-employee directors of the Company, with incentives and rewards to encourage
them to continue in the service of the Company. The Amended 2013 Plan is
designed to serve this goal by providing such employees and eligible
non-employee directors with a proprietary
interest in pursuing the long-term growth, profitability and financial success
of the Company. The Amended 2013 Plan is designed to enable, but not require, us
to grant performance-based equity and cash awards that are intended to qualify
as performance-based compensation under Section 162(m).
Administration
The Amended 2013 Plan is administered by the Compensation Committee. Unless otherwise determined by our
Board, the Compensation Committee shall consist solely of two or more directors
appointed by our Board, each of whom is an outside director within the meaning
of Section 162(m) of the Code, a non-employee
director within the meaning of the rules under Section 16 of the Securities
Exchange Act of 1934, as amended, and an independent director under the rules
of the NYSE (or other principal securities market on which shares of our
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Proposal No. 4 Amendment to 2013 Incentive Plan |
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common stock are traded). The Compensation
Committee may delegate to a committee of one or more members of our Board or one
or more of our officers the authority to grant or amend awards to participants
other than our senior executives who are subject to Section 16 of the Exchange
Act, subject to restrictions imposed by the Compensation Committee from time to
time and by Delaware law.
Unless otherwise limited by the Board, the
Compensation Committee has the authority to administer the Amended 2013 Plan
with respect to grants of awards, including the power to determine eligibility,
the types and sizes of awards, the price and timing of awards and the
acceleration or waiver of any vesting restriction, as well as the authority to
delegate such administrative responsibilities.
Eligibility
Persons eligible to participate in the Amended 2013 Plan are
all non-employee members of our Board, currently consisting of 7 directors, and,
as of March 29, 2017, approximately 926 employees of the Company (including its
subsidiaries and affiliates), as determined by the Compensation
Committee.
Size of Share Pool; Limitation on
Awards and Shares Available
The 2013 Plan,
without giving effect to the Second Amendment, authorizes an aggregate of
33,850,000 shares of our common stock for issuance under awards granted
thereunder, all of which may be granted as ISOs. If our shareholders approve the
Second Amendment, the aggregate number of shares of our common stock that will
be available for issuance under awards granted pursuant to the Amended 2013 Plan
will equal 52,700,000, all of which may be granted as ISOs. The Amended 2013
Plan also contains a fungible share formula, pursuant to which the authorized
share limit will be reduced by one share of common stock for every one share
subject to an option or stock appreciation rights, or SARs, outstanding under
the Amended 2013 Plan, by one share of common stock for every one share subject
to a full-value award (as described below) granted prior to May 17, 2016, and by
2.3 shares of common stock for every one share subject to a full-value award
granted on or after May 17, 2016 under the Amended 2013 Plan. A full-value
award is any award that is settled in shares, other than an option or
SAR.
If any shares subject to an award under
the Amended 2013 Plan are forfeited, cancelled or returned to the Company, then
any shares subject to such award may, to the extent of such forfeiture,
cancellation or return, be used again for new grants under the Amended 2013
Plan. Shares that are (i) tendered in payment of an option exercise price, (ii)
withheld by us to satisfy any tax withholding obligation; (iii) repurchased by
us with the proceeds from an option exercise; or
(iv) covered by a stock appreciation right (to the extent that it is exercised
and settled in shares of our common stock, without regard to the number of
shares that are actually issued) will be considered issued pursuant to the
Amended 2013 Plan and will not be added to the maximum number of shares that may
be issued under the Amended 2013 Plan.
Awards granted under the Amended 2013 Plan
in connection with the assumption, replacement, conversion or adjustment of
outstanding equity awards in the context of a corporate acquisition or merger
will not reduce the shares authorized for grant under the Amended 2013
Plan.
Under the Amended 2013 Plan, the maximum
aggregate number of shares with respect to one or more awards that may be
granted to any one person during any calendar year will be 2,500,000. The
maximum aggregate amount of cash that may be paid to any one person during any
calendar year with respect to one or more awards payable in cash will remain
unchanged at $10,000,000.
In addition, under the Amended 2013 Plan,
the grant date fair value (determined as of the grant date under Financial
Accounting Standards Board Accounting Standards Codification Topic 718, or any
successor thereto) of equity-based awards granted during any calendar year to a
non-employee director for services as a non-employee director will not exceed
$400,000 (the Director Award Limit).
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Awards
The Amended 2013 Plan provides for the grant of stock options (including
incentive stock options), restricted stock, restricted stock units and any other
cash-based, equity-based or equity-related awards. No determination has been
made as to the types or amounts of awards that will be granted to specific individuals pursuant to the Amended 2013 Plan. See
the Summary Compensation Table and Grants of Plan-Based Awards table for
information on awards granted under the 2013 Plan to our NEOs.
Stock
Options
ISOs and nonqualified stock
options may be granted pursuant to the Amended 2013 Plan. The option exercise
price of all stock options granted pursuant to the Amended 2013 Plan will not be
less than 100% of the fair market value of our common stock on the date of
grant. In general, the fair market value will be the closing price for a share
of our common stock as quoted on the NYSE on the date of grant, which as of
March 29, 2017, was $8.15. Stock options may vest and become exercisable as
determined by the Compensation Committee, but in no event may a stock option
have a term extending beyond the seventh
anniversary of the date of grant. ISOs granted to any person who owns, as of the
date of grant, stock possessing more than 10% of the total combined voting power
of all classes of our stock, however, shall have an exercise price that is not
less than 110% of the fair market value of our common stock on the date of grant
and may not have a term extending beyond the fifth anniversary of the date of
grant. The aggregate fair market value of the shares with respect to which
options intended to be ISOs are exercisable for the first time by an employee in
any calendar year may not exceed $100,000.
Restricted
Stock
Shares of restricted stock may be
granted pursuant to the Amended 2013 Plan. A restricted stock award is the grant
of shares of our common stock at a price determined by the Compensation
Committee, if any, and which is nontransferable and may be subject to
substantial risk of forfeiture until specific conditions are met. Conditions may
be based on continuing service to us or any of our subsidiaries or affiliates or
achieving one or more of the performance criteria
listed below, or other specific criteria. During the period of restriction,
participants holding shares of restricted stock have full voting and dividend
rights with respect to such shares unless otherwise provided by the Compensation
Committee. The restrictions will lapse in accordance with a schedule or other
conditions determined by the Compensation Committee.
Restricted Stock
Units
Restricted Stock Units, or RSUs,
may be granted pursuant to the Amended 2013 Plan. An RSU award provides for the
issuance of our common stock at a future date upon the satisfaction of specific
conditions set forth in the applicable award agreement. The Compensation
Committee will specify the dates on which the RSUs will become fully vested and
nonforfeitable, and may specify such conditions to vesting as it deems
appropriate, including conditions based on achieving one or more of the
performance criteria listed below, or other specific criteria, including service
to us or any of our subsidiaries or affiliates. RSUs may not be sold, or
otherwise hypothecated or transferred, and a holder of RSUs will not have voting
rights or dividend rights prior to the time when the vesting conditions are
satisfied and the shares of common stock are issued. RSUs generally will be
forfeited and the underlying shares of our common stock will not be issued, if the applicable vesting conditions are not met. The
Compensation Committee will specify, or permit the RSU holder to elect, the
conditions and dates upon which the shares underlying the vested RSUs will be
issued (subject to compliance with the deferred compensation requirements of
Section 409A of the Code). RSUs may be paid in cash, shares, or both, as
determined by the Compensation Committee. On the distribution dates, we will
transfer to the participant one unrestricted, fully transferable share of our
common stock (or the fair market value of one such share in cash) for each RSU
scheduled to be paid out on such date and not previously forfeited. RSUs may
constitute, or provide for a deferral of compensation, subject to Section 409A
of the Code and there may be certain tax consequences if the requirements of
Section 409A of the Code are not met.
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Proposal No. 4 Amendment to 2013 Incentive Plan |
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Other
Awards
The Compensation Committee may
grant cash-based, equity-based or equity-related awards not otherwise described
in the Amended 2013 Plan in such amounts and subject to such terms and
conditions as it may determine, using individual agreements or programs adopted
under the Amended 2013 Plan. Other awards may (i) involve the transfer of actual
shares of stock, either at the time of grant or after, or payment in cash or
otherwise of amounts based on the value of shares of stock, (ii) be subject to
performance-based and/or service-based conditions, including conditions based on
achieving one or more of the performance criteria listed below, or other
specific criteria, (iii) be in the form of cash, stock appreciation rights,
phantom stock, performance shares, deferred share units or share-denominated
performance units, (iv) be designed to comply with applicable laws of
jurisdictions other than the United States and
(v) be intended to qualify as performance-based compensation within the meaning
of Section 162(m) of the Code; provided, that each equity-based or
equity-related award shall be denominated in, or shall have a value determined
by reference to, a number of shares of stock that is specified (or will be
determined using a formula that is specified) at the time of the grant. The
exercise price per share of stock covered by any stock appreciation right shall
be not less than 100% of the fair market value of a share of stock on the date
on which such stock appreciation right is granted, and the compensation payable
pursuant to any stock appreciation right shall not exceed the excess of the fair
market value of a share of stock on the date on which such stock appreciation
right is exercised over the exercise price.
Performance
awards
Performance awards, in the form
of performance shares or performance units, may also be granted pursuant to the
Amended 2013 Plan. Performance awards may be granted in the form of cash bonus
awards, stock bonus awards, performance awards or incentive awards that are paid
in cash, shares or a combination of both. The value of performance awards may be
linked to any one or more of the performance criteria listed below, or other
specific criteria determined by the Compensation Committee, in each case on a
specified date or dates or over any period or periods determined by the
Compensation Committee. Performance awards may be
payable upon the attainment of pre-established performance goals based on one or
more of the performance criteria listed below, or other specific criteria
determined by the Compensation Committee. The goals are established and
evaluated by the Compensation Committee and may relate to performance over any
periods as determined by the Compensation Committee. The Compensation Committee
will also determine whether performance awards are intended to be
performance-based compensation within the meaning of Section 162(m).
Performance Based
Compensation under Section 162(m)
The
Compensation Committee may grant awards to employees who are or may be covered
employees, as defined in Section 162(m), that are intended to be
performance-based compensation within the meaning of Section 162(m) in order to
try to preserve the deductibility of these awards for federal income tax
purposes. Under the Amended 2013 Plan, these performance-based awards may be
either equity or cash awards or a combination of the two. Participants are only
entitled to receive payment for a Section 162(m) performance-based award for any
given performance period (other than options or stock appreciation rights) to
the extent that pre-established performance goals set by our Compensation
Committee for the period are satisfied. These
pre-established performance goals must be based on one or more of the following
performance criteria:
● |
financial metrics relating to
present value added, return on assets, return on equity, income, earnings,
profits, capital, cash flow, operating cost, margins, assets or
stockholder equity, earnings before interest earnings before interest,
taxes, depreciation and amortization |
● |
financial metrics relating to
present value added, return on assets, return on equity, income, earnings,
profits, capital, cash flow, operating
cost, |
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margins, assets
or stockholder equity, earnings before interest earnings before interest,
taxes, depreciation and amortization |
● |
operational metrics relating
to reserves, production, volume, maintenance |
● |
stock performance measures
relating to stock price or total stockholder return |
● |
health, safety and
environmental measures relating to incident rates or
citation |
any of which may be measured with respect
to us, or any subsidiary, affiliate or other internal unit of ours, either in
absolute terms, terms of growth or as compared to any incremental increase, or
as compared to results of a peer group or index. The Compensation Committee will
define in an objective fashion the manner of calculating the performance
criteria it selects to use for such awards. With regard to a particular
performance period, the Compensation Committee will have the discretion to
select the length of the performance period (which may not be less than 12
months), the type of performance-based awards to be granted, and the performance
goals that will be used to measure the performance for the period. In
determining the actual size of an individual performance-based award for a
performance period, the Compensation Committee may reduce or eliminate (but not
increase) the initial award.
Except as provided by the Compensation
Committee, the achievement of each performance goal will be determined in
accordance with U.S. generally accepted accounting principles or such other
accounting principles or standards as may apply to our financial statements
under the U.S. federal securities laws from time to time, to the extent
applicable. At the time of grant, the Compensation Committee may provide that
objectively determinable adjustments will be made for purposes of determining
the achievement of one or more of the performance goals established for an
award. Any such adjustments will be based on one or more of the
following:
● |
the impact of charges for
restructurings |
● |
discontinued
operations |
● |
extraordinary items and other
unusual or non-recurring items |
● |
all non-cash charges resulting
from any write-down of oil and gas properties and all other non-cash
components of Accumulated Other Comprehensive Income and |
● |
the cumulative effects of
accounting changes, |
each as defined by generally accepted
accounting principles and as identified in the Companys audited financial
statements, including the notes thereto.
Payment
Methods
The Compensation Committee will
determine the methods by which payments by any award holder with respect to any
awards granted under the Amended 2013 Plan may be paid, the form of payment,
including, without limitation: (1) cash, (2) shares of our common stock issuable
pursuant to the award or held for such period of
time as may be required by the Compensation Committee in order to avoid adverse
accounting consequences and having a fair market value on the date of delivery
equal to the aggregate payments required.
Vesting and Exercise
of an Award
The applicable award
agreement governing an award will contain the period during which the right to
exercise the award in whole or in part vests, including the events or conditions
upon which the vesting of an award will occur or may accelerate.
With respect to stock options, except in
the case of a holders death, disability or qualified retirement (generally
defined as a termination other than for cause, or in the case of a director, a
decision not to stand for re-election or to resign on or after the holder has
reached 65 years of age and completed three years
of service with the Company), no portion of an award which is not vested at the
holders termination of service with us will subsequently become vested, except
as may be otherwise provided by the Compensation Committee in the agreement
relating to the award or by action following the grant of the award. In the
event of a holders death, disability or qualified retirement, all stock options
granted to the holder, whether or not vested at the time of termination, will
fully vest and become exercisable until the expiration of their original
term.
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Proposal No. 4 Amendment to 2013 Incentive Plan |
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With respect to RSUs and shares of
restricted stock, in the event a holders service with us terminates due to
death, disability or a qualified retirement (as described above), all RSUs and
shares of restricted stock shall vest and all other restrictions shall lapse, to
the extent not previously forfeited or cancelled, except as may be otherwise
provided by the Compensation Committee in the agreement relating to the award or
by action following the grant of the award. In the event of a termination for
cause, all RSUs and shares of restricted stock which have not vested as of the
date of termination will immediately be cancelled and forfeited. In the event of
a termination for reasons other than cause or a qualified retirement, the
Compensation Committee shall determine the portion of the award that will
vest.
Generally, an option or stock appreciation
right may be exercised only while such person remains an employee, consultant or
non-employee director of us or one of our subsidiaries or affiliates or for a
specified period of time (up to the remainder of the award term) following the
holders termination of service with us or one of our subsidiaries or
affiliates. An award may be exercised for any vested portion of the shares
subject to such award until the award expires. Upon the grant of an award or
following the grant of an award, the Compensation Committee may provide that the
period during which the award will vest or become exercisable will accelerate,
in whole or in part, upon the occurrence of one or more specified events,
including, a change in control or a holders termination of employment or
service with us or otherwise.
Substitution and
Repricing Prohibition
Under the Amended
2013 Plan, no new award may be issued in substitution for outstanding previously
granted awards, nor shall any repricing of awards be permitted at any time, in
each case unless the stockholders of the Company expressly approve such
substitution or repricing.
The Amended 2013 Plan also expressly
provides that, in addition to this repricing prohibition, the plan administrator
may not cancel any option or SAR in exchange for cash when the exercise price
per share of the option or SAR exceeds the fair market value of the underlying
shares.
Transferability
No award
under the Amended 2013 Plan may be transferred unless and until such award has
been exercised or the shares underlying such award have been issued and all
restrictions applicable to such shares have lapsed, except that in the case of
stock options other than ISOs, such awards may be transferred, if fully vested,
(i) to the holders immediate family members; (ii) to a trust, partnership
(including a family limited partnership), or corporation or other similar entity
which is owned solely by one or more of the participants spouse or natural or
adopted lineal descendants or which will hold such options solely for the
benefit of one or more such persons, or (iii), in the discretion of the
Compensation Committee (x) pursuant to a domestic
relations order as defined in Section 414(p)(1)(B) of the Code or (y) to any
other person. During the lifetime of the holder of an award granted under the
Amended 2013 Plan, only such holder may exercise such award unless it has been
disposed of pursuant to a domestic relations order. After the holders death,
any exercisable portion of an award may be exercised by his personal
representative or any person empowered to do so under such holders will or the
then applicable laws of descent and distribution until such portion becomes
unexercisable under the Amended 2013 Plan or the applicable award
agreement.
Effect of a Change in
Control
Unless otherwise set forth in the
instrument evidencing an award, upon a change in control (as defined in the
Amended 2013 Plan), each outstanding award that is eligible to vest based solely
on the passage of time or the holders continued service to the Company shall
become fully vested and exercisable or settled, as applicable. Additionally,
each outstanding award that is eligible to vest based on the achievement of
performance criteria shall vest and become
exercisable or settled, as applicable, with respect to the number of shares or
cash underlying the award eligible to vest based on performance during the
performance period that includes the date of the change in control, prorated for
the number of days which have elapsed during the performance period prior to the
change of control.
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Proposal No. 4 Amendment to 2013 Incentive
Plan |
Forfeiture
The Company has the right, to the extent permitted or required
by applicable law or Company policy in effect from time to time, to include in
any award agreement the Companys right to recoup
compensation of whatever kind paid by the Company or any of its subsidiaries to
a participant in the Amended 2013 Plan.
Adjustment
Provisions
In the event of certain changes
in our capitalization, the Compensation Committee will equitably adjust the kind
of shares issuable and the maximum number and kind of shares of our common stock
subject to the Amended 2013 Plan and the other award limits under the Amended
2013 Plan, and will equitably adjust outstanding awards as to the kind, number
of shares and exercise price per share of our common stock and other terms of
such awards.
In addition, in the event of certain
corporate transactions involving us as specified in the Amended 2013 Plan, the
Compensation Committee may, in its discretion, provide for the continuation,
exchange or cancellation and cash-out of outstanding awards under the Amended
2013 Plan, in each case, subject to such equitable adjustments to such awards as
the Compensation Committee may determine to be necessary or
appropriate.
Amendment and
Termination
The Board may terminate,
suspend, amend or modify the Amended 2013 Plan at any time; however, except to
the extent permitted by the Amended 2013 Plan in connection with certain changes
in capital structure, stockholder approval must be obtained for any amendment to
(i) increase the number of shares available under the Amended 2013 Plan, (ii)
materially increase the benefits accruing to participants granted awards under
the Amended 2013 Plan, (iii) materially modify the requirements as to eligibility for participation in the Amended 2013 Plan
and (iv) increase any Individual Award Limit or the Director Award Limit. In
addition, no amendment may be made without stockholder approval if stockholder
approval is required under applicable law, and no amendment to the Amended 2013
Plan or any award may be made if such amendment would violate the prohibition on
repricing under the Amended 2013 Plan.
Material U.S. Federal Income Tax
Consequences
The following is a brief
description of the principal United States federal income tax consequences
related to awards under the Amended 2013 Plan. This summary deals with the
general federal income tax principles that apply and is provided only for
general information. Some kinds of taxes, such as
state, local and foreign income taxes and federal employment taxes, are not
discussed. This summary is not intended as tax advice to participants, who
should consult their own tax advisors.
Non-Qualified Stock
Options
If an optionee is granted a
non-qualified stock option under the Amended 2013 Plan, the optionee should not
have taxable income on the grant of the option. Generally, the optionee should
recognize ordinary income at the time of exercise in an amount equal to the fair
market value of the shares acquired on the date of exercise, less the exercise
price paid for the shares. The optionees basis in the common stock for purposes
of determining gain or loss on a subsequent sale
or disposition of such shares generally will be the fair market value of our
common stock on the date the optionee exercises such option. Any subsequent gain
or loss will be taxable as a long-term or short-term capital gain or loss. We or
our subsidiaries or affiliates generally should be entitled to a federal income
tax deduction at the time and for the same amount as the optionee recognizes
ordinary income.
Incentive Stock
Options
A participant receiving ISOs
should not recognize taxable income upon grant. Additionally, if applicable
holding period requirements are met, the participant should not recognize taxable income at the time of exercise. However, the
excess of the fair market value of the shares of our common stock received over
the option exercise price is
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Proposal No. 4 Amendment to 2013 Incentive Plan |
|
an item of tax preference income
potentially subject to the alternative minimum tax. If stock acquired upon
exercise of an ISO is held for a minimum of two years from the date of grant and
one year from the date of exercise and otherwise satisfies the ISO requirements,
the gain or loss (in an amount equal to the difference between the fair market
value on the date of disposition and the exercise price) upon disposition of the
stock will be treated as a long-term capital gain or loss, and we will not be
entitled to any deduction. If the holding period
requirements are not met, the ISO will be treated as one that does not meet the
requirements of the Code for ISOs and the tax consequences described above for
nonqualified stock options will apply. We are not entitled to a tax deduction
upon either the exercise of an ISO or upon disposition of the shares acquired
pursuant to such exercise, except to the extent that the participant recognizes
ordinary income on disposition of the shares.
Other
Awards
The current federal income tax
consequences of other awards authorized under the Amended 2013 Plan generally
follow certain basic patterns: stock appreciation rights are taxed and
deductible in substantially the same manner as nonqualified stock options;
nontransferable restricted stock subject to a substantial risk of forfeiture
results in income recognition equal to the excess of the fair market value over
the price paid, if any, only at the time the restrictions lapse (unless the
recipient elects to accelerate recognition as of the date of grant); restricted
stock units, stock-based performance awards and
other types of awards are generally subject to income tax at the time of
payment, vesting or settlement based on the fair market value of the award on
that date. Compensation otherwise effectively deferred will generally be subject
to income taxation when paid. In each of the foregoing cases, we will generally
have a corresponding deduction at the time the participant recognizes income,
subject to Section 162(m) of the Code with respect to covered
employees.
Section
162(m)
Section 162(m) of the Code
denies a deduction to any publicly held corporation for compensation paid to
certain covered employees in a taxable year to the extent that compensation to
such covered employee exceeds $1,000,000. It is possible that compensation
attributable to awards under the Amended 2013 Plan, when combined with all other
types of compensation received by a covered employee from us, may cause this
limitation to be exceeded in any particular year.
Qualified performance-based compensation
is disregarded for purposes of the deduction limitation. In accordance with
Treasury Regulations issued under Section 162(m), compensation attributable to
stock awards will generally qualify as performance-based compensation if (1) the
award is granted by a compensation committee composed solely of two or more
outside directors, (2) the plan contains a per-employee limitation on the
number of awards which may be granted during a specified period, (3) the material terms of the plan are disclosed to and
approved by the stockholders, (4) with respect to stock options and SARs, under
the terms of the award, the amount of compensation an employee could receive is
based solely on an increase in the value of the stock after the date of the
grant (which requires that the exercise price of the option is not less than the
fair market value of the stock on the date of grant), and for awards other than
options and SARs, pre-established performance criteria that must be met before
the award actually will vest or be paid, and (5) in the case of awards other
than stock options and stock appreciation rights, the compensation committee has
certified that the performance goals have been met prior to payment.
The Amended 2013 Plan is designed to
permit us to meet the requirements of Section 162(m); however, awards other than
options and stock appreciation rights granted under the Amended 2013 Plan will
be treated as qualified
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Proposal No. 4 Amendment to 2013 Incentive
Plan |
performance-based compensation under
Section 162(m) only if the awards and the procedures associated with them comply
with all other requirements of Section 162(m). As one of the factors in its
decisions regarding grants under and administration of the Amended 2013 Plan,
the Compensation Committee will consider the anticipated effect of Section
162(m). These effects will depend upon a number of factors, including not only
whether the grants qualify for the performance exception, but also the timing of
executives vesting in or exercise of previously granted
equity awards and receipt of other compensation. Furthermore, interpretations of
and changes in the tax laws and other factors beyond the Compensation
Committees control may also affect the deductibility of compensation. For these
and other reasons, the Compensation Committee may make grants that do not
qualify for the performance exception and our tax deductions for those grants
may be limited or eliminated as a result of the application of Section
162(m).
Section 409A of the Code
Certain types of awards under the Amended 2013 Plan may
constitute, or provide for, a deferral of compensation subject to Section 409A
of the Code. Unless certain requirements set forth in Section 409A of the Code
are complied with, holders of such awards may be taxed earlier than would
otherwise be the case (e.g., at the time of vesting instead of the time of
payment) and may be subject to an additional 20% penalty tax (and, potentially,
certain interest penalties and additional state taxes). To the extent
applicable, the Amended 2013 Plan and awards granted under the Amended 2013 Plan
are intended to be structured and interpreted in a
manner intended to either comply with or be exempt from Section 409A of the Code
and the Department of Treasury regulations and other interpretive guidance that
may be issued under Section 409A of the Code. To the extent determined necessary
or appropriate by the plan administrator, the Amended 2013 Plan and applicable
award agreements may be amended to further comply with Section 409A of the Code
or to exempt the applicable awards from Section 409A of the
Code.
New Plan Benefits
Awards under the Amended 2013 Plan are subject to the
discretion of the plan administrator and no determination has been made as to
the types or amounts of awards that will be granted in the future to specific
individuals pursuant to the plan. Therefore, it is not possible to determine the
future benefits that will be received by any individual under the Amended 2013
Plan.
Certain tables above under the general
heading Executive Compensation, including the Summary Compensation Table,
Grants of Plan-Based Awards table, Outstanding Equity Awards at Fiscal Year-End
table, and Option Exercises and Stock Vested table set forth information with
respect to prior awards granted to our NEOs under the 2013 Plan as currently in
effect.
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Proposal No. 4 Amendment to 2013 Incentive Plan |
|
Equity Awards Outstanding as of March
29, 2017
The following table sets forth
summary information concerning the number of shares of our common stock subject
to stock options, restricted stock and performance unit awards outstanding under the 2013 Plan to our named executive
officers, directors and employees as of March 29, 2017, without giving effect to
the fungible share ratio.
Name and Position |
|
Number of Securities Underlying
Options |
|
Number of Securities Underlying
Restricted Stock Awards |
|
Number of Securities Underlying
Performance Unit Awards (Target) |
William J. Way |
|
|
|
|
|
|
President and Chief
Executive Officer |
|
1,126,238 |
|
296,140 |
|
677,500 |
R.
Craig Owen |
|
|
|
|
|
|
Senior Vice
President & Chief Financial Officer |
|
419,070 |
|
122,142 |
|
269,520 |
Mark
K. Boling |
|
|
|
|
|
|
Executive Vice
President & President - V+ |
|
|
|
|
|
|
Development
Solutions |
|
409,585 |
|
83,625 |
|
202,040 |
John
C. Ale |
|
|
|
|
|
|
Senior Vice
President, General Counsel & |
|
|
|
|
|
|
Secretary |
|
281,210 |
|
81,445 |
|
175,600 |
Jack
E. Bergeron, Jr. |
|
|
|
|
|
|
Senior Vice
President E&P Operations |
|
172,670 |
|
46,198 |
|
105,870 |
Steven
L. Mueller |
|
|
|
|
|
|
Former Chairman and Chief Executive Officer |
|
882,920 |
|
|
|
367,610 |
All current
executive officers (1) |
|
2,564,060 |
|
800,760 |
|
1,774,770 |
All
current directors who are not executive officers (2) |
|
197,037 |
|
83,525 |
|
|
All
employees who are not named executive officers (3) |
|
2,174,578 |
|
8,055,514 |
|
1,057,523 |
(1) |
Does not include Mr.
Mueller, who ceased to serve as an executive officer as of the date of his
retirement on January 6, 2016. |
(2) |
Does not include Mr.
Mueller, who ceased to serve as Chairman of the Board and director at the
2016 Annual Meeting. |
(3) |
Does not include Mr.
Mueller. With respect to Mr. Mueller, individual information and
information as part of current director group are provided in the rows
above. |
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Proposal No. 5 Ratification of Independent
Registered Public Accounting Firm |
The Audit Committee of the Board has
selected PricewaterhouseCoopers LLP, or PwC, as the independent registered
public accounting firm of the Company for 2017. PwC has been the independent
registered public accounting firm of the Company since its selection, based upon
recommendation of the Audit Committee, on June 20, 2002.
Recommendation of the Board |
|
|
|
The Board recommends
that the stockholders vote FOR the ratification of the reappointment of
PwC. |
|
Pre-Approval Policy for
Services of Independent Registered Public Accounting Firm
As part of its duties, the Audit Committee
is required to pre-approve audit and non-audit services performed by the
independent registered public accounting firm (the independent auditors) to
assure that the provision of such services does not impair the auditors
independence. On an annual basis, the Audit Committee will review and provide
pre-approval for certain types of services that may be provided by the
independent auditors without obtaining specific pre-approval from the Audit
Committee. If a type of service to be provided by the independent auditors has
not received pre-approval during this annual process, it will require specific
pre-approval by the Audit Committee.
The Audit Committee does not delegate to
executive leadership its responsibilities to pre-approve services performed by
the independent auditors.
Representatives of PwC will be present at
the Annual Meeting and will have an opportunity to make a statement to
stockholders if they so desire. The representatives will also be available to
respond to questions from stockholders. There have been no disagreements with
the independent registered public accounting firm on accounting and financial
disclosure.
Relationship with
Independent Registered Public Accounting Firm
The following table presents aggregate
fees for professional audit services rendered by PwC for the audit of the
Companys annual financial statements for each of the years ended December 31,
2016 and 2015, and fees billed for other services
rendered by PwC during those years. The Audit Committee approved all non-audit
services for 2016.
|
|
2016 |
|
2015 |
Audit Fees (1) |
|
$ |
2,297,170 |
|
$ |
2,041,970 |
Audit-Related Fees |
|
|
|
|
|
|
Tax
Fees (2) |
|
|
$44,712 |
|
|
90,023 |
All
Other Fees |
|
|
|
|
|
|
Total |
|
$ |
2,341,882 |
|
$ |
2,131,993 |
(1) |
The Audit Fees for the
years ended December 31, 2016 and 2015 were for professional services
rendered for the integrated audits of the Companys consolidated financial
statements, reviews of the quarterly financial statements, subsidiary
audits, consents and assistance with review of documents filed with the
SEC. |
(2) |
Tax Fees for the years
ended December 31, 2016 and 2015 were for services related to the review
of federal and state tax returns, tax planning and
consultation. |
Table of Contents
General
Information
We have been advised that a stockholder
proposal may be introduced at the 2017 Annual Meeting. The Board of Directors
disclaims any responsibility for the content of the proposal and for the
statement made in support thereof, which, except
for references to the proposal number and minor formatting changes, are
presented in the form received from the stockholder.
Board Action with Respect
to Approved Stockholder Proposals
It has been the practice of our Board of
Directors to consider matters that are approved by the stockholders and, if
appropriate, to refer the matter to the appropriate Board committee for further
study and recommendation to the full Board or the applicable committee.
Generally, this initial consideration and referral takes place at the
next regularly scheduled meeting of the Board.
Depending on the complexity of the issue and the desire of the committee to seek
advice from independent advisors, the committee usually reports to the full
Board no later than the final meeting of the calendar year.
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Proposal No. 6 Focus on For and Against Votes
(Stockholder Proposal)
|
John Chevedden, the holder of 90 shares of
the Companys common stock, has advised the Company that he intends to present
the following proposal at the 2017 Annual Meeting:
RESOLVED: Shareholders request the Board
to take the steps necessary to amend our Companys governing documents to
provide that all non-binding matters presented by shareholders shall be decided
by a simple majority of the votes cast FOR and AGAINST an item. This policy
shall apply to all such matters unless shareholders have approved higher
thresholds, or applicable laws or stock exchange regulations dictate
otherwise.
A simple-majority formula includes FOR and
AGAINST votes, but not abstentions. Our companys current policies disadvantage
shareholders in three ways:
1. |
|
Abstentions are
treated as votes AGAINST every shareholder-sponsored item, but not when
tallying managements Director election or Say-on-Pay votes. This
advantages management while harming shareholder interest. |
|
|
|
Why provide ballots on
shareholder proposals that offer three choices FOR, AGAINST, and ABSTAIN
when in reality, stockholders only have two choices: FOR or
AGAINST? |
|
|
|
Absent conducting a
survey, it seems presumptuous to assume that every abstaining voter has
read the entire proxy and intends their vote to be treated as AGAINST all
shareholder items. |
|
2. |
|
Counting abstentions
depresses outcomes. |
|
|
|
By simple math,
including abstentions in a formula lowers the vote result and raises the
threshold require to pass a resolution. |
|
|
|
This constitutes an
unacknowledged supermajority as the percentage of abstentions rise, the
supermajority threshold increases at an exponential rate. |
|
3. |
|
Counting abstentions
distorts communication. |
|
|
|
These practices cloud
communication at stockholder meetings which is the only opportunity most
shareholders have each year to interact with each other, management, and
the Board. |
|
|
|
|
|
Of
greater concern, our companys voting policies which discriminate
against shareholders create misimpressions that endure. Once figures are
reported in the press, they become indelibly imprinted on the minds of
shareholders and lodged in the public
record. |
Three facts:
● |
CalPERS research found that 48% of
the nations largest corporations employ a simple-majority standard
making it a mainstream practice. |
● |
Under this proposal, shareholders
retain the right to send a message by abstaining in fact,
message-sending may be more effective if our company cannot use
abstentions to depress reported outcomes on shareholder
proposals. |
● |
Any suggestion that
management-sponsored and shareholder-sponsored items are treated
identically or equally is false, because management-sponsored Director
elections and Say-on-Pay votes do not include abstentions in their
formulas. |
Notable entities favor simple-majority
voting:
● |
US Securities and Exchange
Commission (Staff Legal Bulletin No. 14): Only votes FOR and AGAINST a
proposal are included in the calculation of the shareholder vote of that
proposal. Abstentions
are not included in this
calculation. |
● |
Institutional Shareholder Services
(ISS the nations leading proxy reporting service):
a simple
majority of voting shares should be all that is necessary to effect change
regarding a company and its governance provisions. |
● |
The Council of Institutional
Investors (Governance Policy 3.7): Uninstructed broker votes and
abstentions should be counted only for purposes of a
quorum. |
Support equitable voting and good
governance at Southwestern Energy Company:
Focus on For and Against Votes Proposal 6
Table of Contents
Proposal No. 6 Focus on For and Against Votes (Stockholder
Proposal) |
|
Recommendation of the Board |
|
|
|
The Board recommends
that the stockholders vote AGAINST the stockholder
proposal. |
|
Our voting standards are clearly
disclosed, are consistently applied, and we believe correctly reflect the intent
of our shareholders. Your Board does not believe that revising our voting
standards would be in the best interests of our company or our
shareholders.
● |
We clearly disclose all votes and
our voting standards. |
|
○ |
The company is fully transparent
with the results of voting on all issues, including stockholder proposals.
Shortly after each meeting, we file the exact votes (for, against, abstain
and broker non-votes) with the SEC. Any interested stakeholder can view
the actual results to determine whether more votes were cast for than
against. |
|
○ |
We disclose our voting standards in
our proxy statements (see page 83 in our Frequently Asked
Questions). |
● |
We have a majority vote standard for
all matters to be voted by our shareholders. |
|
○ |
In uncontested director elections,
we require a majority of votes cast for and againstabstentions do not
count. |
|
○ |
We treat advisory votes on proposals
submitted by the Board or management, such as say on pay, in the same
fashion as stockholder proposals; i.e., they too are decided by a majority
of the shares present at the meeting. |
|
○ |
Our bylaws reflect what the law of
Delaware, where the company is incorporated, specifies in the absence of a
contrary provision: that for a measure to pass it must receive the votes
of a majority of the shares owned by stockholders who attend the meeting
in person or by proxy. We do not see a need to change what Delaware law
mandates in this instance. |
● |
Contrary to the assertions of the
proposals supporting statement, there is no
general SEC Standard for vote calculation, and the ISS policy quoted
does not specify how to count votes. |
|
○ |
The SEC does not mandate or prescribe any
preferred voting standard for determining how the vote results should be
calculated. The SEC calculation rules cited by the proponent are solely
for determining whether a proponent may resubmit a proposal at a
subsequent annual meeting. |
|
○ |
The proponent quotes ISS as recommending that
a simple majority of voting shares should be all that is necessary to
effect change regarding a company and its governance provisions. In
context, voting shares means shares entitled to vote, not those actually
voted. Regardless, our company has no supermajority voting requirements,
even on such matters as approving amendments to our governing documents,
mergers and other significant actions. |
● |
Our management regularly
engages with representatives of our shareholders on a variety of issues,
not only economic ones but also
environmental, social and governance matters. |
|
○ |
We listen to our shareholders and often
implement changes to our policies and practices that they suggest. |
|
○ |
Your Board carefully reviews any matter that
receives significant support at a shareholders
meeting. |
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Questions and Answers about the Annual Meeting and
Voting |
Who is entitled to vote at
the Annual Meeting?
Stockholders who own shares of common
stock as of March 29, 2017, the Record Date, may vote at the meeting. There were
502,526,469 shares of common stock outstanding on that date. Each share of
common stock entitles the holder to one vote on all matters submitted to a vote
at the Annual Meeting and any adjournment or
postponement of the meeting. A complete list of the stockholders entitled to
vote will be available for examination at the meeting and for at least 10 days
prior to the meeting at our corporate offices located at 10000 Energy Drive,
Spring, Texas 77389.
How may I attend the
Annual Meeting?
You may vote your shares without attending
by following the instructions regarding proxies, which appear on pages 85-86.
Admission to the Annual Meeting will be on a first-come, first-served basis.
Registration will begin at 8:00 a.m. Central Daylight Time on the date of the
Annual Meeting. Attendance at the Annual Meeting is limited to stockholders, our
employees, invited guests, and, in some cases, special representatives of
stockholders whose proposals appear in our proxy statement. All shareholders as
of the record date may attend the Annual Meeting but must present photo
identification and proof of stock ownership. If
you are a shareholder of record (your shares are held in your name), valid photo
identification such as a drivers license or passport showing a name that
matches our records will suffice. If you are a beneficial owner (your shares are
held through a broker, bank or nominee), you must provide valid photo
identification and current evidence of your ownership of shares, which you can
obtain from your broker, bank or nominee. The use of cell phones, smartphones,
recording and photographic equipment and computers is not permitted in the
meeting room at the Annual Meeting.
When were the enclosed
solicitation materials first given to stockholders?
This proxy statement and the accompanying
proxy are first being mailed, given or made available to stockholders, on or
about April 12, 2017. We are making our proxy materials available to our
stockholders on the Internet. You may read, print and download our 2016 Annual Report to Stockholders and our proxy statement
at www.swnannualmeeting.com and www.proxyvotenow.com/swn. On an
ongoing basis, stockholders may request to receive proxy materials in printed
form by mail or electronically by email.
I share an address with
another shareholder, and we received only one paper copy of the proxy materials.
How can I obtain an additional copy of the proxy
materials?
Southwestern Energy Company has adopted a
procedure approved by the Securities and Exchange Commission called
householding. Under this procedure, the Company may deliver a single copy of
this proxy statement and the Annual Report to multiple shareholders who share
the same address unless the Company has received contrary instructions from one
or more of the shareholders. This procedure reduces the environmental impact of
the Companys annual meetings, and reduces the Companys printing and mailing
costs. Shareholders who participate in householding will continue to receive
separate proxy cards. Upon written or oral request, the Company will deliver
promptly a separate copy of this proxy statement and the Annual Report to any
shareholder at a shared address to which the Company delivered a single copy of
any of these documents.
To receive free of charge a separate copy
of this proxy statement or the Annual Report, or separate copies of any future
notice, proxy statement or annual report, shareholders may write or call the
Company at the following:
Southwestern Energy Company
Attention:
Secretary
10000 Energy Drive
Spring, Texas 77389
(832)
796-4700
Table of Contents
Questions and Answers about the Annual Meeting and Voting |
|
If you are receiving more than one copy of
the proxy materials at a single address and would like to participate in
householding, please contact the Company using the mailing address and phone
number above. Shareholders who hold shares in
street name (as described below) may contact their brokerage firm, bank,
broker-dealer or other similar organization to request information about
householding.
What constitutes a quorum
of stockholders?
We must have a quorum to conduct the
meeting. A quorum is the presence at the Annual Meeting in person or by proxy of
stockholders entitled to cast a majority of all the votes entitled to be cast as
of the Record Date. Because there were 502,526,469 shares of common stock
outstanding on March 29, 2017, the Record Date, the quorum for the Annual
Meeting requires the presence at the meeting in person or by proxy of
stockholders entitled to vote at least
251,263,235 shares. Broker non-votes, abstentions and withhold-authority votes
COUNT for purposes of determining a quorum. A broker non-vote occurs when a
broker holding shares for a beneficial owner represents the shares at the
meeting but does not vote on a particular proposal because the broker does not
have discretionary voting power for that proposal and has not received
instructions from the beneficial owner.
If I am the beneficial
owner of shares that are held in street name by my broker, will my broker
vote for me? How are broker non-votes treated?
Under the NYSE member rules, a member
broker (that is, a member of the NYSE) that holds shares in street name for
customers generally has the authority to vote on certain routine or
discretionary proposals if it has transmitted proxy soliciting materials to
the beneficial owner but has not received instructions from that owner. However,
the NYSE precludes brokers from exercising their voting discretion on certain
proposals without instructions from the beneficial owner, and the NYSE
now expressly prohibits brokers holding in
street name for their beneficial holder clients from voting in an election of
directors and from voting on certain corporate governance matters without
receiving specific instructions from those clients. Therefore, if you hold your
shares in the name of a bank, broker or other holder of record, for your vote to
be counted on Proposals No. 1, 2, 3, 4 and 6 you will need to communicate your
voting decisions to your bank, broker or other holder of record before May 19,
2017.
How will you treat
abstentions?
Abstentions are counted for purposes of
determining whether a quorum is present. For the purpose of determining whether
the stockholders have approved the matters addressed by Proposals No. 1 and 3,
abstentions will have no effect on the vote, but
because Proposals No. 2, 4, 5 and 6, require approval of a majority of shares
represented at the meeting, abstentions on these proposals will have the same
effect as a vote AGAINST.
How do I
vote?
On or about April 12, 2017, we mailed a
notice to stockholders containing instructions on how to access our proxy
materials and vote online at www.proxyvotenow.com/swn. Because many
of our stockholders are unable or choose not to attend the meeting in person and
may have limited access to the Internet, we also send proxy cards and offer
electronic and telephonic voting to all of our stockholders who hold their
shares in their own names (that is, whose shares are not held by a broker in
street name) to enable them to direct the voting of their shares.
If you are the record holder of your
shares, you may vote your shares (i) via the Internet, (ii) by telephone, or
(iii) in person at the Annual Meeting by proxy. If your shares are held by your
broker in street name, your broker is required to provide you with
instructions for voting your shares.
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Table of Contents
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Questions and Answers about the Annual Meeting and
Voting |
Internet Access: Record holders with Internet access may submit proxies by
following the Vote by Internet instructions on their proxy cards. Stockholders
who hold shares beneficially in street name may vote by accessing the website
specified on the voting instruction cards provided by their brokers, trustee or
nominees. Please check the voting instruction card for Internet voting
availability.
By Telephone: Record holders may submit proxies by following the Vote by
Telephone instructions on their proxy cards. Stockholders who hold shares
beneficially in street name may vote by telephone by calling the number
specified on the voting instruction card provided by their brokers, trustee or
nominees. Please check the voting instruction card for telephonic voting
availability.
What is the voting
requirement to approve each of the proposals?
Proposal No. 1 Election of
Directors: Any nominee who receives a greater
number of votes cast FOR his or her election than votes cast AGAINST his or
her election will be elected to the Board. Shares not represented in person or
by proxy at the Annual Meeting, abstentions and broker non-votes will have no
effect on the election of directors.
Proposal No. 2 A Non-Binding Advisory
Vote to the Compensation of our Named Executive Officers: The affirmative vote of holders of a majority of the shares
represented and entitled to vote at the meeting, either in person or by proxy,
is required to approve Proposal No. 2. Therefore, abstentions will have the same
effect as a vote AGAINST. Broker non-votes will have no effect on the results
of this vote.
Proposal No. 3 A Non-Binding Advisory
Vote on Frequency of future Say-on-Pay Votes: Because Proposal No. 3 is an advisory vote with multiple options, there
is no minimum vote that constitutes the choice of stockholders on this proposal.
We will consider the frequency that receives the highest number of votes cast to
be the choice of stockholders on the advisory vote on this proposal.
Proposal No. 4 Approval of Amended
2013 Incentive Plan: The affirmative vote of
holders of a majority of the shares represented and entitled to vote at the
meeting, either in person or by proxy, on Proposal No. 4 is required
to approve the Amended 2013 Plan. Therefore, abstentions
will have the same effect as a vote AGAINST. Broker non-votes will have no
effect on the results of this vote.
Proposal No. 5 Ratification of
Independent Registered Public Accounting
Firm: The affirmative vote of holders of a
majority of the shares represented and entitled to vote at the meeting, either
in person or by proxy, on Proposal No. 5 is required to ratify the appointment
of PwC as our independent registered public accounting firm. Therefore,
abstentions will have the same effect as a vote AGAINST. Brokers generally
have discretionary authority to vote on the ratification of our independent
registered public accounting firm. Therefore, we do not expect any broker
non-votes on this proposal. However, to the extent there are any broker
non-votes, they will have no effect on the results of this vote.
Proposal No. 6 Stockholder Proposal
Focus on For and Against Votes: The
affirmative vote of holders of a majority of the shares represented and entitled
to vote at the meeting, either in person or by proxy, on Proposal No. 6 is
required to approve the stockholder proposal. Therefore, abstentions will have
the same effect as a vote AGAINST. Broker non-votes will have no effect on the
results of this vote. Because the stockholder proposal is phrased as a request
for our Board to take action, we will not be required to take the requested
action if a proposal is approved; however, we will reevaluate the subject if the
proposal is approved or receives significant support.
What is a
proxy?
A proxy is a person you appoint to vote on
your behalf. When you vote by completing and returning the enclosed proxy card,
you will be designating John D. Gass and Terry W. Rathert as your proxies. We
solicit proxies so that as many shares as possible of common stock may be voted
at the Annual Meeting. You must complete and
return the enclosed proxy card or vote by phone or Internet to have your shares
voted by proxy as contemplated by this proxy statement.
Table of Contents
Questions and Answers about the Annual Meeting and Voting |
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How will my proxy vote my
shares?
Your proxies will be voted in accordance
with your instructions. If you complete and return your proxy card but do not
provide instructions on how to vote, your proxies will vote FOR the eight
director nominees, the proposal regarding an advisory vote on executive
compensation, the proposal regarding the advisory vote on the frequency of
future Say-on-Pay votes, the approval of the amendment of the 2013 Incentive Plan and the
ratification of PwC as the Companys independent registered public accounting
firm for 2016, and AGAINST the stockholder proposal. Also, your proxy card or
your vote via phone or Internet will give your proxies authority to vote, using
their best judgment, on any other business that properly comes before the
meeting.
How do I vote by mail
using my proxy card?
There are three steps:
Step 1
a. Proposal No.
1
Election of a board of eight directors
to serve until the next Annual Meeting or until their successors are duly
elected and qualify.
To vote for a director, check the box
marked FOR opposite the name of the director. To cast your vote against a
director, mark the box AGAINST opposite the name of the director. If you do
not wish to vote, mark the box ABSTAIN.
b. Proposal No. 2, Proposal No. 4,
Proposal No. 5 and Proposal No. 6
To vote
for a proposal, check the box marked FOR. If you are opposed to a proposal,
check the box, AGAINST. If you do not wish to vote, mark the box
ABSTAIN.
c. Proposal No. 3
To vote with respect to Proposal No. 3, you must check one of
the three boxes indicating the desired frequency of the advisory vote on
executive compensation: ONE YEAR, TWO YEARS or THREE YEARS. If you do not
wish to vote, mark the box ABSTAIN.
Step 2
Sign and date your proxy card. IF YOU DO NOT SIGN AND DATE YOUR PROXY
CARD, YOUR VOTES WILL NOT BE COUNTED. EACH PROPERLY EXECUTED PROXY WILL BE VOTED
IN THE MANNER DIRECTED. IF NO DIRECTION IS MADE, EACH SUCH PROXY WILL BE VOTED
IN ACCORDANCE WITH THE BOARDS RECOMMENDATIONS AS SET FORTH IN THIS PROXY
STATEMENT.
Step 3
Mail your proxy card in the pre-addressed, postage-paid
envelope.
May I vote by proxy even
if I plan to attend the Annual Meeting?
Yes. If you vote by proxy, you need to
fill out a ballot at the Annual Meeting only if you want to change your
vote.
How may I revoke my proxy
after I have delivered it?
A proxy may be revoked at any time before
it is voted by sending written notice of revocation to the Secretary of the
Company, by delivering a later dated proxy (by one of the methods described
above) or by voting in person at the meeting.
The Secretary may be contacted at the
following address: Southwestern Energy Company, Attention: Secretary, 10000
Energy Drive, Spring, Texas 77389.
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Questions and Answers about the Annual Meeting and
Voting |
Who is soliciting my
proxy, how is it being solicited, and who pays the costs?
The Company, on behalf of the Board,
through its officers and employees, is soliciting proxies primarily by mail.
However, proxies also may be solicited in person, by telephone or facsimile.
Morrow Sidali LLC, a proxy solicitation firm, will be assisting us for a fee of
approximately $12,000 plus out-of-pocket
expenses. Southwestern Energy Company pays the cost of soliciting proxies and
reimburses brokers and others for forwarding proxy materials to you.
When will the voting
results be available?
We will announce preliminary voting
results at the Annual Meeting. Voting results will also be disclosed on a
current report on Form 8-K filed with the SEC within four business days after
the Annual Meeting. Once filed, this Form 8-K will be available on our and the
SECs websites.
Confidential
Voting
The Company has a confidential voting
policy to protect our stockholders voting privacy. Under this policy, all
proxies, ballots and other voting materials or compilations (collectively,
Voting Records) that identify specific holders of record or beneficially of
any class of stock of the Company, entitled to vote at any annual or special
meeting and the manner in which such holders voted shall be kept permanently
confidential and shall not be disclosed to any entity or person, including the
directors, officers, employees or stockholders of the Company except (i) to
allow the tabulator of the vote to tabulate and certify the vote, (ii) to comply
with federal or state law, including the order of any court, department or
agency having jurisdiction over the Company, and to assert or defend claims for
or against the Company, (iii) in connection with a contested proxy solicitation;
(iv) in the event a stockholder has made a written comment on a proxy card or
ballot, or (v) if a stockholder expressly
requests disclosure of his or her vote. Proxy cards shall be returned in
envelopes addressed to the tabulator of the vote. Notwithstanding the foregoing,
the tabulator of the vote may report to the Company the aggregate number of
shares voted with respect to any matter and whether (but not how) a stockholder
has voted and shall report to the Company any written comments on any Voting
Records, including the names and addresses of the stockholders making the
comments. Any party receiving or tabulating the Voting Records and any person
serving as an inspector of elections shall be given a copy of the policy and
shall sign a statement acknowledging receipt of the policy and the obligation to
comply with it. The policy does not operate to impair free and voluntary
communication between the Company and its stockholders, including the disclosure
by stockholders of the nature of their votes.
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Requirements for
Submitting Proxy Proposals and Transaction of Business at Annual
Meeting |
Transaction of Business at
the Annual Meeting
Although the Notice of Annual Meeting of
Stockholders calls for transaction of such other business as may properly come
before the meeting, the Companys executive leadership has no knowledge of any
matters to be presented for action by stockholders at the meeting other than as
set forth in this proxy statement. The Companys bylaws set forth the
requirements for stockholders to propose to bring matters before the meeting. A
stockholder must timely submit a notice containing certain information about any
proposal and the proposing stockholder. To be timely, such notice must be
delivered to or mailed and received at the
Companys principal executive offices not less than 90, nor more than 120, days
prior to the first anniversary of the preceding years annual meeting. No such
notice was received for the 2017 Annual Meeting. If any other business should
come before the meeting, the persons named in the proxy have discretionary
authority to vote in accordance with their best judgment. A copy of the relevant
bylaw provisions may be obtained on www.sec.gov or by contacting the
Secretary, Southwestern Energy Company, 10000 Energy Drive, Spring, Texas 77389,
(832) 796-4700.
Date for Receipt of
Shareholder Proposals for the 2018 Annual Meeting
Stockholder proposals intended to be
presented for possible inclusion in the Companys proxy materials for the 2018
Annual Meeting must be received by the Company at its principal offices not
later than December 11, 2017. Any stockholder submitting a proposal intended to
be brought before the 2018 Annual Meeting who has not sought inclusion of the
proposal in the Companys proxy materials must provide written notice of such
proposal to the Secretary of the Company at the Companys principal executive
offices no later than the close of business on February 22, 2018, and no earlier
than the opening of business on January 23, 2018. If, however, the 2018 Annual
Meeting is called for a date that is not within 25 days before or after the anniversary of the 2017 Annual Meeting, written
notice of any such proposal must be received no later than the close of business
on the 10th day following the day on which notice of the Annual
Meeting date was mailed or such public disclosure of the date of the 2018 Annual
Meeting was made, whichever first occurs. The Companys bylaws require that
notices of stockholder proposals contain certain information about any proposal
and the proposing stockholder. A copy of the relevant bylaw provisions may be
obtained on www.sec.gov or by contacting the Secretary, Southwestern Energy Company,
10000 Energy Drive, Spring, Texas 77389, (832) 796-4700.
Date for Receipt of
Stockholder Director Nominations for the 2018 Annual
Meeting
Eligible stockholders may nominate a
candidate for election to the Board for inclusion in the Companys proxy
materials in accordance with the proxy access provisions of our Amended and
Restated Bylaws. Our Amended and Restated Bylaws require that you provide notice
in writing to the Secretary of the Company (at the same address noted above) no
later than the close of business on December 13, 2017, and no earlier than the
opening of business on November 13, 2017. For more information regarding the
proxy access provisions of our Amended and Restated Bylaws, see page
26.
Our Amended and Restated Bylaws also
provide that any stockholder may nominate a candidate for election to the Board,
which nomination is not submitted for inclusion in the Companys proxy materials. Assuming that the Annual Meeting is
held within 25 days of May 23, 2018, our Bylaws require that you provide notice
in writing to the Secretary of the Company (at the same address noted above) no
later than the close of business on February 22, 2018, and no earlier than the
opening of business on January 23, 2018. For additional information, see page
33. See Corporate Governance Stockholder Nominations Other Nominations for
a discussion of the delivery requirements if our 2018 Annual Meeting is held
outside the above window.
Dated: April 12, 2017
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Annex A: Second
Amendment to Southwestern Energy Company 2013 Incentive Plan |
THIS SECOND AMENDMENT (this Amendment)
to the Southwestern Energy Company 2013 Incentive Plan, as amended, is made and
adopted by the Board of Directors (the Board) of Southwestern Energy Company
(the Company), effective as of May 23, 2017 (the Effective Date), subject to
approval by the Companys stockholders. All capitalized terms used but not
otherwise defined herein shall have the respective meanings ascribed to such
terms in the Plan (as defined below).
RECITALS
WHEREAS, the Company maintains the
Southwestern Energy Company 2013 Incentive Plan (as amended, the
Plan);
WHEREAS, pursuant to Section 17(a) of the
Plan, the Board has the authority to amend the Plan from time to time, including
the authority to amend, subject to stockholder approval, the number of shares of
common stock of the Company that may be issued under the Plan; and
WHEREAS, the Board believes it is in the
best interests of the Company and its stockholders to amend the Plan as set
forth herein.
NOW, THEREFORE, BE IT RESOLVED, that the
Plan is hereby amended as follows, effective as of the Effective Date, subject
to approval by the Companys shareholders:
AMENDMENT
1.
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The first sentence of Section 3(a) of the Plan is hereby
amended and restated in its entirety as follows: |
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(a) Stock Subject to the
Plan |
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The maximum number of shares of Common Stock that may be issued pursuant
to Awards granted under the Plan shall not exceed 52,700,000 shares of
Common Stock in the aggregate. |
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2. |
This Amendment shall be and is hereby incorporated in
and forms a part of the Plan. |
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3. |
Except as expressly provided herein, all terms and
conditions of the Plan shall remain in full force and
effect. |
[Signature page
follows]
Table of Contents
* * *
I hereby certify that the foregoing
Amendment was duly adopted by the Board of Directors of Southwestern Energy
Company on _______________, 2017.
Executed on this _____ day of _______________, 2017.
* * *
I hereby certify that the foregoing
Amendment was approved by the stockholders of Southwestern Energy Company on ____________________,
2017.
Executed on this _____ day of _______________, 2017.
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Table of Contents
SOUTHWESTERN ENERGY COMPANY
10000
ENERGY DRIVE
SPRING, TEXAS
77389
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
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The undersigned hereby appoints each
of John D. Gass and Terry W. Rathert as Proxies, with power of
Substitution, and hereby authorizes them to represent and to vote, as
designated on the reverse side, all of the shares of Common Stock of
Southwestern Energy Company held of record by the undersigned on March 29,
2017, at the Annual Meeting of Stockholders to be held at the Companys
Headquarters, 10000 Energy Drive, Spring, Texas 77389 at 9:00 a.m. CDT on
May 23, 2017, or any adjournments thereof. |
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The signer hereby revokes all proxies
heretofore given by the signer to vote at said meeting or any adjournments
thereof. This proxy is revocable at anytime before it is exercised, the
signer retaining the right to attend the meeting and vote in
person. |
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This proxy, when properly executed,
will be voted in the manner directed herein. If no direction is made, this
proxy will be voted in accordance with the recommendations of the Board of
Directors, FOR the election of all nominees, FOR Proposal 2, 1 Year on
Proposal 3, FOR Proposals 4 and 5, and AGAINST Proposal 6. |
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Non-Voting Items |
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Change of Address Please print your new address
below. |
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Comments Please print your comments
below. |
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(Continued, and to be dated and
signed, on the other side)
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▲ TO
VOTE BY MAIL, PLEASE DETACH HERE ▲ |
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YOUR VOTE IS
IMPORTANT! |
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YOU CAN VOTE IN ONE OF
THREE WAYS: |
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1. |
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Call toll-free 1-866-257-2279 on
a Touch-Tone telephone and follow the instructions on the reverse side.
There is NO CHARGE to you for this call. You will need your control number
to access the system. |
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or |
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2. |
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Vote by Internet at our Internet
Address: https://www.proxyvotenow.com/swn. You will need your control
number to access the system. |
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or |
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3. |
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Mark, sign, and date your proxy
card and return it promptly in the enclosed
envelope. |
PLEASE REFER TO THE REVERSE SIDE FOR
TELEPHONE AND INTERNET VOTING INSTRUCTIONS.
PROXIES SUBMITTED BY THE INTERNET
OR TELEPHONE MUST BE RECEIVED BY
11:59
P.M. EDT ON MAY 22, 2017.
PLEASE VOTE!
Table of Contents
The Board of Directors recommends a
FOR all nominees, FOR Proposal 2, 1 Year on Proposal 3, FOR Proposals 4 and 5,
and AGAINST Proposal 6.
Proposals |
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1. |
Election of Directors: |
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FOR |
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AGAINST |
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ABSTAIN |
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01 John D. Gass |
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☐ |
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☐ |
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☐ |
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02 Catherine A. Kehr |
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☐ |
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☐ |
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☐ |
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03 Greg D. Kerley |
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☐ |
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☐ |
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☐ |
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04 Jon A. Marshall |
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☐ |
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☐ |
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☐ |
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05 Elliott Pew |
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☐ |
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☐ |
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☐ |
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06 Terry W. Rathert |
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☐ |
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☐ |
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☐ |
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07 Alan H. Stevens |
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☐ |
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☐ |
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☐ |
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08 William J. Way |
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☐ |
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☐ |
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☐ |
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FOR |
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AGAINST |
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ABSTAIN |
2. |
Advisory vote to approve named
executive officer compensation. |
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3. |
Advisory vote to approve the frequency
of future Say-on-Pay votes. |
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1 Year |
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2 Years |
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3 Years |
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ABSTAIN |
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4. |
Proposal to approve an amendment to the
Southwestern Energy Company 2013 Incentive Plan to increase the number of
shares authorized for issuance. |
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FOR |
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AGAINST |
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ABSTAIN |
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☐ |
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☐ |
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☐ |
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5. |
Proposal to ratify the appointment of
PricewaterhouseCoopers LLP to serve as the Companys independent
registered public accounting firm for 2017. |
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FOR |
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AGAINST |
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ABSTAIN |
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☐ |
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6. |
Advisory vote on a stockholder proposal
regarding voting standards. |
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FOR |
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AGAINST |
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ABSTAIN |
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Note: |
In their discretion, to vote
upon such other business as may properly come before the meeting or any
adjournments thereof. |
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Meeting
Attendance |
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Mark the box to the right if you plan
to attend the Annual Meeting. ☐ |
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Authorized Signatures This section
must be completed for your vote to be counted. Date and Sign
Below. |
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Date: |
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2017 |
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Signature of Shareholder(s) |
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Please sign
exactly as name(s) appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, corporate officer,
trustee, guardian, or custodian, please give full
title. |
PLEASE MARK, SIGN, DATE, AND
RETURN THIS CARD PROMPTLY USING THE ENCLOSED ENVELOPE. |
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▲ TO VOTE BY MAIL, PLEASE DETACH
HERE ▲
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VOTE BY INTERNET OR
TELEPHONE |
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QUICK ★ ★
★ EASY ★ ★ ★
IMMEDIATE |
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Your telephone or Internet vote
authorizes the named proxies to vote your shares in the same manner as if
you marked, signed, and returned your proxy card. |
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VOTE BY TELEPHONE:
The toll free number is 1-866-257-2279.
You will be asked to enter a CONTROL NUMBER which is located in the lower
right hand corner of this form. |
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OPTION A: |
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You are encouraged to review each
proposal and select a voting choice before you submit your proxy. Please
press 1 in order to vote on each proposal separately. |
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OPTION
B: |
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If you prefer not to select a
voting choice with respect to each proposal you may press 2 to submit a
proxy. If you select this option, your shares will be voted in accordance
with the recommendations made by the Board of Directors. |
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VOTE BY
INTERNET: The web address is
https://www.proxyvotenow.com/swn. You will need your control number to
access the system. |
IF YOU VOTE BY TELEPHONE OR
INTERNETDO NOT MAIL THE PROXY CARD. THANK
YOU FOR VOTING
Internet
https://www.proxyvotenow.com/swn
Call ★ ★
Toll Free ★
★ On a
Touch-Telephone
1-866-257-2279
There is NO CHARGE to you for this
call
CONTROL NUMBER
for
Internet/Telephone Voting
This regulatory filing also includes additional resources:
swn_courtesy-pdf.pdf
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