Filed by the
Registrant ☒ Filed by a Party other than the
Registrant ☐
Compensation Committee Report
The Compensation Committee of the Board of Directors (the Committee) has reviewed and discussed with management the
Compensation Discussion and Analysis contained in this proxy statement. Based upon this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and
in the Companys Annual Report on Form
10-K
for the fiscal year ended September 30, 2018.
COMPENSATION COMMITTEE
S. E. E
WING
, Chairman
J. N. J
AGGERS
T. E. S
KAINS
Compensation Discussion and Analysis
EXECUTIVE SUMMARY
The
Companys compensation policies and procedures encourage a culture of pay for performance and are strongly aligned with the long-term interests of the Companys stockholders. This Compensation Discussion and Analysis (CD&A)
provides a detailed review of the Companys executive compensation program, including the goals of the program. The Committee retained two independent compensation consultants, Korn Ferry (Korn Ferry, a unit of Korn/Ferry
International) and Meridian Compensation Partners, LLC (Meridian), to assist it in setting and monitoring the program. Overall, the Companys long-term performance and total direct compensation are in line with that of its peers.
2018
Say-on-Pay
Vote and Stockholder Engagement
The 2018
Say-on-Pay
advisory vote yielded a
result of approximately 97% of votes cast in support of the compensation of the Companys named executive officers. The Board considered this outcome an indicator of stockholder support for the overall philosophy and structure of the
Companys executive compensation policies and decisions. As a result, the Committee did not make any significant changes to the executive compensation program that were based specifically on the results of the 2018
Say-on-Pay
advisory vote.
In recent years,
including 2018, members of Company management have held
in-person
meetings with some of the Companys largest stockholders to obtain feedback on the Companys compensation program, among other
topics. Several of the Companys largest stockholders have informed the Company that scheduling such visits every two to three years is appropriate. Management engages with the Companys stockholders in telephone conferences and intends to
schedule
in-person
meetings in 2019, if desired. The Board has directed management to continue to engage as appropriate with interested stockholders, and to inform it of any requests for meetings with members
of the Board. The Board and management believe that engagement with stockholders facilitates important dialogue from which we gather various viewpoints.
The Compensation Committee has developed the Companys compensation policies and procedures to align the interests of
executives with those of the Companys stockholders. For fiscal 2018, 81% of our CEOs target compensation was tied to long-term
(3-year)
performance or shorter-term business performance, as
reflected in the charts below (target compensation consists of base salary, target annual incentive, and grant date fair value of the long-term incentive award).
25
CEO Compensation Aligned with Shareholders Interests
81% Variable Performance Shares Annual lncentive Base Salary Compensation 60% 21% 19% Factors Key Factors 50% Total Return
on Capital (3-year average ROC vs. peer group) 50% Total Shareholder Return (3-year TSR vs. peer group) Goals relate to earnings safety and costs 81% of Target Compensation is Tied to 3-Year Performance or Short-Term Business Performance
*
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Fiscal 2018 target compensation for CEO
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26
CEO and Other Named Executive Officer Target Compensation
Performance Shares 60% Annual Incentive 21% Base Salary 19% President & CEO 2017 Target Compensation Structure
Restricted Stock Units 8% Performance Shares 39% Annual Incentive 24% Base Salary 29% Other Named Executive Officers 2017 Average Target Compensation Structure
Total Shareholder Return
The Companys TSR for the three-year period ended September 30, 2018 was 18.59%, using the calculation method
specified in the award of TSR performance shares granted to the named executive officers in the first quarter of fiscal 2016. Under that calculation method, starting and ending stock prices are calculated as the average closing stock price for the
prior calendar month, and dividends are reinvested at each
ex-dividend
date. The three-year TSR of 18.59% placed the Company at the 50
th
percentile of the
Korn Ferry peer group used to benchmark fiscal 2016 compensation.
The Companys
one-year
TSR for fiscal 2018 was 2.17%, using fiscal
year-end
closing market prices and with dividends reinvested at each
ex-dividend
date. This return placed the Company at the 46
th
percentile of the Korn Ferry peer group used to benchmark fiscal 2018 compensation.
CEO Compensation in Alignment with Peers
The Compensation Committee understands the importance of using benchmark data that reflects information from companies with
comparable business segments over similar time periods. Reflected in the table below is Korn Ferrys comparison of fiscal 2017 total direct compensation for the Companys CEO, Mr. Tanski, against that of CEOs in our Korn Ferry peer
group. The target total direct compensation of the Companys CEO for fiscal 2017, shown in the table below, was at the 43
rd
percentile of our peers. Actual total direct compensation, which
reflects the results of performance against annual incentive goals, was at the 45
th
percentile of our peers.
27
Fiscal 2017 is the most recent complete fiscal year for which proxy statement
data is available.
It is not possible to compare 2018 compensation against the peer group because almost
two-thirds
of the group maintains a fiscal year based on the calendar year, and will therefore not
report 2018 compensation until months after this proxy statement is filed.
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CEO & President
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Compared to CEO proxy data for fiscal year 2017
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Total Direct
Compensation
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Company
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Title
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FYE
Revenue
(millions)
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Market Cap
as of 9/30/17
(millions)
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FYE # of
Employees
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Actual
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Target
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ATMOS ENERGY CORP
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CEO
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$2,760
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$8,893
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4,565
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$4,583,351
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$4,342,068
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CABOT OIL & GAS CORP
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Chairman, CEO & President
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$1,764
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$12,372
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468
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$12,122,248
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$10,903,498
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ENERGEN CORP
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Chairman, President & CEO
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$961
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$5,315
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390
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$6,796,850
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$6,341,430
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EQT CORP
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President & CEO
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$3,378
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$11,308
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2,067
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$8,001,614
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$6,851,589
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MDU RESOURCES GROUP INC
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President & CEO
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$4,443
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$5,068
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10,140
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$3,674,303
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$3,090,046
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NEW JERSEY RESOURCES CORP
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Chairman, CEO & President
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$2,269
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$3,648
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1,052
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$2,575,759
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$2,357,459
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RANGE RESOURCES CORP
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Chairman, President & CEO
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$2,611
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$4,856
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773
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$8,505,649
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$8,615,649
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SM ENERGY CO
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President & CEO
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$1,129
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$1,980
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635
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$7,346,339
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$6,812,800
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SOUTHWESTERN ENERGY CO
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President & CEO
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$3,203
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$3,111
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1,575
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$8,547,712
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$8,593,252
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SOUTHWEST GAS HOLDINGS INC
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President & CEO
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$2,549
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$3,695
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7,771
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$3,495,921
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$3,322,671
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SPIRE INC
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CEO & President
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$1,741
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$3,603
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3,279
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$3,211,544
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$3,181,544
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UGI CORP
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Vice Chair, President & CEO
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$6,121
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$8,124
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13,000
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$6,476,859
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$6,635,265
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WGL HOLDINGS INC
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Chairman & CEO
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$2,355
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$4,313
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1,500
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$4,032,943
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$3,824,362
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WHITING PETROLEUM CORP
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President & CEO
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$1,481
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$2,010
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830
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$5,775,000
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$6,116,500
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Summary Statistics
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75th Percentile
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$3,092
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$7,422
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4,244
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$7,837,795
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$6,841,892
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Average
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$2,626
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$5,592
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3,432
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$6,081,864
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$5,784,867
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Median
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$2,452
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$4,584
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1,538
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$6,125,930
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$6,228,965
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25th Percentile
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$1,747
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$3,614
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787
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$3,763,963
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$3,448,094
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NATIONAL FUEL GAS CO
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CEO & President
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$1,580
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$4,841
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2,100
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$5,603,294
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$5,324,913
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Percentile Rank
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18%
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54%
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62%
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45%
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43%
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NOTE:
Total Direct Compensation = base salary + bonus +
long-term incentives (target value for cash and grant date value for equity)
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©
2018 Korn Ferry. All rights reserved
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1
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28
OBJECTIVES OF THE EXECUTIVE COMPENSATION PROGRAM
The Companys executive compensation program is designed to attract, motivate, reward and retain executive talent in order
to achieve the objectives that contribute to the overall success of the Company. The Company provides a total compensation program established by the Compensation Committee based on its business judgment after consultation with its compensation
consultants. Total compensation for executive officers is comprised of the following components, each of which is addressed in greater detail below:
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Compensation Component
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Objectives
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Key Features in 2018
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Base Salary
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Provide a fixed level of pay in recognition of
day-to-day
job performance.
Attract, retain and motivate leadership with compensation reflecting specific
responsibilities, experience and effectiveness.
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Targeted range of the
50
th
to 75
th
percentile of peer median provided by independent compensation consultants.
Adjustments are made
based on Compensation Committee members business judgment.
Overall corporate performance is a factor for subjective consideration.
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Annual Cash Incentive Compensation
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Motivate performance toward, and reward achievement on, near-term
financial, operating and individual goals.
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Target awards are set as a percentage of base salary.
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Long-Term Equity Incentive Compensation
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Focus attention on managing the Company from a long-term investors
perspective to create long-term stockholder value.
Encourage executives and other managers to have a significant, personal investment in the
Company through stock ownership.
Reward executives for longer-term performance of the Company relative to an industry peer
group.
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Long-term compensation denominated in equity.
For Messrs. Tanski,
Pustulka and Carlotti, entire long-term incentive award granted as performance shares.
For Messrs. Bauer and McGinnis,
two-thirds
of
long-term incentive award granted as performance shares,
one-third
as time-based RSUs as an additional retention tool.
Performance shares split between two distinct performance conditions three-year
TSR and three-year ROC.
Performance conditions are objective and measured relative to a recognized peer
group.
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29
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Compensation Component
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Objectives
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Key Features in 2018
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Executive Health, Welfare, and Retirement Benefits
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Provide executives with reasonable and competitive benefits commensurate
with those in the regulated and unregulated energy industry.
Help the Company attract and retain high-caliber employees in high-level management
positions.
Restore
retirement benefits lost under qualified retirement plans as a result of Internal Revenue Code limits.
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Retirement benefits consisting of:
1. a qualified defined contribution
plan (401(k));
2. a qualified
non-contributory
defined contribution plan (Retirement Savings Account or RSA) or qualified defined benefit plan (depending on year of hire); and
3. a
non-qualified
executive retirement plan and/or
non-qualified
tophat plan, depending on year of hire.
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Change in Control Agreements
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Help assure that executives direct their attention to their duties,
acting in the best interests of stockholders, notwithstanding potential for loss of employment in connection with a Change in Control.
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Double-trigger provision to avoid providing benefits to officers who
continue to enjoy employment with the Company after a Change in Control event.
No tax
gross-up
on payment.
Lump sum severance
payment is reduced on a
pro-rata
basis if termination occurs between age 62 and 65.
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Risk Assessment
The Board conducted a risk assessment of the Companys compensation programs during fiscal 2018. Based on the assessment,
the Board concluded that the Companys compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
Role of the Compensation Committee
The Committee comprises three directors, all of whom have been determined by the Board to be independent. The Committee
administers the Companys compensation program for executive officers, setting base salaries and available incentive compensation ranges. The Committee exercises the authority delegated to it by the stockholders or the Board under the
Companys cash and equity incentive compensation plans, which include:
Cash Compensation Plans
Short-Term
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2012 Annual At Risk Compensation Incentive Plan (the At Risk Plan) for named executive officers
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Executive Annual Cash Incentive Program (the EACIP) for other executive officers
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Equity Compensation Plans
Long-Term
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2010 Equity Compensation Plan
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30
In addition, the Committee makes recommendations to the Board with respect to the
development of incentive compensation plans and equity-based plans and changes in compensation for
non-employee
directors.
As described below, the Committee retained the services of independent compensation consultants to assist the Committee in
administering the Companys compensation program. Further, as described earlier in this proxy statement, the members of the Committee have significant experience in the energy industry and/or as leaders of major corporations. In these roles, as
well as through their experiences with the Company, the Committee has garnered extensive knowledge regarding the establishment of a competitive and properly focused compensation program for the Companys executive officers. In making the
decisions discussed below, the Committee uses its subjective business judgment developed through its years of experience.
Role of
the Chief Executive Officer
In making its subjective determinations with respect to named executive officers other
than Mr. Tanski, the Committee discusses the information it receives from its compensation consultants with Mr. Tanski and seeks his recommendation as to the appropriate base salaries and target short-term and long-term incentive awards
for each of these officers, based on Korn Ferry and Meridian recommendations and his assessment of their performance, contributions and abilities. Mr. Tanski also provides input to the Committees compensation consultants with regard to
the responsibilities of the Companys named executive officers, to facilitate the consultants recommendations and comparisons of such officers and their positions to other positions in the marketplace. Mr. Tanski made no
recommendations with regard to his own compensation.
Independent Compensation Consultants
The Compensation Committee retains independent compensation consultants to inform its business judgment as to compensation
matters, including the selection of peer companies for compensation comparison purposes. The Committee retained the services of Korn Ferry to benchmark compensation at the Companys businesses other than its exploration and production business,
and Meridian to benchmark compensation at its exploration and production business.
Determining Our Peers
Because of the Companys diverse asset mix,
selecting an appropriate peer group of companies requires a customized
approach that calls for more critical thought than simple selection of a standard industry group, which may include utility companies without a presence in the broader natural gas industry.
The Companys assets span the entire natural gas
supply chain and include exploration and production (E&P), pipeline and storage, natural gas gathering, and natural gas utility operations. For compensation and performance comparisons, the Committee utilizes two separate peer
groups. The Korn Ferry peer group is the primary peer group against which the Compensation Committee generally benchmarks named executive officer compensation and is intended to include a group of companies that, as a whole, represent our asset mix.
Meridian assists in the formulation of a peer group that is targeted to evaluate our E&P business and the compensation of executives who oversee it. Both peer groups may change over time due to corporate transactions or as the Committee believes
is warranted based on its business judgment. The Committee believes that the peer groups selected with the guidance of Korn Ferry and Meridian include a mix of companies that reflect businesses in which the Company participates, or with which it
competes, as reflected in the tables below.
For the purpose of establishing 2018 compensation, the Compensation Committee
reviewed the Korn Ferry peer group listed below. In addition, the Committee utilized the Korn Ferry peer group for purposes of setting relative performance conditions on long-term incentive awards of performance shares.
31
Korn Ferry
Korn Ferry assists the Compensation Committee in evaluating and setting compensation for Company officers and officers employed
by affiliate companies other than Seneca. Generally, Korn Ferry provides job matching advice to a wide range of companies through detailed position analyses based on proprietary information from multiple participant companies. Korn Ferry provides
similar analyses for supervisory positions in the Companys regulated subsidiaries. Korn Ferrys job evaluation and benchmarking methodology allows for customizable job descriptions and organizational rankings that are specific to the
Company but relative to industry benchmarks.
For Company officers and officers employed by affiliate companies other than
Seneca, Korn Ferry provided an analysis of compensation practices with respect to the following forms of compensation compared to similar positions in the general industry and, where appropriate, in the energy industry based on Korn Ferrys
proprietary databases:
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2)
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Total Cash Compensation (base salary plus short-term cash incentive); and
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3)
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Total Direct Compensation (base salary plus short-term cash incentive plus long-term equity incentive).
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Korn Ferry also made recommendations on incentive compensation target amounts to the Committee for:
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1)
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Short-Term Cash Incentive; and
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2)
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Long-Term Equity Incentive.
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Additionally, Korn Ferry provided a proxy analysis of base salary, incentive targets, total cash compensation, long-term
incentive and total direct compensation for the offices of President and CEO of the Company, Chief Operating Officer of the Company, Treasurer and Principal Financial Officer of the Company, and President of National Fuel Gas Distribution
Corporation, based on proxy data for the Company and the 14 energy companies in the peer group listed below. The Compensation Committee selected these 14 companies for purposes of establishing compensation for 2018 because each participated in one
or more businesses that are similar to those of the Company:
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Korn Ferry Peer Companies for Fiscal 2018
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Exploration
&
Production
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Pipeline
&
Storage
and/or
Gathering
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Natural
Gas Utility
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1
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Atmos Energy Corporation
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X
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X
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2
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Cabot Oil & Gas Corporation
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X
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3
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Energen Corporation
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X
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4
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EQT Corporation
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X
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X
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5
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MDU Resources Group, Inc.
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X
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X
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6
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New Jersey Resources Corporation
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X
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X
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7
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Range Resources Corporation
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X
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8
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SM Energy Company
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X
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9
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Southwest Gas Corporation
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X
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10
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Southwestern Energy Company
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X
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X
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11
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Spire Inc.
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X
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12
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UGI Corporation
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X
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13
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WGL Holdings, Inc.
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X
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X
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14
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Whiting Petroleum Corporation
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X
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TOTAL
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7
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6
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7
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32
The Compensation Committee reviews the members of the peer group each year and
makes such adjustments as it believes are warranted. The Compensation Committee made no revisions to the peer group for purposes of establishing compensation for 2018.
Meridian Compensation Partners, LLC
Meridian assists the Committee in evaluating and setting compensation for employees at Seneca, including Senecas
President. Meridian also benchmarked Mr. Tanskis compensation and Mr. Bauers compensation against the E&P peer group. The Committee requested these analyses for its use in supplementing the Korn Ferry-provided comparisons
due to the importance of the Companys E&P segment and Mr. Tanskis and Mr. Bauers management of that segment. The Committee selected Meridian due to its expertise in E&P industry compensation matters.
Meridian provided an analysis for officers of Seneca and select officers of the Company of compensation practices with respect
to the following forms of compensation compared to similar positions in the E&P industry:
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2.
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Target Short-Term Incentive;
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3.
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Target Cash Compensation (base salary plus short-term incentive);
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4.
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Long-Term Incentive; and
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5.
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Total Target Compensation (base salary plus short-term and long-term incentive).
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The Meridian analysis was based on data from Meridians Proprietary Oil and Gas Compensation Database, supplemented by
published survey data and available proxy data, from 15 E&P companies chosen by the Committee based on certain criteria, such as revenues, assets, and the nature of each companys operations in the E&P segment of the energy industry,
that made them relatively comparable to the operations at Seneca. The companies in the
15-member
peer group range in size from approximately $3.0 billion to $155 million in revenues (with a median of
$720 million) and from approximately $15.7 billion to $0.9 billion in asset size (with a median of $4.7 billion). The peer group is:
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Meridian Compensation Partners Peer E&P Companies for Fiscal
2018
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1
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Callon Petroleum Company
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9
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Oasis Petroleum
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2
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Cimarex Energy Co.
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10
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Parsley Energy, Inc.
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3
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Comstock Resources Inc.
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11
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PDC Energy
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4
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Eclipse Resources Corporation
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12
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Range Resources Corporation
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5
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EP Energy Corporation
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13
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Sanchez Energy Corporation
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6
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EQT Corporation
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14
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SM Energy Company
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7
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Jones Energy, Inc.
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15
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Southwestern Energy Company
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8
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Laredo Petroleum, Inc.
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The Committee reviews the members of this E&P peer group from time to time and makes
adjustments as it believes are warranted. For purposes of establishing compensation for 2018, the Compensation Committee reviewed the peer group and determined to remove Antero Resources Corporation, Carrizo Oil & Gas, Inc. and Halcon
Resources Corporation as a result of corporate restructuring or
non-participation
in Meridians annual compensation survey. The Committee added Callon Petroleum Company and Cimarex Energy Co., each of
which conducts exploration and production activities in U.S. shale formations.
33
FISCAL 2018 TOTAL COMPENSATION
Base Salary
Base salaries provide a predictable base compensation for
day-to-day
job performance. The Committee reviews executive officer base salaries at calendar
year-end
and adjusts them, if it
deems appropriate in its subjective business judgment, following review of its compensation consultants competitive analyses and, with respect to executive officers other than the CEO, upon consideration of the recommendations of the CEO. In
addition, base salary may be adjusted during the calendar year when changes in responsibility occur. Base salary is not adjusted based on specific objective financial results, although overall corporate performance is reviewed by the Committee in
its decision making process. The Committee does not use formulas; rather, it exercises its business judgment.
In
establishing the base salary amount, the Committee generally references the 50
th
percentile of the Korn Ferry Energy survey data. In its subjective business judgment, the Committee may pay between
the 50
th
and 75
th
percentiles of the Korn Ferry data or a greater amount if it is necessary to attract, retain and motivate the individuals
responsible for the success of the business enterprise. The Committee considers overall corporate performance and an individuals specific responsibilities, experience (including time in position) and effectiveness and makes adjustments based
on the Committee members business judgment and, for named executive officers other than the CEO, the CEOs recommendations.
In setting Mr. Tanskis base salary for calendar year 2018, the Compensation Committee considered the Korn Ferry
report indicating Mr. Tanskis then-current base salary was at the 50
th
percentile of Korn Ferrys Energy Industry market data. For January 1, 2018, the Compensation Committee
increased Mr. Tanskis base salary to $1,050,000, slightly above the 50
th
percentile mark.
In determining Mr. Bauers base salary for calendar year 2018, the Committee referenced the Korn Ferry report and
increased Mr. Bauers salary to a level that approximated the Energy Industry 50
th
percentile for positions of similar scope. This action followed discussion with Mr. Tanski of
Mr. Bauers specific responsibilities, experience and effectiveness as Principal Financial Officer of the Company and President of Supply Corporation.
For calendar year 2018, upon consultation with Mr. Tanski, the Committee increased Mr. Pustulkas base salary to
a level slightly below the Energy Industry 50
th
percentile for positions comparable to his position as Chief Operating Officer, which he assumed in February 2016. The increase recognized
Mr. Pustulkas performance managing the operations and development plans of the Company.
For calendar year 2018,
consistent with the Committees past practice regarding the President of Seneca, the Committee increased Mr. McGinnis base salary to a level above the 75
th
percentile of the
Meridian survey data for chief operating officers of independent exploration and production company peers. Given the size and importance to the Company of the E&P segment and the highly competitive nature of the Marcellus and Utica shales, the
Committee generally sets the base salary of Senecas president above the 75
th
percentile of the Meridian survey data. The long-term incentive compensation opportunities for Mr. McGinnis
and other employees in the E & P segment have tended to rank below independent exploration and production benchmarks to reflect the relative stability of the positions of these employees due to being part of a diversified and integrated
holding company system. The Committees action on Mr. McGinnis salary followed discussion with Mr. Tanski of Mr. McGinnis responsibilities, experience and effectiveness.
For calendar year 2018, following discussion with Mr. Tanski, the Committee increased Mr. Carlottis base salary
to an amount that approximated the Energy Industry 50
th
percentile for positions comparable to his position as President of Distribution Corporation. The increase was based on the Committees
and Mr. Tanskis assessment of Mr. Carlottis attention to customer service, safety and oversight of
day-to-day
operations, budget and cost control
at the utility segment.
On October 31, 2018, Mr. Carlotti provided notice to the Company of his intention to
retire, effective February 1, 2019.
34
The fiscal 2018 base salaries paid to the named executive officers are shown in
the Fiscal 2018 Summary Compensation Table under the Salary column within this proxy statement.
Annual Cash Incentive
The Company provides an annual cash incentive to its executives to motivate their performance over a short term
(which is generally considered to be no longer than two years). Early in the fiscal year, the Committee establishes for each named executive officer a target amount for the annual cash incentive, stated as a percentage of base salary. Executives
typically can earn up to 200% of target, based on performance on written goals, provided that the maximum payment may not exceed the lesser of (i) two times the executives base salary, or (ii) two million dollars.
Target Award Levels
In considering target award levels for the annual cash incentive for 2018, the Committee took into account the recommendations
of Korn Ferry and Meridian based on reviews of competitive market practices, and the recommendations of Mr. Tanski with respect to executive officers other than himself. The Committee exercised its business judgment and set target awards as
follows:
|
|
|
|
|
|
Named Executive Officer
|
|
Target
(As a Percentage of Base Salary)
|
Mr. Tanski
|
|
|
|
110
|
%
|
Mr. Bauer
|
|
|
|
70
|
%
|
Mr. Pustulka
|
|
|
|
100
|
%
|
Mr. McGinnis
|
|
|
|
85
|
%
|
Mr. Carlotti
|
|
|
|
70
|
%
|
Performance Goals
Based upon discussions with Mr. Tanski and upon review of forecasted financial data, the Committee approved for each named
executive officer a set of particular performance goals for the 2018 fiscal year. Certain goals overlapped among named executive officers; for example, each named executive officer had a goal tied to consolidated EBITDA and to safety. Incentive
payments are based upon performance against the stated goals. For each of the named executive officers, 100% of the target incentive was made dependent on objective performance criteria. All performance criteria applicable to a particular executive
are communicated to that executive in writing at the time the criteria are established.
The types of goals approved for
fiscal 2018 and the purpose of the goals are set forth in the following table:
|
|
|
Goals
|
|
Purpose
|
Earnings-related goals (EBITDA)
|
|
To focus executives attention on the
Companys overall profitability, as well as the profitability of certain segments, as appropriate. Performance is averaged with the prior years performance to mitigate against short-term action to impact one years earnings.
|
Health, safety and environmental goals
|
|
To focus executives attention on
employee, customer and public safety, environmental compliance and operational efficiency.
|
Expense goals
|
|
To focus executives attention on
controlling expense.
|
Customer service goals
|
|
To encourage continued excellence in Utility
customer service.
|
35
To determine the annual cash incentive award payout based on stated performance
objectives, the weight assigned to each goal is multiplied by the percentage of the goal achieved to calculate a weighted percentage for each goal. Once the weighted percentage for each goal is determined, the percentages are totaled. That total
weighted percentage is multiplied by the target award to arrive at the total incentive payment amount.
The fiscal 2018
annual cash incentives actually earned by the named executive officers are shown in the Fiscal 2018 Summary Compensation Table in the
Non-Equity
Incentive Plan Compensation column. For each named
executive officer, the amount earned was based on performance against the
pre-established
performance criteria. The incentive payments made to the named executive officers were approved by the Committee.
36
The following chart identifies the goals assigned to each of the named executive
officers for the 2018 fiscal year, the percentage of each goal achieved, the weight assigned to each goal, and the weighted percentage achieved for each goal. Also noted is each named executive officers target percentage of base salary,
maximum percentage of base salary, total weighted percentage achieved, target amount, and actual incentive payout. Following the chart, numbered sequentially to match the appearance of the performance objective in the chart, is a summary of what the
objective was at the threshold level, target level and maximum level of performance, and a summary of actual performance. With regard to EBITDA goals, performance is averaged with the prior years performance as a mechanism to mitigate against
short-term action to impact one years earnings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Ronald J. Tanski
|
|
|
David P. Bauer
|
|
|
John R. Pustulka
|
|
|
John P. McGinnis
|
|
|
Carl M. Carlotti
|
|
Target % of Base Salary
|
|
110%
|
|
|
70%
|
|
|
100%
|
|
|
85%
|
|
|
70%
|
|
Maximum % of Base Salary
|
|
192%
|
|
|
140%
|
|
|
200%
|
|
|
170%
|
|
|
140%
|
|
Fiscal 2018 Goals
|
|
%
Achvd
|
|
|
Wght
|
|
|
Wghtd %
Achvd
|
|
|
%
Achvd
|
|
|
Wght
|
|
|
Wghtd %
Achvd
|
|
|
%
Achvd
|
|
|
Wght
|
|
|
Wghtd %
Achvd
|
|
|
%
Achvd
|
|
|
Wght
|
|
|
Wghtd %
Achvd
|
|
|
%
Achvd
|
|
|
Wght
|
|
|
Wghtd %
Achvd
|
|
1.
|
|
Consolidated EBITDA*
|
|
|
122
|
|
|
|
0.25
|
|
|
|
30.50
|
|
|
|
122
|
|
|
|
0.25
|
|
|
|
30.50
|
|
|
|
122
|
|
|
|
0.25
|
|
|
|
30.50
|
|
|
|
122
|
|
|
|
0.25
|
|
|
|
30.50
|
|
|
|
122
|
|
|
|
0.25
|
|
|
|
30.50
|
|
2.
|
|
Regulated EBITDA*
|
|
|
88
|
|
|
|
0.20
|
|
|
|
17.60
|
|
|
|
88
|
|
|
|
0.25
|
|
|
|
22.00
|
|
|
|
88
|
|
|
|
0.25
|
|
|
|
22.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88
|
|
|
|
0.25
|
|
|
|
22.00
|
|
3.
|
|
Seneca EBITDA*
|
|
|
140
|
|
|
|
0.20
|
|
|
|
28.00
|
|
|
|
140
|
|
|
|
0.15
|
|
|
|
21.00
|
|
|
|
140
|
|
|
|
0.20
|
|
|
|
28.00
|
|
|
|
140
|
|
|
|
0.25
|
|
|
|
35.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
|
Health, Safety and Environmental
|
|
|
100
|
|
|
|
0.10
|
|
|
|
10.00
|
|
|
|
100
|
|
|
|
0.10
|
|
|
|
10.00
|
|
|
|
100
|
|
|
|
0.10
|
|
|
|
10.00
|
|
|
|
100
|
|
|
|
0.10
|
|
|
|
10.00
|
|
|
|
100
|
|
|
|
0.10
|
|
|
|
10.00
|
|
5.
|
|
Safety
|
|
|
200
|
|
|
|
0.10
|
|
|
|
20.00
|
|
|
|
200
|
|
|
|
0.10
|
|
|
|
20.00
|
|
|
|
200
|
|
|
|
0.10
|
|
|
|
20.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200
|
|
|
|
0.10
|
|
|
|
20.00
|
|
6.
|
|
Operational Safety Measures and Leak Reduction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200
|
|
|
|
0.10
|
|
|
|
20.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200
|
|
|
|
0.20
|
|
|
|
40.00
|
|
7.
|
|
Seneca F&D Cost
|
|
|
200
|
|
|
|
0.15
|
|
|
|
30.00
|
|
|
|
200
|
|
|
|
0.15
|
|
|
|
30.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200
|
|
|
|
0.20
|
|
|
|
40.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.
|
|
Seneca LOE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200
|
|
|
|
0.10
|
|
|
|
20.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
|
Seneca G&A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128
|
|
|
|
0.10
|
|
|
|
12.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.
|
|
Distribution Customer Service
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
167
|
|
|
|
0.10
|
|
|
|
16.70
|
|
|
|
Total Weighted % Achieved
|
|
|
136.10%
|
|
|
|
133.50%
|
|
|
|
130.5%
|
|
|
|
148.30%
|
|
|
|
139.20%
|
|
|
|
Target
|
|
|
$1,146,750
|
|
|
|
$411,250
|
|
|
|
$731,250
|
|
|
|
$553,563
|
|
|
|
$387,625
|
|
|
|
Annual Cash Incentive
|
|
|
$1,560,727
|
|
|
|
$549,019
|
|
|
|
$954,281
|
|
|
|
$820,933
|
|
|
|
$539,574
|
|
*
|
Reflects an average of 2018 performance and 2017 performance.
|
37
|
|
|
|
|
|
|
|
|
|
|
Performance Measure
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Actual Performance
|
1.
|
|
Consolidated EBITDA In determining final performance level, the results of this goal are averaged with the prior year results on the consolidated EBITDA goal.
|
|
$652 Million
|
|
$736 Million
|
|
$810 Million
|
|
2018 Consolidated EBITDA=$724 Million; performance level of 93%;
2-year
average of performance
levels=(93%+151%)/2=122%
|
2.
|
|
Regulated EBITDA In determining final performance level, the results of this goal are averaged with the prior year results on the regulated companies EBITDA goal.
|
|
$324 Million
|
|
$334 Million
|
|
$357 Million
|
|
2018 Regulated EBITDA=$329 Million; performance level of 75%;
2-year
average of performance
levels=(75%+100%)/2=88%
|
3.
|
|
Seneca EBITDA In determining final performance level, the results of this goal are averaged with the prior year results on the Seneca EBITDA goal.
|
|
$247 Million
|
|
$308 Million
|
|
$353 Million
|
|
2018 Seneca EBITDA=$313 Million; performance level of 111%;
2-year
average of performance
levels=(111%+169%)/2=140%
|
4.
|
|
Health, Safety and Environmental (HSE) To promote continued importance of safety, measured by participation in HSE meetings.
|
|
Same as Target
|
|
At least 6 HSE meetings
|
|
Same as Target
|
|
At least 6 HSE meetings
|
5.
|
|
Safety Measured by number of OSHA recordable injuries in the utility and pipeline divisions.
|
|
At or better than
3-year
average in any division
|
|
At or better than
3-year
average in any
2 divisions
|
|
At the combined average of 3.25 or less
|
|
Combined average = 3.08
|
6.
|
|
Operational Safety Measures and Leak Reduction Measured by the Utility segments operational safety performance standards in New York and outstanding leaks reduction.
|
|
Complete 2 of 3 Public Service Commission (PSC) Safety Performance Standards
|
|
Complete all 3 PSC Safety Performance Standards OR any 2 PSC Performance Standards and Outstanding Leaks Reduction
|
|
Complete all 3 PSC Performance Standards and Outstanding Leaks Reduction
|
|
Completed all 3 PSC Performance Standards and Outstanding Leaks Reduction
|
7.
|
|
Seneca Finding and Development Cost (per thousand cubic feet equivalent (Mcfe))
|
|
$1.04/Mcfe
|
|
$0.75/Mcfe
|
|
$0.58/Mcfe
|
|
$0.57/Mcfe
|
8.
|
|
Seneca Lease Operating Expense (per Mcfe)
|
|
$0.98/Mcfe
|
|
$0.94/Mcfe
|
|
$0.91/Mcfe
|
|
$0.91/Mcfe
|
9.
|
|
Seneca General and Administrative Expense excluding certain expenses related to joint development and acquisition or divestiture transactions
|
|
$64.0 Million
|
|
$61.7 Million
|
|
$57 Million
|
|
$60.4 Million
|
10.
|
|
Distribution Customer Service Measured by average of performance
levels on residential satisfaction rates and
non-emergency
appointments
kept.
|
|
Residential Satisfaction Rate in NY or PA is 85% OR
Non-Emergency
Appointments Kept are 98% in NY or 96% in PA
|
|
Residential Satisfaction Rates in NY and PA are 91%, and
Non-Emergency
Appointments Kept are 98% in NY and 96% in PA
|
|
Residential Satisfaction Rates in NY and PA are greater than 95%, and
Non-Emergency
Appointments Kept are at least 99% in NY and at least 98% in
PA
|
|
Residential Satisfaction Rates in NY and PA between target and maximum performance levels, and
Non-Emergency
Appointments Kept in NY and PA at maximum performance levels
|
38
Discretionary Bonus
On December 4, 2018, the Compensation Committee authorized the following discretionary bonuses to the named executive
officers: R. J. Tanski, $73,392; D. P. Bauer, $31, 872; J. R. Pustulka, $56,672; J. P. McGinnis, $5,536; and C. M. Carlotti, $30,041, for the aggregate amount of $197,513 across the entire named executive officer group. The discretionary bonuses
offset an unforeseen negative impact on
non-equity
incentive plan compensation resulting from the Tax Cuts and Jobs Act of 2017 (the Act). Regulatory adjustments recorded by the Company in accordance with
state utility commission orders issued in the wake of the Act reduced Utility segment revenues. As a result, performance on EBITDA goals, both for the Companys regulated businesses and the consolidated Company, was negatively impacted, even
though the Act had a significant positive effect on the Companys consolidated net income and the regulatory adjustments by state utility commissions were fully offset by a reduction in corporate income tax liabilities.
Long-Term Incentive Compensation
The Compensation Committee uses its business judgment to establish target long-term incentive awards, taking into account the
recommendations of its compensation consultants based on reviews of competitive market practices, and the recommendations of Mr. Tanski with respect to executive officers other than himself. Such awards are intended to focus attention on
managing the Company from a long-term investors perspective. In addition, the Committee wishes to encourage officers and other managers to have a significant, personal investment in the Company through stock ownership. The Committee typically
makes equity awards on an annual basis in December, but has not established a policy to make grants at a specific meeting, to allow flexibility to review and evaluate appropriate equity grant practices.
In fiscal years 2016, 2017 and 2018, the Compensation Committee granted Messrs. Tanski, Pustulka and Carlotti a long-term
incentive award entirely in the form of performance shares. The Committee adopted this practice to focus attention on the achievement of performance targets. For Messrs. Bauer and McGinnis, the Committee granted
two-thirds
of the long-term incentive award in the form of performance shares and
one-third
in the form of time-vested RSUs, which serve as an additional retention tool.
For each named executive officer, the performance shares are split evenly between relative TSR and relative ROC performance conditions, as described below, which are to be achieved over a three-year performance cycle.
The Committee established the performance condition for one set of performance shares as the Companys three-year TSR over
the performance cycle as compared to the same metric for companies in the Korn Ferry peer group, as calculated based on the data reported for each company in the Bloomberg online database. Starting and ending stock prices over the performance cycle
are calculated as the average closing stock price for the prior calendar month with dividends reinvested in each companys securities at each
ex-dividend
date. The Committee linked the awards to relative
levels of performance, which results in the vesting and payment of a percentage of the target number of performance shares depending on the Companys percentile rank in the Korn Ferry peer group, as follows:
|
|
|
|
|
|
Relative TSR Goal
|
|
Percentage of
Target Opportunity Paid
|
Companys Percentile Ranking
|
30
th
or below
|
|
|
|
0
|
%
|
40
th
|
|
|
|
50
|
%
|
50
th
|
|
|
|
100
|
%
|
70
th
|
|
|
|
150
|
%
|
90
th
or above
|
|
|
|
200
|
%
|
If the Companys three-year TSR is negative (less than 0.0), the percentage of target
opportunity paid is capped at 100%, regardless of the Companys percentile ranking. For performance between two established performance levels, the percentage of target opportunity paid is determined by straight line mathematical interpolation.
39
With respect to the TSR performance shares granted in fiscal 2016, which had a
performance cycle covering fiscal years 2016 through 2018, the Company performed at the 50
th
percentile, which resulted in a payout of 100% of the target opportunity.
The Committee established the performance condition for the second set of performance shares as the Companys three-year
ROC over the performance cycle as compared to the same metric for companies in the Korn Ferry peer group. ROC for the Company or any member of the peer group means the average of the returns on capital for each twelve month period corresponding to
each of the Companys fiscal years during the performance cycle, calculated based on the data reported for that company in the Bloomberg database. The Committee linked the awards to relative levels of performance, which results in the vesting
and payment of a percentage of the target number of performance shares depending on the Companys percentile rank in the Korn Ferry peer group, as follows:
|
|
|
|
|
|
Relative ROC Goal
|
|
Percentage of
Target Opportunity Paid
|
Companys Percentile Ranking
|
<45
th
|
|
|
|
0
|
%
|
45
th
|
|
|
|
50
|
%
|
60
th
|
|
|
|
100
|
%
|
75
th
|
|
|
|
150
|
%
|
100
th
|
|
|
|
200
|
%
|
If the Companys three-year ROC is negative (less than 0.0), the percentage of target
opportunity paid is capped at 100%, regardless of the Companys percentile ranking. For performance between two established performance levels, the percentage of target opportunity paid is determined by mathematical interpolation.
With respect to the ROC performance shares granted in fiscal 2016, which had a performance cycle covering fiscal years 2016
through 2018, the Company performed at the 66.67 percentile, which resulted in a payout of 122.23% of the target opportunity.
No dividend equivalents are provided in respect of any performance shares.
Each of the time-based RSU awards granted to Messrs. Bauer and McGinnis in fiscal years 2016, 2017 and 2018 vests in three
equal annual installments beginning on the first anniversary of the date of grant. No dividend equivalents are provided in respect of any RSUs.
The performance shares and RSUs granted to the named executive officers in fiscal 2018 are set out in the Grants of Plan-Based
Awards in Fiscal 2018 Table within this proxy statement.
EMPLOYEE BENEFITS
Retirement Benefits
The Company maintains a qualified defined contribution retirement plan which includes a traditional 401(k) benefit as well as a
Retirement Savings Account (RSA) benefit for eligible employees (in other words, those hired at various points in 2003 and thereafter, depending on employee type), a qualified defined benefit retirement plan (for those hired prior to
various points in 2003), a
non-qualified
executive retirement plan (available only to selected officers promoted prior to 2002) and a
non-qualified
tophat plan. These
plans help the Company attract and retain high caliber employees in high-level management positions and, in the case of the
non-qualified
plans, restore retirement benefits lost to employees under the
qualified retirement plans as a result of the effect of the Internal Revenue Code limits and the qualified plans limits on compensation considered and benefits provided under such qualified plans. The employee benefits for executive officers
employed prior to 2003 differ from those made available to those employed during or after that year. The Company made changes to its programs that reflected a shift in competitive practices away from certain types of retirement benefits, but
generally grandfathered existing employees (including executive officers) who were then in service in the benefits programs that are commensurate with those in the regulated energy industry.
40
Messrs. Tanski, Pustulka and Carlotti are eligible to participate in the
qualified defined contribution retirement plan (traditional 401(k)), the qualified defined benefit retirement plan, and both of the
non-qualified
plans. Mr. McGinnis is eligible to participate in the
qualified defined contribution retirement plan (traditional 401(k), including the RSA benefit) and the
non-qualified
tophat plan. Mr. Bauer is eligible to participate in the qualified defined contribution
retirement plan (traditional 401(k)), the qualified defined benefit retirement plan and the
non-qualified
tophat plan. These benefits are described in more detail in the section entitled Fiscal 2018
Pension Benefits within this proxy statement.
Executive Life Insurance
In 2004, the Committee authorized an insurance program known as the ExecutiveLife Insurance Plan. Under this plan,
upon specific direction of the Companys CEO, when an executive officer reaches age 50, the Company would pay the premium of a life insurance policy or policies, to be owned by the executive officer, in an amount up to $15,000 per year. The
payment is taxable income to the executive officer and ceases when the executive officers employment ceases. The Committee authorized this plan as a replacement for its prior practice of providing split dollar life insurance agreements to
designated executive officers. The Committee replaced the split dollar arrangement with the current plan because the Company was prohibited by the Sarbanes-Oxley Act from making premium payments on certain split dollar policies due to their nature
as loans. Messrs. Tanski, Pustulka, Carlotti and McGinnis are covered by the ExecutiveLife Insurance Plan. Mr. Bauer is not a participant in this Plan.
Executive Perquisites
The Company offers a limited number of perquisites to our executive officers. The basis for offering these perquisites is to
enhance the Companys ability to attract and retain highly qualified persons and also to assist the officer in conducting business on behalf of the Company. For certain items, the perquisite is incidental to other business-related use. For
example, the Company shares an arena suite with a local law firm for the local professional hockey team. The Company also has additional season tickets for seats for both the local professional hockey and football teams. The Company made these
investments as a result of specific drives by the Buffalo, New York business community to support the retention of these professional athletic teams in the Buffalo area. These suites are primarily used for Company business. On the occasions when the
suites are not used for Company business, the executive officers as well as other employees are permitted personal use.
The Company offers executive officers tax preparation advice, in part to assure the Company that its officers are properly
reporting compensation. The Company makes contributions for the named executive officers long-term disability plans. The Company also pays the costs of spouses accompanying named executive officers to certain of the Board of Directors and
industry meetings and functions, as well as blanket travel insurance for the named executive officer and spouse.
CHANGE IN CONTROL
ARRANGEMENTS
The Companys named executive officers serve at the pleasure of the Board of Directors and are not
employed pursuant to employment agreements. Each of the named executive officers is a party to an Employment Continuation and Noncompetition Agreement with the Company, which would become effective upon a Change in Control of the Company.
The Company and the Committee believe that these agreements are required for the attraction and retention of the executive
talent needed to achieve corporate objectives and to assure that executive officers direct their attention to their duties, acting in the best interests of the stockholders, notwithstanding the potential for loss of employment in connection with a
Change in Control.
The agreement contains a double-trigger provision that provides payment only if employment
terminates within three years following a Change in Control, as defined in the agreement, either by the Company other than for cause or by the executive officer for good reason. The Committee believes this
41
structure strikes a balance between the incentive and the executive attraction and retention efforts described above, without providing Change in Control benefits to executive officers who
continue to enjoy employment with the Company in the event of a Change in Control transaction.
The payment is generally
calculated by multiplying 1.99 by the sum of the executive officers current base salary plus the average of the annual short-term incentive compensation payment for the previous two fiscal years. The 1.99 multiplier is reduced on a
pro-rata
basis if termination occurs between age 62 and age 65, at which point no amount is payable. If payment is triggered, certain health benefits are continued for the earlier of 18 months following termination
or the date other similar coverage becomes available.
The agreement contains a restrictive covenant whereby the executive
officer may, upon termination following a Change in Control, choose to refrain from being employed by or otherwise serving as an agent, consultant, partner or major stockholder of a business engaged in activity that is competitive with that of the
Company or its subsidiaries. If the executive officer so chooses to be bound by this restrictive covenant, an additional payment is made in the amount of one times the sum of current base salary plus the average of the annual short-term incentive
compensation payment for the previous two fiscal years. The Committee and the Company believe this is an appropriate payment in exchange for the executive officers agreement to the
non-compete
covenant.
There is no
gross-up
for taxes on either payment.
If a named executive officer
experiences a qualifying termination of employment within a specific time following a Change in Control of the Company, many of the components of total compensation described above become immediately vested or paid out in a lump sum. More detail
about these items and calculations as of September 28, 2018, are set forth in the section entitled Potential Payments Upon Termination or Change in Control within this proxy statement.
STOCK OWNERSHIP GUIDELINES
In an effort to emphasize the importance of stock ownership and in consultation with the Compensation Committee, the Company
maintains Common Stock ownership guidelines for officers, ranging from one times base salary for junior officers to six times base salary at the CEO level. Generally, officers are expected to meet the guidelines within five years following
promotion. The CEO holds approximately 21 times his base salary as of November 30, 2018. All other named executive officers meet their ownership requirements or expect to do so within five years from promotion. Other employees receiving equity
awards are encouraged to retain their Common Stock for long-term investment. The Board and management believe that employees who are stockholders perform their jobs in a manner that considers the long-term interests of the stockholders. Company
directors are also subject to ownership requirements, as noted previously in this proxy statement.
TAX AND ACCOUNTING CONSIDERATIONS
In designing the Companys compensation program, general consideration is given to the accounting treatment of
the awards made to our executive officers and pertinent tax law provisions. Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code), generally prohibits the Company from deducting compensation paid in excess of
$1 million per year to certain covered officers (including, beginning for 2018, certain former executive officers). Historically, an exception was available for compensation that qualifies as qualified performance-based compensation
within the meaning of Section 162(m) of the Code, but the exception has now been repealed, effective for taxable years beginning after December 31, 2017, unless certain transition relief for certain compensation arrangements in place as of
November 2, 2017 is available. In general, the Committee has historically intended for the short-term cash incentive compensation payable under the At Risk Plan and the long-term equity awards to qualify for this performance-based exception.
However, there may have been cases where the Committee elected to award compensation that was not (or will not be) deductible (or was not able to award compensation that was or will be deductible), if the Committee considered such compensation to be
consistent with its philosophy and in the best interests of the Company and its
42
stockholders, or if the performance-based exception was otherwise unavailable. Furthermore, even if the Company intended to grant compensation that qualifies for the performance-based exception,
it cannot guarantee that such compensation will so qualify or ultimately will be deductible by the Company. The Company has also designed its compensation program with the intent that any awards granted thereunder will either be exempt from, or
comply with the applicable requirements under, Section 409A of the Code.
43
Fiscal 2018 Summary Compensation Table
The following table sets forth a summary of the fiscal 2018 compensation of the Companys CEO, Principal Financial Officer
and each of the three most highly compensated executive officers other than the CEO and Principal Financial Officer. The compensation reflected for each officer was for the officers services provided in all capacities to the Company and its
subsidiaries.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal
Position
|
|
Fiscal
Year
|
|
Salary
($)
|
|
Bonus
($)(1)
|
|
Stock
Awards
($)(2)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive
Plan
Compensation
($)(3)
|
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(4)
|
|
All Other
Compensation
($)(5)
|
|
Total
($)
|
Ronald J. Tanski
President and Chief Executive Officer of the Company
|
|
|
|
2018
2017
2016
|
|
|
|
|
1,042,500
1,010,000
972,500
|
|
|
|
|
73,392
N/A
N/A
|
|
|
|
|
3,277,447
3,254,412
2,769,023
|
|
|
|
|
0
0
0
|
|
|
|
|
1,560,727
1,338,881
1,717,022
|
|
|
|
|
1,945,027
1,851,383
1,486,028
|
|
|
|
|
185,084
169,472
191,453
|
|
|
|
|
8,084,177
7,624,148
7,136,026
|
|
|
|
|
|
|
|
|
|
|
|
David P. Bauer
Treasurer and Principal Financial Officer of the Company; President of National Fuel Gas Supply Corporation
|
|
|
|
2018
2017
2016
|
|
|
|
|
587,500
537,500
459,537
|
|
|
|
|
31,872
N/A
N/A
|
|
|
|
|
724,657
704,902
336,072
|
|
|
|
|
0
0
0
|
|
|
|
|
549,019
544,246
333,508
|
|
|
|
|
268,191
253,874
330,362
|
|
|
|
|
68,805
65,674
48,558
|
|
|
|
|
2,230,044
2,106,196
1,508,037
|
|
|
|
|
|
|
|
|
|
|
|
John R. Pustulka
|
|
|
|
2018
|
|
|
|
|
731,250
|
|
|
|
|
56,672
|
|
|
|
|
1,445,921
|
|
|
|
|
0
|
|
|
|
|
954,281
|
|
|
|
|
813,346
|
|
|
|
|
118,864
|
|
|
|
|
4,120,334
|
|
Chief Operating Officer of the Company
|
|
|
|
2017
|
|
|
|
|
660,000
|
|
|
|
|
N/A
|
|
|
|
|
1,281,395
|
|
|
|
|
0
|
|
|
|
|
731,214
|
|
|
|
|
615,496
|
|
|
|
|
112,764
|
|
|
|
|
3,400,869
|
|
|
|
|
2016
|
|
|
|
|
591,250
|
|
|
|
|
N/A
|
|
|
|
|
695,834
|
|
|
|
|
0
|
|
|
|
|
745,596
|
|
|
|
|
934,996
|
|
|
|
|
98,038
|
|
|
|
|
3,065,714
|
|
|
|
|
|
|
|
|
|
|
|
John P. McGinnis
|
|
|
|
2018
|
|
|
|
|
651,250
|
|
|
|
|
5,536
|
|
|
|
|
1,159,482
|
|
|
|
|
0
|
|
|
|
|
820,933
|
|
|
|
|
N/A
|
|
|
|
|
123,469
|
|
|
|
|
2,760,670
|
|
President of Seneca Resources Company, LLC
|
|
|
|
2017
2016
|
|
|
|
|
600,000
457,917
|
|
|
|
|
N/A
68,688
|
|
|
|
|
961,113
747,834
|
|
|
|
|
0
0
|
|
|
|
|
776,250
206,750
|
|
|
|
|
N/A
N/A
|
|
|
|
|
117,596
82,103
|
|
|
|
|
2,454,959
1,563,292
|
|
|
|
|
|
|
|
|
|
|
|
Carl M. Carlotti
|
|
|
|
2018
|
|
|
|
|
553,750
|
|
|
|
|
30,041
|
|
|
|
|
674,810
|
|
|
|
|
0
|
|
|
|
|
539,574
|
|
|
|
|
982,231
|
|
|
|
|
80,565
|
|
|
|
|
2,860,971
|
|
President of National Fuel Gas Distribution Corporation
|
|
|
|
2017
2016
|
|
|
|
|
526,250
447,743
|
|
|
|
|
N/A
N/A
|
|
|
|
|
696,472
538,092
|
|
|
|
|
0
0
|
|
|
|
|
501,543
525,135
|
|
|
|
|
809,829
591,081
|
|
|
|
|
86,854
73,384
|
|
|
|
|
2,620,948
2,175,435
|
|
(1)
|
Please refer to the Compensation Discussion and Analysis for information about the discretionary bonus.
|
(2)
|
The stock award values for fiscal 2018 show the aggregate grant date fair value of performance shares and,
where applicable, time-based RSUs. For information on the valuation assumptions and performance conditions with respect to these awards, refer to Note A under the heading Stock-Based Compensation and Note E under the heading Stock
Award Plans in the Companys financial statements in its Form
10-K
for the fiscal year ended September 30, 2018 (2018 Form
10-K).
The grant
date fair value of performance shares reflects an estimate that 100% of the performance shares awarded will vest at the end of the three-year performance period. The actual percentage to vest will be determined following fiscal 2020. The grant date
fair value of performance shares granted in fiscal 2018, assuming the highest level of performance (200%), is $6,554,894 for Mr. Tanski, $963,811 for Mr. Bauer, $2,891,841 for Mr. Pustulka, $1,542,220 for Mr. McGinnis and $1,349,621 for Mr.
Carlotti.
|
(3)
|
For fiscal 2018, this column reflects compensation under the At Risk Plan. Please refer to the Compensation
Discussion and Analysis for additional information about the At Risk Plan, including information regarding the performance conditions applicable to the awards.
|
(4)
|
This column represents, for fiscal 2018, the actuarial increase in the present value of the named executive
officers benefits under all pension plans maintained by the Company determined using interest rate and mortality rate assumptions consistent with those used in the Companys financial statements in its 2018 Form
10-K,
as described in Note H, Retirement Plan and Other Post-Retirement Benefits. The amount for Mr. Bauer also includes the actuarial increase in the present value of his retirement-related tophat
benefit under the
non-qualified
tophat plan. These amounts may include amounts which the named executive officer may not currently be entitled to receive because such amounts are not vested as of
September 30, 2018, 2017 and 2016, respectively. For fiscal 2018, the amount includes above-market earnings under the Deferred Compensation Plan for Mr. Pustulka of $904. See the narrative, tables and notes to the sections entitled
Fiscal 2018 Pension Benefits and Fiscal 2018 Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans within this proxy statement for more information.
|
(5)
|
See the All Other Compensation Table below for more information.
|
44
The following table describes each component of the All Other Compensation column
in the Fiscal 2018 Summary Compensation Table for fiscal 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Ronald J.
Tanski
($)
|
|
|
David P.
Bauer
($)
|
|
|
John R.
Pustulka
($)
|
|
|
John P.
McGinnis
($)
|
|
|
Carl M.
Carlotti
($)
|
|
Defined Contributions(a)
|
|
|
16,425
|
|
|
|
16,425
|
|
|
|
16,425
|
|
|
|
27,375
|
|
|
|
16,425
|
|
401(k) Tophat(b)
|
|
|
139,619
|
|
|
|
51,516
|
|
|
|
84,332
|
|
|
|
22,475
|
|
|
|
49,049
|
|
RSA Tophat(c)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
47,821
|
|
|
|
0
|
|
Employee Stock Ownership Plan (ESOP) Supplemental Payment(d)
|
|
|
2,191
|
|
|
|
0
|
|
|
|
3,016
|
|
|
|
0
|
|
|
|
0
|
|
Life Insurance(e)
|
|
|
15,000
|
|
|
|
773
|
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
15,000
|
|
Travel Accident Insurance(f)
|
|
|
110
|
|
|
|
91
|
|
|
|
91
|
|
|
|
91
|
|
|
|
91
|
|
Perquisites(g)
|
|
|
11,739
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
10,707
|
|
|
|
N/A
|
|
Total
|
|
|
185,084
|
|
|
|
68,805
|
|
|
|
118,864
|
|
|
|
123,469
|
|
|
|
80,565
|
|
a)
|
Represents the Company contributions to the 401(k) plan accounts of the named executive officers. Each named
executive officer receives a Company match of 6% within the 401(k) plan on the lesser of base salary or the IRS annual compensation limit. In addition, Mr. McGinnis is a participant in the Companys RSA benefit within the 401(k) plan,
pursuant to which he receives a Company contribution of 4% on the portion of his base salary plus annual bonus that does not exceed the IRS annual compensation limit.
|
b)
|
Each named executive officer is prohibited from receiving the full 401(k) Company match due to the IRS annual
compensation limit. The 401(k) tophat benefit gives each named executive officer except Mr. McGinnis a Company match on the following forms of compensation: (1) base salary that exceeds the IRS annual compensation limit, and (2) At
Risk Plan payment. For Mr. McGinnis, the 401(k) tophat benefit is based on the portion of base salary that exceeds the IRS annual compensation limit.
|
c)
|
Represents the Company contributions on Mr. McGinnis base salary plus At Risk Plan payment that
exceeded the IRS annual compensation limit.
|
d)
|
All management participants who were hired prior to December 31, 1986 participate in the ESOP, which
pays dividends to the participants on the Common Stock held in the plan. The participant does not have the option to reinvest these dividends. The formula for the supplemental payment was designed to result in aggregate supplemental payments to the
participants approximating the amount the Company saved in corporate income taxes by prohibiting the reinvestment of dividends. The ESOP is a qualified benefit plan that was frozen in 1987 and closed to future participants.
|
e)
|
Represents the Company-paid life insurance premiums on behalf of Messrs. Tanski, Pustulka, McGinnis and
Carlotti under the ExecutiveLife Insurance Plan. For Mr. Bauer, this represents the Company-paid insurance premiums under the National Fuel Gas Company Group Life Insurance Plan.
|
f)
|
Represents the premiums paid for the blanket travel insurance policy, which provides a death benefit to
beneficiaries of an officer if the officer dies while traveling on business.
|
g)
|
Perquisites for Mr. Tanski consist of tax preparation and advice, personal use of Company purchased
tickets to attend local sporting, entertainment or
not-for-profit
events, attendance at Company and industry events for a family member, blanket travel insurance for
personal travel, and long-term disability contributions paid by National Fuel. Perquisites for Mr. McGinnis consist of the same types of benefits, with the exception of tickets to sporting, entertainment or
non-for-profit
events. Perquisites for each of Messrs. Bauer, Pustulka and Carlotti were less than $10,000.
|
45
Grants of Plan-Based Awards in Fiscal 2018
The following table sets forth information with respect to awards granted to the named executive officers during fiscal 2018
under the At Risk Plan and the 2010 Equity Compensation Plan. Please refer to the CD&A within this proxy statement for additional information regarding these plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible
Payouts Under
Non-Equity
Incentive Plan
Awards
|
|
Estimated Future
Payouts
Under
Equity Incentive Plan
Awards
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock
or
Units
(#)
|
|
Grant Date
Fair Value of
Stock and
Option
Awards
($)(5)
|
Name
|
|
Note
|
|
Grant
Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum
(#)
|
Ronald J. Tanski
|
|
|
|
(1
|
)
|
|
|
|
12/20/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,081
|
|
|
|
|
32,162
|
|
|
|
|
64,324
|
|
|
|
|
|
|
|
|
|
1,596,661
|
|
|
|
|
|
(2
|
)
|
|
|
|
12/20/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,198
|
|
|
|
|
32,162
|
|
|
|
|
64,324
|
|
|
|
|
|
|
|
|
|
1,680,786
|
|
|
|
|
|
(3
|
)
|
|
|
|
12/20/17
|
|
|
|
|
524,925
|
|
|
|
|
1,146,750
|
|
|
|
|
2,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David P. Bauer
|
|
|
|
(1
|
)
|
|
|
|
12/20/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,365
|
|
|
|
|
4,729
|
|
|
|
|
9,458
|
|
|
|
|
|
|
|
|
|
234,768
|
|
|
|
|
|
(2
|
)
|
|
|
|
12/20/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,352
|
|
|
|
|
4,729
|
|
|
|
|
9,458
|
|
|
|
|
|
|
|
|
|
247,138
|
|
|
|
|
|
(3
|
)
|
|
|
|
12/20/17
|
|
|
|
|
181,156
|
|
|
|
|
411,250
|
|
|
|
|
822,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
12/20/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,731
|
|
|
|
|
242,752
|
|
|
|
|
|
|
|
|
|
|
|
|
John R. Pustulka
|
|
|
|
(1
|
)
|
|
|
|
12/20/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,095
|
|
|
|
|
14,189
|
|
|
|
|
28,378
|
|
|
|
|
|
|
|
|
|
704,403
|
|
|
|
|
|
(2
|
)
|
|
|
|
12/20/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,058
|
|
|
|
|
14,189
|
|
|
|
|
28,378
|
|
|
|
|
|
|
|
|
|
741,517
|
|
|
|
|
|
(3
|
)
|
|
|
|
12/20/17
|
|
|
|
|
353,011
|
|
|
|
|
731,250
|
|
|
|
|
1,462,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John P. McGinnis
|
|
|
|
(1
|
)
|
|
|
|
12/20/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,784
|
|
|
|
|
7,567
|
|
|
|
|
15,134
|
|
|
|
|
|
|
|
|
|
375,659
|
|
|
|
|
|
(2
|
)
|
|
|
|
12/20/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,164
|
|
|
|
|
7,567
|
|
|
|
|
15,134
|
|
|
|
|
|
|
|
|
|
395,451
|
|
|
|
|
|
(3
|
)
|
|
|
|
12/20/17
|
|
|
|
|
221,425
|
|
|
|
|
553,563
|
|
|
|
|
1,107,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
12/20/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,569
|
|
|
|
|
388,372
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl M. Carlotti
|
|
|
|
(1
|
)
|
|
|
|
12/20/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,311
|
|
|
|
|
6,622
|
|
|
|
|
13,244
|
|
|
|
|
|
|
|
|
|
328,745
|
|
|
|
|
|
(2
|
)
|
|
|
|
12/20/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,894
|
|
|
|
|
6,622
|
|
|
|
|
13,244
|
|
|
|
|
|
|
|
|
|
346,066
|
|
|
|
|
|
(3
|
)
|
|
|
|
12/20/17
|
|
|
|
|
121,617
|
|
|
|
|
387,625
|
|
|
|
|
775,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The ROC performance shares awarded to executive officers on December 20, 2017 generally vest at the end
of a three-year performance cycle (October 1, 2017 through September 30, 2020), subject to the achievement of a performance condition tied to relative total return on capital. Please refer to the narrative disclosure under the National
Fuel Gas Company 2010 Equity Compensation Plan section within this proxy statement for additional information on the performance condition and vesting terms.
|
(2)
|
The TSR performance shares awarded to executive officers on December 20, 2017 generally vest at the end
of a three-year performance cycle (October 1, 2017 through September 30, 2020), subject to the achievement of a performance condition tied to relative total shareholder return. The threshold number represents a payout of approximately 28.6% of
the target opportunity, which would result from performance at approximately the 35.71 percentile. Performance at the 35.71 percentile would be the lowest achievable percentile above the 30
th
percentile, assuming no changes to the
14-member
peer group. Please refer to the narrative disclosure under the National Fuel Gas Company 2010 Equity Compensation Plan section within this proxy
statement for additional information on the performance condition and vesting terms.
|
(3)
|
This represents the annual cash incentive opportunity set in fiscal 2018 under the At Risk Plan. The amount
actually paid for fiscal 2018 is set forth in the Fiscal 2018 Summary Compensation Table under the
Non-Equity
Incentive Plan Compensation column. Please refer to the CD&A for additional
information about the performance conditions applicable to each payment.
|
(4)
|
The restricted stock units (RSUs) shown on this table were granted to Messrs. Bauer and McGinnis under the
Companys 2010 Equity Compensation Plan and generally vest in
one-third
increments on the first three anniversaries of the date of grant. Please refer to the narrative disclosure under the Fiscal
2018 Potential Payments Upon Termination or Change in Control section within this proxy statement for additional information regarding termination prior to and after the vest date of the RSUs.
|
(5)
|
The equity award values reflect the fair value of performance shares and, where applicable, RSUs at the date
of grant. For performance shares, values are based on the probable outcome of the applicable performance condition. Refer to Note A under the heading Stock-Based Compensation and Note E under the heading Stock Award Plans in
the Companys financial statements in its 2018 Form
10-K.
|
46
Outstanding Equity Awards at Fiscal 2018
Year-End
The following table sets forth, on an
award-by-award
basis for each of the named executive officers, the number of securities underlying unexercised SARs, the total number and aggregate market value of
shares of unvested restricted stock, and the number and market value of unvested RSUs and performance shares, as of September 30, 2018. The table also provides the grant price, which is the fair market value (the average of the high and low) on
grant date, and date of expiration of each unexercised SAR.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Grant
Date
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(1)
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Option
Exercise
Price
($)(2)
|
|
Option
Expiration
Date
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(3)
|
|
Market
Value of
Shares
or Units
of Stock
That
Have
Not
Vested
($)(3)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or
Other
Rights
That Have
Not Vested
(#)(4)
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units
or
Other
Rights
That Have
Not Vested
($)(4)
|
Ronald J. Tanski
|
|
|
|
03/11/10
|
|
|
|
|
70,000
|
|
|
|
|
0
|
|
|
|
|
52.10
|
|
|
|
|
03/11/2020
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/20/10
|
|
|
|
|
25,000
|
|
|
|
|
0
|
|
|
|
|
63.87
|
|
|
|
|
12/20/2020
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/19/11
|
|
|
|
|
25,000
|
|
|
|
|
0
|
|
|
|
|
55.09
|
|
|
|
|
12/19/2021
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/19/12
|
|
|
|
|
42,953
|
|
|
|
|
0
|
|
|
|
|
53.05
|
|
|
|
|
12/19/2022
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/17/15
|
(5)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
90,158
|
|
|
|
|
5,054,257
|
|
|
|
|
|
12/17/15
|
(6)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
45,079
|
|
|
|
|
2,527,129
|
|
|
|
|
|
12/15/16
|
(5)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
57,708
|
|
|
|
|
3,235,110
|
|
|
|
|
|
12/15/16
|
(6)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
28,854
|
|
|
|
|
1,617,555
|
|
|
|
|
|
12/20/17
|
(5)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
64,324
|
|
|
|
|
3,606,003
|
|
|
|
|
|
12/20/17
|
(6)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
16,081
|
|
|
|
|
901,501
|
|
|
|
|
|
|
|
|
|
|
|
David P. Bauer
|
|
|
|
03/11/10
|
|
|
|
|
4,000
|
|
|
|
|
0
|
|
|
|
|
52.10
|
|
|
|
|
03/11/2020
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/20/10
|
|
|
|
|
5,000
|
|
|
|
|
0
|
|
|
|
|
63.87
|
|
|
|
|
12/20/2020
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/19/11
|
|
|
|
|
5,000
|
|
|
|
|
0
|
|
|
|
|
55.09
|
|
|
|
|
12/19/2021
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/19/12
|
|
|
|
|
10,629
|
|
|
|
|
0
|
|
|
|
|
53.05
|
|
|
|
|
12/19/2022
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/17/15
|
(5)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
6,846
|
|
|
|
|
383,787
|
|
|
|
|
|
12/17/15
|
(6)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
3,423
|
|
|
|
|
191,893
|
|
|
|
|
|
12/17/15
|
(7)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
1,142
|
|
|
|
|
64,021
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/15/16
|
(5)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
8,464
|
|
|
|
|
474,492
|
|
|
|
|
|
12/15/16
|
(6)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
4,232
|
|
|
|
|
237,246
|
|
|
|
|
|
12/15/16
|
(7)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
2,822
|
|
|
|
|
158,201
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/20/17
|
(5)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
9,458
|
|
|
|
|
530,215
|
|
|
|
|
|
12/20/17
|
(6)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
2,365
|
|
|
|
|
132,554
|
|
|
|
|
|
12/20/17
|
(7)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
4,731
|
|
|
|
|
265,220
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
John R. Pustulka
|
|
|
|
12/22/08
|
|
|
|
|
20,000
|
|
|
|
|
0
|
|
|
|
|
29.88
|
|
|
|
|
12/22/2018
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
03/11/10
|
|
|
|
|
15,000
|
|
|
|
|
0
|
|
|
|
|
52.10
|
|
|
|
|
03/11/2020
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/20/10
|
|
|
|
|
15,000
|
|
|
|
|
0
|
|
|
|
|
63.87
|
|
|
|
|
12/20/2020
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/19/11
|
|
|
|
|
15,000
|
|
|
|
|
0
|
|
|
|
|
55.09
|
|
|
|
|
12/19/2021
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/19/12
|
|
|
|
|
22,121
|
|
|
|
|
0
|
|
|
|
|
53.05
|
|
|
|
|
12/19/2022
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/17/15
|
(5)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
22,656
|
|
|
|
|
1,270,095
|
|
|
|
|
|
12/17/15
|
(6)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
11,328
|
|
|
|
|
635,048
|
|
|
|
|
|
12/15/16
|
(5)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
22,722
|
|
|
|
|
1,273,795
|
|
|
|
|
|
12/15/16
|
(6)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
11,361
|
|
|
|
|
636,898
|
|
|
|
|
|
12/20/17
|
(5)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
28,378
|
|
|
|
|
1,590,871
|
|
|
|
|
|
12/20/17
|
(6)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
7,095
|
|
|
|
|
397,718
|
|
|
|
|
|
|
|
|
|
|
|
John P. McGinnis
|
|
|
|
09/17/09
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
20,000
|
|
|
|
|
1,121,200
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
03/11/10
|
|
|
|
|
20,000
|
|
|
|
|
0
|
|
|
|
|
52.10
|
|
|
|
|
03/11/2020
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/20/10
|
|
|
|
|
7,500
|
|
|
|
|
0
|
|
|
|
|
63.87
|
|
|
|
|
12/20/2020
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/19/12
|
|
|
|
|
20,802
|
|
|
|
|
0
|
|
|
|
|
53.05
|
|
|
|
|
12/19/2022
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/17/15
|
(5)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
15,234
|
|
|
|
|
854,018
|
|
|
|
|
|
12/17/15
|
(6)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
7,617
|
|
|
|
|
427,009
|
|
|
|
|
|
12/17/15
|
(7)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
2,540
|
|
|
|
|
142,392
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/15/16
|
(5)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
11,540
|
|
|
|
|
646,932
|
|
|
|
|
|
12/15/16
|
(6)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
5,770
|
|
|
|
|
323,466
|
|
|
|
|
|
12/15/16
|
(7)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
3,848
|
|
|
|
|
215,719
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/20/17
|
(5)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
15,134
|
|
|
|
|
848,412
|
|
|
|
|
|
12/20/17
|
(6)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
3,784
|
|
|
|
|
212,103
|
|
|
|
|
|
12/20/17
|
(7)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
7,569
|
|
|
|
|
424,318
|
|
|
|
|
0
|
|
|
|
|
0
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Grant
Date
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(1)
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Option
Exercise
Price
($)(2)
|
|
Option
Expiration
Date
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(3)
|
|
Market
Value of
Shares
or Units
of Stock
That
Have
Not
Vested
($)(3)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or
Other
Rights
That Have
Not Vested
(#)(4)
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units
or
Other
Rights
That Have
Not Vested
($)(4)
|
Carl M. Carlotti
|
|
|
|
03/11/10
|
|
|
|
|
15,000
|
|
|
|
|
0
|
|
|
|
|
52.10
|
|
|
|
|
03/11/2020
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/20/10
|
|
|
|
|
5,000
|
|
|
|
|
0
|
|
|
|
|
63.87
|
|
|
|
|
12/20/2020
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/19/11
|
|
|
|
|
5,000
|
|
|
|
|
0
|
|
|
|
|
55.09
|
|
|
|
|
12/19/2021
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/19/12
|
|
|
|
|
10,170
|
|
|
|
|
0
|
|
|
|
|
53.05
|
|
|
|
|
12/19/2022
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
12/17/15
|
(5)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
17,520
|
|
|
|
|
982,171
|
|
|
|
|
|
12/17/15
|
(6)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
8,760
|
|
|
|
|
491,086
|
|
|
|
|
|
12/15/16
|
(5)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
12,350
|
|
|
|
|
692,341
|
|
|
|
|
|
12/15/16
|
(6)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
6,175
|
|
|
|
|
346,171
|
|
|
|
|
|
12/20/17
|
(5)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
13,244
|
|
|
|
|
742,459
|
|
|
|
|
|
12/20/17
|
(6)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
N/A
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
3,311
|
|
|
|
|
185,615
|
|
(1)
|
SARs granted on December 22, 2008 vested over a period of three years in
one-third
increments at each anniversary date of the awards subject to the fulfillment of performance conditions.
|
|
SARs granted on March 11, 2010 vested in
one-third
increments on
the dates the Companys Form
10-K
was filed for fiscal 2010, 2011 and 2012 subject to the fulfillment of performance conditions.
|
|
SARs granted on December 20, 2010 vested over a period of three years in
one-third
increments at each anniversary date of the awards.
|
|
SARs granted on December 19, 2011 vested over a period of three years in
one-third
increments at each anniversary date of the awards and became exercisable on December 19, 2014.
|
|
SARs granted on December 19, 2012 vested over a period of three years in
one-third
increments at each anniversary date of the awards.
|
(2)
|
Awards were granted at an exercise price equal to the fair market value on the grant date.
|
(3)
|
The stock awards granted to Mr. McGinnis consist in part of an award of 20,000 shares of restricted
stock, granted on September 17, 2009, that generally will vest on November 14, 2020, subject to Mr. McGinnis continued employment.
|
|
The restricted stock units awarded on December 17, 2015, December 15, 2016 and December 20,
2017 generally vest over a period of three years in
one-third
increments at each anniversary date of the awards. The market value represents the total number of unvested RSUs multiplied by the closing market
price ($56.06) of the Common Stock as of September 28, 2018.
|
(4)
|
The performance shares awarded on December 17, 2015, December 15, 2016 and December 20, 2017
generally vest after the end of three-year performance cycles ending September 30, 2018, September 30, 2019 and September 30, 2020, respectively, subject to the achievement of a performance condition based on ROC or TSR.
|
|
Estimated performance through September 30, 2018 for each of the ROC performance share awards granted on
December 17, 2015, December 15, 2016 and December 20, 2017 was above target but below maximum. Accordingly, the estimated number of unearned ROC performance shares is reported at the maximum amount of 200% of each award.
|
|
Estimated performance through September 30, 2018 for then outstanding TSR performance share awards was
as follows: for the award granted on December 17, 2015, at target; for the award granted on December 15, 2016, above threshold and below target; and for the award granted on December 20, 2017, at threshold. Accordingly, the estimated
number of unearned TSR performance shares is reported at the target amount of 100% of the December 17, 2015 and December 15, 2016 awards, and at 50% of the December 20, 2017 award.
|
|
As explained in the CD&A, actual performance over the full three-year performance cycle could result in a
lesser or greater payout. The market value of the unearned performance shares represents the estimated number of shares multiplied by the closing market price of the Common Stock as of September 28, 2018 ($56.06). Please refer to the narrative
disclosure under the National Fuel Gas Company 2010 Equity Compensation Plan section within this proxy statement for additional information on the performance conditions and vesting terms.
|
(5)
|
ROC performance shares.
|
(6)
|
TSR performance shares.
|
(7)
|
Restricted stock units.
|
48
Option Exercises and Stock Vested in Fiscal 2018
The following table sets forth, as to each named executive officer, information with respect to exercises of SARs and vesting
of RSUs and performance shares during the fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares
Acquired on
Exercise
(#)(1)
|
|
|
Value
Realized
on
Exercise
($)(2)
|
|
|
Number of
Shares
Acquired on
Vesting
(#)
|
|
|
Value
Realized
on
Vesting
($)(3)
|
|
Ronald J. Tanski
|
|
|
90,000
|
|
|
|
2,342,250
|
|
|
|
26,420
|
|
|
|
1,517,706
|
|
David P. Bauer
|
|
|
7,166
|
|
|
|
157,037
|
|
|
|
5,566
|
|
|
|
316,242
|
|
John R. Pustulka
|
|
|
4,166
|
|
|
|
9,482
|
|
|
|
6,475
|
|
|
|
371,957
|
|
John P. McGinnis
|
|
|
4,166
|
|
|
|
9,482
|
|
|
|
9,975
|
|
|
|
566,899
|
|
Carl M. Carlotti
|
|
|
0
|
|
|
|
0
|
|
|
|
2,732
|
|
|
|
156,941
|
|
(1)
|
Represents the aggregate number of shares of Common Stock as to which awards were exercised.
|
(2)
|
Represents the aggregate difference between the exercise or grant price and the fair market value of the
Common Stock at exercise.
|
(3)
|
Represents the fair market value of the Common Stock on the vest date multiplied by the number of restricted
shares, RSUs or performance shares that vested.
|
Fiscal 2018 Pension Benefits
The following table sets forth information with respect to the pension benefits as of September 30, 2018 of each of the
named executive officers. The Company sponsors a qualified pension plan and a
non-qualified
supplemental benefit plan in which the named executive officers participate, except as noted below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Plan Name
|
|
Number of
Years
Credited
Service
(#)(1)
|
|
Present Value
of
Accumulated
Benefit
($)(1)
|
|
Payments
During
Last
Fiscal Year
($)
|
Ronald J. Tanski
|
|
Executive Retirement Plan
|
|
39
|
|
|
|
16,233,572
|
|
|
|
|
0
|
|
|
|
National Fuel Gas Company
|
|
38
|
|
|
|
1,951,429
|
|
|
|
|
0
|
|
|
|
Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David P. Bauer
|
|
Executive Retirement Plan
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
(not a participant in the ERP)
|
|
National Fuel Gas Company
|
|
16
|
|
|
|
614,746
|
|
|
|
|
0
|
|
|
|
Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement-Related Tophat
|
|
16
|
|
|
|
1,046,989
|
|
|
|
|
0
|
|
|
|
|
|
|
John R. Pustulka
|
|
Executive Retirement Plan
|
|
40
|
|
|
|
7,932,894
|
|
|
|
|
0
|
|
|
|
National Fuel Gas Company
|
|
40
|
|
|
|
2,028,210
|
|
|
|
|
0
|
|
|
|
Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John P. McGinnis
|
|
Executive Retirement Plan
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
(not a participant in either plan)
|
|
National Fuel Gas Company
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl M. Carlotti
|
|
Executive Retirement Plan
|
|
33
|
|
|
|
4,070,061
|
|
|
|
|
0
|
|
|
|
National Fuel Gas Company
|
|
32
|
|
|
|
1,782,873
|
|
|
|
|
0
|
|
|
|
Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
For actuarial assumptions, please refer to Note H, Retirement Plan and Other Post-Retirement Benefits, to
the Companys 2018 Form
10-K.
The Executive Retirement Plan recognizes all years of service, whereas the National Fuel Gas Company Retirement Plan excludes the first year of service.
|
49
Retirement Plan
The National Fuel Gas Company Retirement Plan (the Retirement Plan) is a
tax-qualified
defined benefit plan. The base benefit under the Retirement Plan is a life annuity that is calculated by multiplying the employees final average pay by 1.5% and then multiplying such
product by the employees years of credited service up to a maximum of 40 years. Final average pay is the average of the participants total pay during the five consecutive years of highest pay from the last ten years of participation.
Total pay only includes base salary, certain lump sum payments, and annual At Risk Plan and EACIP payments. Credited service is the period that an employee is a participant in the plan and receives pay from the Company or one of its participating
subsidiaries.
The Retirement Plan provides unreduced retirement benefits at or after age 65, or, for participants with at
least ten years of service, at or after age 60. Participants may otherwise retire with no reduction in their accrued benefit on or after the date on which the sum of their age plus years of service equals ninety (rule of 90).
Participants who are at least age 55 with 10 years of service and who do not meet the rule of 90 are eligible for and may commence early retirement with a benefit reduction of .4167% per whole month prior to age 60. The Retirement Plan does not
permit the granting of extra years of credited service to the participants. The retirement benefit is available as a single life annuity or in various other annuity forms, including joint and survivor and term-certain annuities. All are calculated
on an actuarially equivalent basis using a 6% interest rate and the
RP-2014
Mortality Table for healthy annuitants blended 50% male and 50% female.
Messrs. Tanski, Pustulka and Carlotti are currently eligible for an unreduced benefit. Mr. Bauer is a participant in the
Retirement Plan, but is not yet eligible for either an unreduced or reduced retirement benefit. Mr. McGinnis is not a participant in the Retirement Plan.
Executive Retirement Plan
The National Fuel Gas Company and Participating Subsidiaries Executive Retirement Plan (the ERP) is a
non-qualified
defined benefit plan. Although the CEO of the Company is authorized to designate all participants of the ERP, no such designation has occurred since 2001.
The ERP provides a
two-part
benefit: a tophat benefit and a supplemental benefit. The
tophat benefit makes an ERP participant whole for any reduction in the regular pension he or she receives under the Retirement Plan resulting from Internal Revenue Code limitations. The supplemental benefit provides an additional retirement benefit
to the Retirement Plan. Participants in the Retirement Plan who are not designated to participate in the ERP will receive a retirement-related tophat benefit under a separate Tophat Plan (discussed below under Fiscal 2018 Nonqualified Defined
Contribution and Other Nonqualified Deferred Compensation Plans), if appropriate based on the Internal Revenue Code limitations.
The tophat benefit under the ERP vests in the same manner and subject to the same service requirements that apply to the
Retirement Plan. The supplemental benefit under the ERP vests at age 55 and completion of five years of credited service. An ERP participant who vests in the tophat benefit, but does not vest in the supplemental benefit, receives only a tophat
benefit. A participant who is vested in both the tophat benefit and the supplemental benefit and who terminates service with the Company before age 65 receives the tophat benefit and a portion of the supplemental benefit that is based upon the
participants age and years of credited service. For the Executive Retirement Plan, credited service is the number of years the participant has been employed by the Company or one of its participating subsidiaries, not to exceed 40 years.
The tophat benefit is stated as a life annuity that is calculated as the difference between (a) and (b), where (a) is
the benefit the ERP participant would have received under the Retirement Plan but for the limitations imposed by the Internal Revenue Code and (b) is the base benefit the participant receives under the Retirement Plan.
50
Assuming retirement at age 65, the supplemental benefit is stated as a life
annuity that is calculated using the following formula:
(a) 1.97% of final average pay for each year of service not in
excess of 30 years; plus
(b) 1.32% of final average pay for each of the next 10 years of service that are in excess of 30
(but not to exceed 10); minus
(c) 1.25% of an assumed Social Security benefit (calculated as if the participant had no
future wages) for each year of service not in excess of 40 years; minus
(d) the participants base benefit under the
Retirement Plan; minus
(e) the participants tophat benefit.
Final average pay under the ERP is the same as under the Retirement Plan, but without the compensation limitations imposed by
the Internal Revenue Code.
If a participant retires on or after age 62, but before age 65, the supplemental benefit is
reduced by 1/2 of 1% for each whole month prior to age 65. If a participant retires before age 62, the supplemental benefit is further reduced by 1% for each whole month between age 55 years and 2 months and age 62. Furthermore, the members
supplemental benefit shall be increased by .125% for each whole calendar month by which a members years of service exceed 30, subject to a maximum of 40 years.
The normal form of benefit under the ERP is a four-year period certain annuity that is actuarially equivalent to the
lump-sum
present value (calculated using the most recently published mortality table that is generally accepted by American actuaries and reasonably applicable to the ERP, and a 6 percent discount rate) of the
sum of the participants tophat benefit and supplemental benefit (if the participant is vested therein). Other available forms of payment include single life,
ten-year
period certain and life, and joint
and survivor annuities.
Fiscal 2018 Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans
The Deferred Compensation Plan (the DCP) is a
non-qualified
deferred compensation plan, which was instituted for certain high-level management employees of the Company and certain subsidiaries. The DCP is not an active plan and has been closed with no deferrals since July 31, 2002. The purpose of the
DCP was to provide retirement/savings financial planning opportunities, which were not available to the officers in the qualified retirement plans due to Internal Revenue Code limitations. All account balances are subject to the general creditors of
the Company.
DCP participants were able to defer receipt of portions of their salaries and bonuses, to be paid to them
following retirement, termination of employment, death or earlier in certain circumstances. The participants were eligible to elect a Savings and/or a Retirement account. The participant signed a contract selecting the amount
to be deferred for the upcoming deferral period, the type of account (Savings and/or Retirement), annuity term (5, 10 or 15 years) if a Retirement account and up to three payment dates with percentages and/or dollar amounts if a Savings account. The
annuity for the Retirement account is determined by setting the interest rate on all outstanding balances at 135% of the average of the Moodys Index (as defined below) in effect for the
60-month
period
that ends with the month preceding the month of retirement.
Beginning with deferrals after May 1, 1994, the
participants could select a Savings and/or a Retirement account. The two investment choices were the Moodys Composite Average of Yields on Corporate Bonds (Moodys Index) in effect for the month of May prior to the plan year
beginning August 1 and a return equal to the total return of the Standard and Poors 500 stock index minus 1.2% per annum (S&P 500 Minus 1.2% Election). The participant could select either the Moodys Index or the
S&P 500 Minus 1.2% Election, but not both within the same account. In addition, participants with deferrals after May 1, 1994 could elect to defer their Savings and Retirement account balance past their retirement date, but not past age 70.
51
The DCP deferral contract indicates the participants investment selection
and future payouts or retirement choices regarding the term of the annuity (5, 10 or 15 years). A participant who selected the S&P 500 Minus 1.2% Election for his Retirement account may, after he reaches age 55, switch once to the Moodys
Index. For a participant who retires and elected to invest in the S&P 500 Minus 1.2% Election, the investments return will assume the Moodys Index six months prior to his retirement date in order to determine the final benefit.
The Company also maintains a
non-qualified
Tophat Plan (the Tophat Plan)
that provides restoration of benefits lost under the Retirement Plan (see Fiscal 2018 Pension Benefits) and/or the
Tax-Deferred
Savings Plan (the 401(k) plan) due to the effect of Internal Revenue Code limits.
See notes (b) and (c) under the All Other Compensation Table. The Company pays the 401(k) tophat benefit and the RSA tophat benefit under the Tophat Plan no later than March 15 of the calendar year following the year in which the
benefits were earned.
The following table reflects the contributions, earnings, distributions and total balance of the DCP
and the 401(k) and RSA benefits under the Tophat Plan:
Nonqualified Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
Contributions
in Last FY
($)
|
|
Registrant
Contributions
in Last FY
($)(1)
|
|
Aggregate
Earnings (Loss)
in Last FY
($)(2)
|
|
Aggregate
Withdrawals/
Distributions
($)(3)
|
|
Aggregate
Balance at
Last FYE
($)(4)
|
Ronald J. Tanski Tophat Plan
|
|
|
|
0
|
|
|
|
|
139,619
|
|
|
|
|
0
|
|
|
|
|
125,133
|
|
|
|
|
128,369
|
|
David P. Bauer Tophat Plan
|
|
|
|
0
|
|
|
|
|
51,516
|
|
|
|
|
0
|
|
|
|
|
49,205
|
|
|
|
|
47,316
|
|
John R. Pustulka Tophat Plan
|
|
|
|
0
|
|
|
|
|
84,332
|
|
|
|
|
0
|
|
|
|
|
67,873
|
|
|
|
|
78,257
|
|
DCP
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
15,386
|
|
|
|
|
0
|
|
|
|
|
188,850
|
|
John P. McGinnis Tophat Plan
|
|
|
|
0
|
|
|
|
|
70,296
|
|
|
|
|
0
|
|
|
|
|
65,717
|
|
|
|
|
61,421
|
|
Carl M. Carlotti Tophat Plan
|
|
|
|
0
|
|
|
|
|
49,049
|
|
|
|
|
0
|
|
|
|
|
45,818
|
|
|
|
|
45,074
|
|
(1)
|
All amounts in this column are reported as fiscal 2018 compensation in the Fiscal 2018 Summary Compensation
Table. Refer to notes (b) and (c) to the All Other Compensation Table.
|
(2)
|
This column represents the net earnings during the fiscal year for the DCP. Mr. Pustulkas
earnings include above-market earnings associated with the Moodys Index of $904, which amount is reflected in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column of the Fiscal 2018 Summary
Compensation Table.
|
(3)
|
This column represents the annual payment of the 401(k) and RSA benefits under the Tophat Plan for the
calendar year ended December 31, 2017, which were paid in January 2018.
|
(4)
|
This column includes the balance of the 401(k) and RSA benefits under the Tophat Plan for each named
executive officer and the DCP balance for Mr. Pustulka, the only named executive officer in the DCP. These balances reflect amounts previously reported as compensation to the named executive officers in the Companys Summary Compensation
Tables for prior years.
|
Fiscal 2018 Potential Payments Upon Termination or Change in Control
The information below describes and quantifies certain compensation that would become payable under existing plans and
arrangements if the named executive officers employment had terminated on September 28, 2018 (the last business day of the Companys fiscal year), assuming each named executive officers compensation and service levels as of
that date and, if applicable, based on the closing price of the Common Stock on that date ($56.06 per share). These benefits are in addition to benefits available generally to most salaried employees. Due to the number of factors that affect the
nature and amount of any benefit provided upon the events discussed below, any actual amounts paid or distributed in the future may be different from the amounts contained in the following tables. Factors that could affect these amounts include the
timing during the year of any such event, the market value of the Common Stock and the named executive officers age.
52
National Fuel Gas Company 1997 Award and Option Plan
Awards outstanding to named executive officers at September 28, 2018 under the National Fuel Gas Company 1997 Award and
Option Plan included SARs (all of which were vested) and restricted stock.
Stock Appreciation Rights
(SARs)
A change in ownership and certain terminations within three years following a change in control, as described below, will trigger payment of the value of vested SARs.
Restricted Stock
Mr. McGinnis was awarded 20,000 shares of restricted stock on September 17,
2009. The vesting restrictions on these shares lapse on November 14, 2020. In the event Mr. McGinnis employment terminates by reason of death or disability, the restrictions will lapse. The estimated value of the 20,000 shares of
restricted stock upon death or disability on September 28, 2018 would have been $1,121,200 based on the closing price of the Common Stock on that date.
If a change in ownership had occurred on September 28, 2018 or Mr. McGinnis had been terminated due to a change in
control as described below, the restrictions on his restricted stock would have lapsed.
Change in Ownership and Change
in
C
ontrol
If there is a change in ownership or a named executive officers employment terminates within three years following a change in control, unless the termination is due to death, disability, retirement, cause, or
resignation by the named executive officer other than for good reason, then all terms and conditions on outstanding awards would lapse, and all unvested awards become vested. In addition, any outstanding awards are cashed out based on the fair
market value of the Common Stock.
The following table represents the estimated values of already vested SARs outstanding
to the named executive officers under this plan as of September 28, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Payment Due on
Already Vested
SARs ($)
|
|
Name
|
|
Payment Due on
Already Vested
SARs ($)
|
Ronald J. Tanski
|
|
|
|
24,250
|
|
|
John P. McGinnis
|
|
|
|
0
|
|
David P. Bauer
|
|
|
|
4,850
|
|
|
Carl M. Carlotti
|
|
|
|
4,850
|
|
John R. Pustulka
|
|
|
|
538,150
|
|
|
|
|
|
|
|
|
Under the 1997 Award and Option Plan, change in ownership means a change which
results in the Common Stock ceasing to be actively traded on a national securities exchange or the National Association of Securities Dealers Automated Quotation System.
A change in control generally occurs when (a) any person other than the Company, a subsidiary or any employee
benefit plan sponsored by the Company is the beneficial owner, directly or indirectly, of twenty percent (20%) or more of the voting power of the outstanding stock of the Company; (b) a consolidation or merger occurs and the persons who,
immediately prior to the consolidation or merger, held the capital stock of the Company do not hold, immediately following, (i) at least a majority of the stock entitled to vote in the election of directors of the surviving corporation, or
(ii) stock in the surviving corporation that represents at least 50% of the fair market value of all classes of stock of that entity, in either case, in substantially the same proportionate ownership as immediately before the consolidation or
merger; (c) there is any sale, lease, exchange or other transfer of all or substantially all the assets of the Company; or (d) individuals who constituted the Board of Directors of the Company on January 1, 1997 (the Incumbent
Board) have ceased to constitute at least a majority, provided that any person becoming a director subsequent to January 1, 1997, whose election, or nomination for election by the Companys stockholders, was approved by a vote of at
least three-quarters of the directors comprising the Incumbent Board, shall be considered as though such person was a member of the Incumbent Board.
Good reason means a good faith determination made by a named executive officer that the Company has materially
reduced the responsibilities, prestige or scope of the named executive officers position. Examples include the assignment to the named executive officer of duties inconsistent with the named executive officers position, assignment of the
executive to another place of employment more
53
than 30 miles from the named executive officers current place of employment, or reduction in the named executive officers total compensation or benefits. The named executive officer
must specify the event relied upon for his or her determination by written notice to the Board of Directors within six months after the occurrence of the event.
National Fuel Gas Company 2010 Equity Compensation Plan
Awards outstanding to named executive officers at September 28, 2018 under the National Fuel Gas Company 2010 Equity
Compensation Plan included SARs (all of which were vested), Performance Shares and RSUs.
SARs
In
connection with a change in control as described below, the Compensation Committee may provide that each SAR shall be canceled in exchange for a cash payment equal to the excess of fair market value over the grant price of the SAR.
Performance Shares
Termination of employment due to death, disability or retirement, or due to a
divestiture by the Company of one or more subsidiaries that does not amount to a change in control, results in the vesting of a conditional right. Payment of the Performance Shares remains subject to satisfaction of the applicable performance
conditions, and the named executive officer would be entitled to a distribution of the same number of performance shares that would be payable for the performance period had the named executive officers service with the Company continued until
the end of the applicable performance period,
pro-rated
to reflect the time period from the commencement of the performance period through the date of termination.
The following table represents the estimated value of Performance Shares at September 28, 2018, assuming a qualifying
termination on that date, performance at the target level of performance, and the closing price of the Common Stock on that date.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Value of
Performance
Shares
($)
|
|
Name
|
|
Value of
Performance
Shares
($)
|
Ronald J. Tanski
|
|
|
|
8,412,999
|
|
|
John P. McGinnis
|
|
|
|
1,568,110
|
|
David P. Bauer
|
|
|
|
876,853
|
|
|
Carl M. Carlotti
|
|
|
|
1,691,218
|
|
John R. Pustulka
|
|
|
|
2,649,582
|
|
|
|
|
|
|
|
|
In connection with a change in control as described below, Performance Shares are deemed earned
at the target level of performance, and the Compensation Committee may provide that the Performance Shares be settled in cash.
Restricted Stock Units (RSUs)
Termination of employment due to death, disability or retirement, or due
to a divestiture by the Company of one or more subsidiaries that does not amount to a change in control, results in the vesting of RSUs.
The following table represents the estimated value of RSUs at September 28, 2018, assuming a qualifying termination on
that date and the closing price of the Common Stock on that date.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Value of RSUs
($)
|
|
Name
|
|
Value of RSUs
($)
|
Ronald J. Tanski
|
|
|
|
0
|
|
|
John P. McGinnis
|
|
|
|
782,429
|
|
David P. Bauer
|
|
|
|
487,442
|
|
|
Carl M. Carlotti
|
|
|
|
0
|
|
John R. Pustulka
|
|
|
|
0
|
|
|
|
|
|
|
|
|
Change in Control
If there is a change in control, no acceleration of
exercisability, vesting, cash settlement or other payment shall occur with respect to any award if the Compensation Committee reasonably determines in good faith, prior to the change in control, that the award will be honored or assumed, or new
rights substituted (an Alternative Award), by the named executive officers employer following the change in control; provided that any Alternative Award must:
a) be based on stock traded on an established U.S. securities market;
54
b) provide the named executive officer with substantially
equivalent rights, entitlements and economic value; and
c) provide that, if the named executive
officers employment is involuntarily terminated (other than for cause) or is constructively terminated, in either case within 24 months after the change in control, then all of the named executive officers awards shall vest and be paid
in cash or immediately transferable, publicly-traded securities in an amount equal to, in the case of a SAR, the excess of the fair market value on the date of termination over the grant price, and in the case of other awards, the fair market value
of the number of shares of stock subject to the award.
If the Compensation Committee cannot make the above determination,
each SAR then outstanding shall be exercisable regardless of the exercise schedule otherwise applicable; each outstanding RSU shall become fully vested and payable; and each outstanding performance share award shall be deemed earned at the target
level of performance for the award. In addition, in connection with a change in control, the Compensation Committee may provide that each SAR shall be canceled in exchange for a cash payment equal to the excess of fair market value over the grant
price of the SAR. The Compensation Committee may also direct that each RSU and performance share shall be settled in cash with its value determined based on the value received by stockholders in the change in control transaction.
The following table represents the value of awards outstanding under the 2010 Equity Compensation Plan which, upon a change in
control as of September 28, 2018, would have been exercisable (in the case of SARs), would have become vested and payable (in the case of RSUs), or would have been deemed earned at the target level of performance (in the case of Performance
Shares), in each case, assuming an Alternative Award is not provided. The amounts below are based on the closing price of the Common Stock on September 28, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Payment Due on
Vested & Unvested
Awards ($)
|
|
Name
|
|
Payment Due on
Vested & Unvested
Awards ($)
|
Ronald J. Tanski
|
|
|
|
12,302,075
|
|
|
John P. McGinnis
|
|
|
|
3,273,710
|
|
David P. Bauer
|
|
|
|
1,923,822
|
|
|
Carl M. Carlotti
|
|
|
|
2,507,033
|
|
John R. Pustulka
|
|
|
|
4,260,856
|
|
|
|
|
|
|
|
|
The 2010 Equity Compensation Plan provides that, if a named executive officer engages in any
business or activity competitive with that of the Company, without the Companys written consent, or the named executive officer performs any act that is against the best interests of the Company, all unexercised, unearned or unpaid awards are
forfeited.
For purposes of this section, change in control has a meaning similar to the definition of change
in control set out in the National Fuel Gas Company 1997 Award and Option Plan section. The main difference is that the 2010 Equity Compensation Plan provides that a change in control shall be deemed to have occurred at such time as
individuals who constitute the Board of Directors of the Company at the beginning of the twelve-month period ended on the date of determination (the Incumbent Board) have ceased to constitute at least a majority, provided that any person
becoming a director subsequent to that date whose election, or nomination for election by the Companys stockholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, shall be considered as
though such person was a member of the Incumbent Board.
National Fuel Gas Company Tophat Plan
Under the Companys Tophat Plan, the Company restores to the named executive officers benefits that may be lost under the
Companys qualified retirement benefit plans (Retirement Plan, traditional 401(k) and RSA) due to the Internal Revenue Code or qualified plan limits.
55
The following table represents the aggregate amount payable for the 401(k) tophat
benefit and RSA tophat benefit if termination occurred September 28, 2018 due to retirement, death, disability, or involuntary termination (other than for cause), or if there was a change in control and the Company terminated the named
executive officer without cause or the named executive officer terminated for good reason.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Payment ($)
|
|
Name
|
|
Payment ($)
|
Ronald J. Tanski
|
|
|
|
128,369
|
|
|
John P. McGinnis
|
|
|
|
61,421
|
|
David P. Bauer
|
|
|
|
47,316
|
|
|
Carl M. Carlotti
|
|
|
|
45,074
|
|
John R. Pustulka
|
|
|
|
78,257
|
|
|
|
|
|
|
|
|
The value of the tophat benefits for all other forms of termination for Messrs. Tanski,
Bauer, Pustulka, McGinnis and Carlotti would have been $34,725, $14,375, $21,000, $28,583 and $12,700, respectively.
Deferred
Compensation Plan (the DCP)
Mr. Pustulka is the only named executive officer who is a participant
in the DCP. Under the DCP, in the event of a termination for any reason, other than death or retirement, prior to a change in control, the participant is entitled to receive his or her retirement account balance in the form of a lump sum payment.
(Note, the term change in control under the DCP has a similar definition as provided in the 2010 Equity Compensation Plan, discussed above, except in the DCP the reference period for changes in the Board of Directors is 24 months.)
Mr. Pustulkas retirement account balance at September 28, 2018 was $188,850.
In the case of retirement,
including disability retirement, at any time, a participant in the DCP is entitled to a monthly payment (a
15-year
annuity, unless the participant elected to receive a
5-
or
10-year
annuity) beginning the first of the month following retirement based on his retirement account balance. If the participant dies before the commencement of
the retirement annuity, the entire DCP balance will be paid in full as a lump sum payment to the participants beneficiary. If the participant dies after commencement of the annuity, the annuity will continue to be paid to the
participants beneficiary for the remainder of its original term.
If termination is due to retirement or disability,
the final account balance is calculated with a plan-mandated switch to the Moodys index rate six months prior to retirement or disability for those participants who elected a return based on the S&P 500 Minus 1.2% Election. For those
participants, DCP retirement and disability benefits will be different than DCP benefits provided upon death or voluntary termination other than retirement. Upon retirement or disability, Mr. Pustulka would have received a
ten-year
annuity of $2,624 per month for the first five years, then $1,222 per month thereafter, with a present value of $182,858.
Employment Continuation and Noncompetition Agreement
Pursuant to each named executive officers Employment Continuation and Noncompetition Agreement with the Company, if there
is a change in control, and the named executive officer remains employed thereafter, the named executive officers annual salary and employee benefits are preserved for at least three years at the levels then in effect. The agreement also
provides the benefits described below.
Severance Benefit
In the event of termination of a named executive officer within three years of a change in control without cause or by the
named executive officer for good reason, the named executive officer is entitled to a single lump sum cash payment equal to 1.99 times the sum of the named executive officers annual base salary and the average of the annual cash bonus for the
previous two fiscal years. The 1.99 multiplier is reduced on a
pro-rata
basis if termination occurs between age 62 and age 65, at which point no amount is payable. The named executive officers are also
entitled to their base salary through the date of
56
termination and to any vested benefits under the employee benefit plans, including any compensation previously deferred and not yet paid and any amounts payable pursuant to any agreement with the
named executive officer.
Cause means the named executives gross misconduct, fraud or dishonesty, which
has resulted or is likely to result in material economic damage to the Company or its subsidiaries as determined in good faith by a vote of at least
two-thirds
of the
non-employee
directors of the Company at a meeting of the Board.
Change in
control generally occurs when: (a) any person (as such term is used in Section 13(d) of the 1934 Act) is the beneficial owner, directly or indirectly, of 20% or more of the outstanding stock of the Company;
(b) a consolidation or merger occurs and the persons who, immediately prior to the consolidation or merger, held the capital stock of the Company do not hold, immediately following, (i) the same proportionate ownership of common stock
of the surviving corporation (where the Company is not the surviving corporation), or (ii) at least a majority of the common stock of the Company (where the Company is the surviving corporation); (c) there is any sale, lease, exchange or
other transfer of all or substantially all the assets of the Company; or (d) there is a change in the majority of the members of the Board of Directors of the Company within a
24-month
period, unless the
election or nomination for election by the Companys stockholders of each new director was approved by the vote of at least
two-thirds
of the directors then still in office who were in office at the
beginning of the
24-month
period. However, Mr. McGinnis agreement provides, in place of the above, that a Change in Control occurs if the Company ceases to own more than 50% ownership of Seneca, or
if the Company sells, leases, exchanges or otherwise transfers all or substantially all the assets of Seneca.
Good
reason means there is a material diminution in the named executive officers responsibilities, base compensation or budget, or in the responsibilities of the person to whom the named executive officer is required to report. Good
reason also means a requirement that the named executive officer relocate to an office outside the United States or more than 30 miles from the location at which the executive performed his services immediately prior to the change in control,
or any other action or inaction that constitutes a material breach by the Company of the agreement. The Company has a period of 30 days to cure any acts which would otherwise give the executive the right to terminate his employment for good reason.
The following table represents the estimated severance benefit payable as a lump sum payment.
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Payment ($)
|
|
|
Name
|
|
Payment ($)
|
|
Ronald J. Tanski
|
|
|
0
|
|
|
John P. McGinnis
|
|
|
2,359,830
|
|
David P. Bauer
|
|
|
2,067,365
|
|
|
Carl M. Carlotti
|
|
|
1,121,615
|
|
John R. Pustulka
|
|
|
0
|
|
|
|
|
|
|
|
Continuation of Health, Welfare and Fringe Benefits
In addition to the severance payment, named executive officers who have not reached age 65 will be entitled to continued
participation in the Companys employee and executive health, welfare and fringe benefit plans and arrangements, excluding any vacation benefits, for eighteen months following termination (or, in the case of Mr. McGinnis, until the end of
the second calendar year following termination for purposes of any
non-health-related
benefit) or until the named executive officer becomes eligible for comparable benefits at a subsequent employer. The
estimated value of the continuation of health benefits due to a qualifying termination of employment of an eligible named executive officer following a change in control is $36,748. This amount was based on 18 months of COBRA rates for the medical,
drug and dental benefits. During fiscal 2018, Mr. McGinnis and Mr. Carlotti participated in an arrangement providing for an allowance related to tax preparation and financial planning, and received a payment for life insurance under the
ExecutiveLife Insurance Plan. The estimated value of the continuation of these benefits at the same rates for eighteen months is $20,346 for Mr. McGinnis and $21,705 for Mr. Carlotti.
57
Retirement
Except for Mr. McGinnis, if the named
executive officer is at least
fifty-two
years old at the date of termination, the named executive officer will be deemed to have earned and be vested in the retirement benefits that are payable to the named
executive officer under the Company retirement plans. Mr. McGinnis is vested in his benefit in the RSA.
Termination for Cause or the Executive Voluntarily Terminates
If the named executive officers
employment is terminated for cause, death, disability, or the named executive officer voluntarily terminates his or her employment other than for good reason, the named executive officer will not be entitled to the severance benefit discussed above.
The named executive officer (or his or her beneficiary) will be entitled to his or her base salary through the date of termination and to any vested benefits under the employee benefit plans, including any compensation previously deferred and not
yet paid and any amounts payable pursuant to any agreement between the named executive officer and the Company. The named executive officer will also be entitled to any other benefits provided in the Companys plans for death or disability.
Non-competition
Unless the named executive officer has
elected not to be bound by the
non-compete
provisions of the agreement, the Company will make a lump sum payment within 30 days following the named executive officers date of termination equal to one
times the sum of (i) the named executive officers annual base salary and (ii) the average of the annual cash bonus for the previous two fiscal years. The
non-compete
payment will not be paid to
the named executive officer if his or her employment is terminated by reason of death or disability.
Under the
non-compete
provisions of the agreement, the named executive officer may not, during the one year period following termination, directly or indirectly engage in, become employed by, serve as an agent or consultant
to, or become a partner, principal or stockholder (other than a holder of less than 1% of the outstanding voting shares of any publicly held company) of any business or entity that is engaged in any activity which is competitive with the business of
the Company or its subsidiaries or affiliates in any geographic area in which the Company or its subsidiaries are engaged in competitive business.
The following table represents the estimated
non-compete
payment payable upon
termination following a change in control as compensation for the covenant not to compete for all forms of termination except for death, disability, cause or retirement.
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Payment ($)
|
|
|
Name
|
|
Payment ($)
|
|
Ronald J. Tanski
|
|
|
2,577,952
|
|
|
John P. McGinnis
|
|
|
1,185,844
|
|
David P. Bauer
|
|
|
1,038,877
|
|
|
Carl M. Carlotti
|
|
|
1,073,339
|
|
John R. Pustulka
|
|
|
1,488,405
|
|
|
|
|
|
|
|
National Fuel Gas Company and Participating Subsidiaries Executive Retirement Plan (the ERP)
Mr. Bauer and Mr. McGinnis are not participants in the ERP and will not receive any benefit under this
plan upon termination. Under the ERP, no benefits will be payable to a named executive officer whose employment is terminated or could have been terminated for serious, willful misconduct in respect of his or her obligations to the Company,
including the commission of a felony or a perpetration of a common law fraud damaging to the Company.
In addition, except
when a change in control has already occurred, rights under the ERP are forfeited if the named executive officer is employed by anyone who engages in a business competitive with the Company; engages, or advises or assists others engaged in such
business; endeavors to interfere with the relations between the Company and any customer; or engages in any activity the committee administering the ERP (ERP Committee) deems detrimental to the Companys best interests. From and
after 60 days following cessation of such activity by the named executive officer and provision of written notice to the ERP Committee, the right to receive benefits under the ERP will be restored, unless the ERP Committee determines that the prior
activity caused substantial damage to the Company.
58
The following table gives the estimated value of the first payment payable under
the ERP that would have been due for all forms of termination except for death or termination for cause.
|
|
|
|
|
Name
|
|
Payment ($)
|
|
Ronald J. Tanski
|
|
|
4,420,402
|
|
John R. Pustulka
|
|
|
2,160,127
|
|
Carl M. Carlotti
|
|
|
1,133,992
|
|
The default form of benefit payment to the named executive officers is a four-year certain
annuity; therefore, if a payment is shown above, three additional payments of the same amount would be made under the ERP, one in each of the next three years as elected by the executive officer.
If termination is due to death, a reduced payment will be calculated as a straight life annuity payment to the named executive
officers surviving spouse/beneficiary until his or her death. The first annualized reduced payment would be $717,108 for Mr. Tanski, $350,431 for Mr. Pustulka and $175,075 for Mr. Carlotti.
Post-Employment Benefits for John P. McGinnis
To the extent John P. McGinnis is employed by Seneca or another Company subsidiary until and including November 14, 2020,
post-employment medical and prescription drug benefits will be provided to Mr. McGinnis, subject to the same terms and conditions, including the same monthly cost and with the same levels and types of benefits, as applicable to then-retiring
officers of the Companys utility subsidiary. Mr. McGinnis will forfeit these benefits if he resigns before November 14, 2020 or if the Company or one of its subsidiaries terminates his employment at any time.
Summary of Potential Payments Upon Termination or Change in Control
The following table provides estimated values of total benefits for each named executive officer if termination had occurred on
September 28, 2018. As disclosed in the table above under National Fuel Gas Company and Participating Subsidiaries Executive Retirement Plan (the ERP), the ERP benefit included in the following estimated values
represents the first payment due upon termination.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential Payments Upon Termination Other than in
Connection with a Change in Control
|
|
Potential Payments Upon Termination
Following a Change in Control
|
Executive Benefits
and
Payments
Upon Termination
For:
|
|
Voluntary
Termination
($)
|
|
Retirement
($)(1)
|
|
Death
($)
|
|
Disability
($)
|
|
Company
Terminates
Without
Cause
and/or
Executive
Terminates
for Good
Reason
($)
|
|
Company
Terminates
for Cause
($)
|
|
Executive
Terminates
Voluntarily
Other
than for
Good
Reason
($)
|
Ronald J. Tanski
|
|
|
|
4,455,127
|
|
|
|
|
12,961,770
|
|
|
|
|
9,258,476
|
|
|
|
|
12,961,770
|
|
|
|
|
19,453,048
|
|
|
|
|
2,612,677
|
|
|
|
|
7,033,079
|
|
David P. Bauer
|
|
|
|
14,375
|
|
|
|
|
N/A
|
|
|
|
|
1,411,611
|
|
|
|
|
1,411,611
|
|
|
|
|
5,118,978
|
|
|
|
|
1,053,252
|
|
|
|
|
1,540,694
|
|
John R. Pustulka
|
|
|
|
2,369,977
|
|
|
|
|
5,070,824
|
|
|
|
|
3,267,120
|
|
|
|
|
5,070,824
|
|
|
|
|
8,714,645
|
|
|
|
|
1,698,255
|
|
|
|
|
3,858,382
|
|
John P. McGinnis
|
|
|
|
28,583
|
|
|
|
|
61,421
|
|
|
|
|
3,533,161
|
|
|
|
|
3,533,161
|
|
|
|
|
8,059,098
|
|
|
|
|
1,214,427
|
|
|
|
|
1,996,856
|
|
Carl M. Carlotti
|
|
|
|
1,146,692
|
|
|
|
|
2,870,284
|
|
|
|
|
1,911,367
|
|
|
|
|
2,870,284
|
|
|
|
|
5,944,355
|
|
|
|
|
1,086,039
|
|
|
|
|
2,220,031
|
|
(1)
|
Retirement will be N/A if the named executive officer was not eligible to retire on
September 28, 2018. In that case, the Company would have accrued benefits payable to the named executive officer; the accrued amounts are included in the other columns for the different types of terminations.
|
CEO Pay Ratio
Pursuant to SEC rules, we are providing information about the relationship of the annual total compensation of Mr. Tanski,
our President and Chief Executive Officer, and the median of the annual total compensation of all of our employees other than Mr. Tanski. We identified our median employee by
59
examining fiscal year base wages plus cash bonuses of all individuals employed by us and our consolidated subsidiaries on September 30, 2018 (other than Mr. Tanski), whether full-time,
part-time, or on a seasonal or temporary basis. We annualized wages and salaries for all permanent employees, as permitted by SEC rules. Once we identified our median employee, we added together all of the elements of that employees
compensation for fiscal 2018 in the same way that we calculate the annual total compensation of our named executive officers in the Summary Compensation Table. For the fiscal year ended September 30, 2018:
|
|
|
the median of the annual total compensation of all employees of the Company other than the CEO was reasonably
estimated to be $82,858;
|
|
|
|
the annual total compensation of the CEO was $8,084,177; and
|
|
|
|
based on this information, the ratio of the annual total compensation of the CEO to the median of the annual
total compensation of all other employees is estimated to be 98 to 1.
|
60
PROPOSAL 2. ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER
COMPENSATION
In accordance with Section 14A of the Securities Exchange Act of 1934, we are asking stockholders for approval of the
following advisory resolution on executive compensation:
RESOLVED, that the compensation paid to the
Companys named executive officers, as disclosed herein pursuant to Item 402 of Regulation
S-K
and described in the Compensation Discussion and Analysis, accompanying compensation tables and related
narrative discussion, is hereby approved.
This proposal allows stockholders to take part in a
non-binding,
advisory vote to approve the compensation of the Companys named executive officers. The Board recommends a vote
FOR
this resolution because it believes that the Companys compensation
policies and procedures encourage a culture of pay for performance and are strongly aligned with the interests of the Companys stockholders.
Fiscal 2018 was another successful year with strong financial and operational results for National Fuel. Over the course of the
year, our Exploration & Production subsidiary, Seneca Resources Company, LLC (Seneca), set company records for production and proved reserves. Senecas production increase also drove the continued growth of our Gathering
subsidiary, National Fuel Gas Midstream Company, LLC, which set a company record for throughput in 2018. Lower taxes from tax legislation enacted in late calendar 2017 served as a tailwind throughout the year, helping to offset the decline in
realized natural gas pricing experienced by Seneca.
Despite significant regulatory hurdles placed in our path by state
regulators over the past couple of years, our FERC-regulated Pipeline & Storage business continued to create meaningful opportunities for further expansion that leverage the location of our existing asset base. In May 2018, we announced our
FM100 Project, which in conjunction with a third-party downstream interstate pipeline project, will provide an important outlet for Senecas growing production in the Appalachian basin, allowing it to reach premium markets. We are targeting the
close of calendar 2021 for the startup of this 330,000 dekatherm per day project. Our Utility business continued to deliver consistent and predictable earnings while providing safe and reliable service for the 750,200 customers located in our
Western New York and Northwest Pennsylvania service territories.
As we look into 2019 and beyond, we have significant
opportunities in front of us to invest in our regulated businesses, expanding and modernizing our transmission, storage and distribution assets. In the Exploration and Production business, Senecas acreage position remains one of the largest in
the basin and, as a proven
low-cost
producer, with the vast majority of our natural gas rights owned in fee, we have the ability to capitalize on opportunities as pricing and returns warrant. Our
co-development
of the Marcellus and Utica shales, along with owning and efficiently operating the associated gathering infrastructure, allows us to achieve enhanced returns.
We expect Seneca production and Gathering segment revenue growth to be driven by a third drilling rig that Seneca added in May
2018. We will continue our transition to development of the Utica Shale in our Western Development Area (WDA), returning to existing Marcellus pads to drill new wells in the deeper Utica formation. By utilizing existing infrastructure to
support Senecas growing production, we expect to drive enhanced consolidated upstream and midstream returns and minimize our environmental footprint. In our Eastern Development Area (EDA), the commissioning of the Atlantic Sunrise
project in October 2018 has provided the Company with an important avenue to further develop our acreage in Lycoming County, Pennsylvania, one of the most prolific positions in Appalachia.
2018 Financial and Operating Highlights:
|
|
|
Increased Dividend for
48
th
Consecutive Year:
In June, the Board of Directors increased the Companys annual dividend rate by 2.4% to $1.70 per share, marking the 48
th
year of consecutive dividend increases and 116
th
year of uninterrupted dividend payments. The financial stability afforded by our integrated
operations supports the Companys dividend.
|
61
|
|
|
Generated Significant Free Cash Flow:
The Companys net cash provided from operating
activities totaled $613.6 million in fiscal 2018, and our net cash used in investing activities was $528.9 million. The excess cash flow was the result of the Companys efforts to prudently manage and mitigate financial risks and
efficiently allocate capital for reinvestment in the business.
|
|
|
|
Continued Appalachian Natural Gas Production Growth:
Seneca generated net production of
178.1 billion cubic feet equivalent (Bcfe) in fiscal 2018, an increase of 2.6 percent versus the prior year. The increase was driven by higher natural gas production in Appalachia, which increased 4.2 percent versus 2017.
The higher output was also the primary driver of the Gathering segments performance in fiscal 2018, which saw a 2 percent throughput increase. With the anticipation of additional pipeline capacity out of the basin in late calendar 2021,
the Company returned to a
three-rig
program for the first time since January 2016.
|
|
|
|
Increased Proved Reserves:
Senecas total proved natural gas and crude oil reserves at
September 30, 2018 increased 17 percent to 2,523 Bcfe from 2,154 Bcfe at September 30, 2017.
|
|
|
|
Continued Development of the Utica Shale in Appalachia:
In fiscal 2018, Seneca made significant
progress in the testing and appraisal of the Utica shale in both the Companys WDA and EDA operations in Pennsylvania. Seneca now has 11 Utica wells producing in the WDA, and an additional
500-plus
locations prospective for Utica development in this area. Additionally, Seneca resumed Utica development in the EDA (Tioga County) during the third quarter of fiscal 2018, where it has over 40 Utica locations remaining. As of September 30,
2018, nearly 20 percent of the Companys proved reserves are in the Utica Shale formation.
|
|
|
|
Continued Expansion of Interstate Pipeline Systems:
In fiscal 2018, Empire Pipeline, Inc.
(Empire) filed its application with the FERC for authorization to construct its Empire North Project. With an estimated capital cost of $145 million and a target
in-service
date in the second
half of fiscal 2020, this fully-subscribed project is designed to provide 205,000 Dth/day of incremental firm transportation capacity from Tioga County, Pennsylvania to markets along Empires interstate pipeline system. Additionally, in May
2018, National Fuel Gas Supply Corporation (Supply Corporation) executed a long-term precedent agreement with Transcontinental Gas Pipe Line Company, LLC (Transco), under which Transco will lease 330,000 Dth/day of
incremental capacity created by an expansion component of Supply Corporations FM100 Project. The FM100 Project has an estimated capital cost of $280 million and a target
in-service
date of late
calendar year 2021. Transco will utilize this leased capacity to provide Seneca with 330,000 Dth/day of incremental firm transportation from the WDA and EDA to premium
Mid-Atlantic
markets connected to Zone 6
of the Transco pipeline system.
|
Supply Corporation and Empire also continue to pursue the development
of, and remain committed to, the Northern Access Project, an approximately $500 million expansion of their respective pipeline systems in New York and Pennsylvania, which would move 490,000 Dth/day of Senecas WDA production to
interconnections with Tennessee Gas Pipeline Company, L.L.C. and TransCanada Corporation. In August 2018, the Company received a favorable decision from the FERC, finding that the New York Department of Environmental Conservation waived its
authority to act on our application for a water quality certification. In light of ongoing legal actions and the need to complete project development activities in advance of construction, the target
in-service
date for Northern Access is no earlier than the first half of fiscal 2022.
|
|
|
Utility Continued Focus on System Improvement:
In fiscal 2018, the Utility segment invested
$69.9 million in the safety and reliability of its system, replacing 153 miles of older pipelines in New York and Pennsylvania. The Companys replacement of aging natural gas infrastructure improves safety and reliability of the system and
leads to fewer leaks, directly resulting in lower greenhouse gas emissions. In addition, through the efforts of its dedicated employees, our Utility continued to provide exceptional customer service and recorded high levels of customer satisfaction
in both states.
|
62
Ongoing Development Plans
National Fuel remains committed to its long-term strategy of safe and financially prudent development of its natural gas assets in Appalachia
via its integrated business model. Our capital intensive operations require a focus on strategic initiatives, including those between subsidiaries, which may take several years from business planning through completion. The results of this focus
include:
|
|
|
Ongoing Major Interstate Pipeline Expansion and Modernization Projects:
As Seneca continues to
develop its vast acreage position in the WDA, the Company is working to build the pipeline infrastructure necessary to move Seneca and third-party production from Pennsylvania to premium markets outside of the Appalachian basin. While Supply
Corporation and Empire remain involved in various legal challenges to move forward construction of their Northern Access expansion project, the Company has continued to develop new projects to leverage its existing assets in Appalachia to move
production to demand centers, including the FM100 (330,000 Dth/day), Empire North (205,000 Dth/day), and Line N to Monaca projects (133,000 Dth/day). Collectively, these projects represent investments of approximately $450 million by our
Pipeline & Storage business.
|
Additionally, the Pipeline & Storage segment expects to
continue its accelerated system modernization efforts over the next two to four years. Investments in system modernization, such as pipeline replacement and compression facility upgrades, are designed in a manner that will enhance safety and
reliability and reduce environmental impact.
63
|
|
|
Integrated Upstream and Midstream Development in Appalachia:
The Company continues to execute a
multi-year plan to develop and grow our upstream and midstream assets in Appalachia. The strategy leverages the exceptional resource potential within our 785,000 net acres in the Marcellus and Utica shales, the geographic integration of our valuable
pipeline footprint in Appalachia, and the operational and financial synergies that are generated from the Companys integrated business structure. With the addition of a third drilling rig in fiscal 2018, the Company expects ongoing production
growth and Gathering segment revenue growth over the next several years.
|
|
|
|
Investment in Safe and Reliable Utility System:
The Companys Utility segment will continue
to direct capital spending to pipeline repair, replacement and maintenance to support its statutory obligation to provide safe and reliable service for our customers.
|
|
|
|
Acceptance of the EPAs
Methane Challenge:
The Company recently announced its
participation in the U.S. Environmental Protection Agencys Natural Gas STAR Methane Challenge Program, a voluntary program designed to provide a platform for utilities, pipeline and storage companies, and energy producers to make, track, and
communicate commitments to reduce methane emissions. In connection with this program, and in furtherance of our longstanding commitment to safe and responsible operations, the Company will analyze new and innovative approaches for further emission
reduction and explore the expansion of current best management practices and the applicability of future best practices.
|
CEO
Compensation in Alignment with Peers
As described in the 2018 Financial and Operating Highlights above, fiscal 2018 was another strong
year financially and operationally for National Fuel. CEO compensation is targeted to be within the 50
th
to 75
th
percentiles of the Korn Ferry
Energy Industry market data. The Compensation Committee understands the importance of using benchmark data that reflects information from companies with comparable business segments over similar time periods. Reflected in the table below is Korn
Ferrys comparison of fiscal 2017 total direct compensation for the Companys CEO (Mr. Tanski) against that of CEOs in our Korn Ferry peer group. The Companys CEO target total direct compensation, shown in the table below, is in
line with that of our peers (43
rd
percentile). Actual total direct compensation, which includes compensation resulting from performance against annual incentive goals, was at the 45
th
percentile of our peers.
64
Fiscal 2017 is the most recent complete fiscal year for which proxy statement data is
available. Fiscal 2018 compensation cannot yet be accurately compared to peers because 2018 compensation data for most of those peers is not yet available.
|
|
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CEO & President
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|
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Compared to CEO proxy data for fiscal year 2017
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Total Direct
Compensation
|
Company
|
|
Title
|
|
FYE
Revenue
(millions)
|
|
Market Cap
as of 9/30/17
(millions)
|
|
FYE # of
Employees
|
|
Actual
|
|
Target
|
ATMOS ENERGY CORP
|
|
CEO
|
|
$2,760
|
|
$8,893
|
|
4,565
|
|
$4,583,351
|
|
$4,342,068
|
CABOT OIL & GAS CORP
|
|
Chairman, CEO & President
|
|
$1,764
|
|
$12,372
|
|
468
|
|
$12,122,248
|
|
$10,903,498
|
ENERGEN CORP
|
|
Chairman, President & CEO
|
|
$961
|
|
$5,315
|
|
390
|
|
$6,796,850
|
|
$6,341,430
|
EQT CORP
|
|
President & CEO
|
|
$3,378
|
|
$11,308
|
|
2,067
|
|
$8,001,614
|
|
$6,851,589
|
MDU RESOURCES GROUP INC
|
|
President & CEO
|
|
$4,443
|
|
$5,068
|
|
10,140
|
|
$3,674,303
|
|
$3,090,046
|
NEW JERSEY RESOURCES CORP
|
|
Chairman, CEO & President
|
|
$2,269
|
|
$3,648
|
|
1,052
|
|
$2,575,759
|
|
$2,357,459
|
RANGE RESOURCES CORP
|
|
Chairman, President & CEO
|
|
$2,611
|
|
$4,856
|
|
773
|
|
$8,505,649
|
|
$8,615,649
|
SM ENERGY CO
|
|
President & CEO
|
|
$1,129
|
|
$1,980
|
|
635
|
|
$7,346,339
|
|
$6,812,800
|
SOUTHWESTERN ENERGY CO
|
|
President & CEO
|
|
$3,203
|
|
$3,111
|
|
1,575
|
|
$8,547,712
|
|
$8,593,252
|
SOUTHWEST GAS HOLDINGS INC
|
|
President & CEO
|
|
$2,549
|
|
$3,695
|
|
7,771
|
|
$3,495,921
|
|
$3,322,671
|
SPIRE INC
|
|
CEO & President
|
|
$1,741
|
|
$3,603
|
|
3,279
|
|
$3,211,544
|
|
$3,181,544
|
UGI CORP
|
|
Vice Chair, President & CEO
|
|
$6,121
|
|
$8,124
|
|
13,000
|
|
$6,476,859
|
|
$6,635,265
|
WGL HOLDINGS INC
|
|
Chairman & CEO
|
|
$2,355
|
|
$4,313
|
|
1,500
|
|
$4,032,943
|
|
$3,824,362
|
WHITING PETROLEUM CORP
|
|
President & CEO
|
|
$1,481
|
|
$2,010
|
|
830
|
|
$5,775,000
|
|
$6,116,500
|
Summary Statistics
|
|
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|
|
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|
|
75th Percentile
|
|
|
|
$3,092
|
|
$7,422
|
|
4,244
|
|
$7,837,795
|
|
$6,841,892
|
Average
|
|
|
|
$2,626
|
|
$5,592
|
|
3,432
|
|
$6,081,864
|
|
$5,784,867
|
Median
|
|
|
|
$2,452
|
|
$4,584
|
|
1,538
|
|
$6,125,930
|
|
$6,228,965
|
25th Percentile
|
|
|
|
$1,747
|
|
$3,614
|
|
787
|
|
$3,763,963
|
|
$3,448,094
|
NATIONAL FUEL GAS CO
|
|
CEO & President
|
|
$1,580
|
|
$4,841
|
|
2,100
|
|
$5,603,294
|
|
$5,324,913
|
Percentile Rank
|
|
|
|
18%
|
|
54%
|
|
62%
|
|
45%
|
|
43%
|
|
|
|
|
|
|
|
NOTE:
Total Direct Compensation = base salary + bonus +
long-term incentives (target value for cash and grant date value for equity)
|
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©
2018 Korn Ferry. All rights reserved
|
|
1
|
As a result of stockholder feedback, the Company has fully transitioned its long-term incentive
program from one awarded partially in cash to one awarded fully in equity. For the Companys CEO and certain other named executive officers, 100 percent of the long-term incentive award is performance-based relative to the Korn Ferry peer
group.
|
Compensation Summary and
Overview
|
Objectives of the Compensation Committee
When setting compensation for the Companys executives, the Compensation Committees primary goal is to provide balanced incentives
for creating value for stockholders in both the near-term and long-term. In order for this to occur, the Compensation Committee awards a combination of cash and equity components that are designed to:
|
Ø
|
Focus management efforts on both near-term and long-term drivers of stockholder value;
|
|
Ø
|
Tie executive compensation to long-term TSR and long-term total ROC by linking a significant portion of an
executive officers potential compensation to the future price of the Companys common stock and the future returns on capital achieved by the Company, both relative to peers; and
|
65
|
Ø
|
Attract, motivate, reward and retain management talent in the highly competitive energy industry in order to
achieve the objectives that contribute to the overall success of the Company.
|
Elements of Compensation
The Compensation Committee has developed the Companys compensation policies and procedures to align the interests of executives with
those of the Companys stockholders and, where appropriate, other stakeholders, including customers. The main elements of the executive compensation program are as follows:
|
Ø
|
Base Salary (Cash)
Provides a predictable base compensation for
day-to-day
job performance;
|
|
Ø
|
Short-Term Performance Incentives (Cash)
Utilizes metrics specific to each executive in order
to motivate them to deliver near-term financial, safety, environmental, and customer service results, generally over a period that is no longer than two years; and
|
|
Ø
|
Long-Term Performance Incentives (Equity)
Focuses the attention of executives on delivering
long-term stockholder value and on maintaining a significant personal investment in the Company through stock ownership.
|
For fiscal 2018, 81% of our CEOs target compensation was tied to long-term
(3-year)
performance
or shorter-term business performance, as reflected in the charts below (target compensation consists of base salary, target annual incentive, and grant date fair value of the long-term incentive award).
CEO Compensation Aligned with Shareholders Interests
81% Variable Compensation Key Factors Performance Shares 60% 50% Total Return on Capital (3-year average ROC vs. peer
group) 50% Total Shareholder Return (3-year TSR vs. peer group) Annual Incentive 21% Goals relate to earnings, safety and costs 81% of Target Compensation is Tied to 3-Year Performance Base Salary 81% of Target Compensation is Tied to 3-Year
Performance or Short-Term Business Performance
*
|
Fiscal 2018 target compensation for CEO
|
66
CEO and Other Named Executive Officer Target Compensation
President & CEO 2018 T:n"get Compensation Structure Performance Shares 60% Annual Incentive 21% Base Salary 19% Other
Named Executive Officers' 2018 Average Target Compensation Structure Restricted Stock Units 8% Performance Shares 39% Annual Incentive 24% Base Salary 29%
Key Compensation Features
|
Ø
|
Annual performance incentives of the named executive officers are based on objective performance goals;
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Ø
|
Long-term performance incentives are composed entirely of equity;
|
|
Ø
|
Long-term performance goals consist of three-year total shareholder return (TSR) and three-year
total return on capital (ROC), each relative to a peer group;
|
|
Ø
|
The Company does not provide tax
gross-ups;
|
|
Ø
|
Named executive officers and other officers are required to meet stock ownership guidelines that range from
one to six times base salary;
|
|
Ø
|
Executive officers may not hedge or pledge Company stock;
|
|
Ø
|
Equity incentive plans prohibit the repricing of equity awards without stockholder approval;
|
|
Ø
|
The Committee engaged two independent compensation consultants to assist in setting compensation;
|
|
Ø
|
All
change-in-control
agreements are double triggered; and
|
|
Ø
|
The Board has adopted a clawback provision (see Recovery of Funds in the Companys
Corporate Governance Guidelines, included as Appendix B to this proxy statement).
|
67
2018
Say-on-Pay
Vote and
Stockholder Engagement
The 2018
Say-on-Pay
advisory
vote yielded a result of approximately 97% of votes cast in support of the compensation of the Companys named executive officers. The Board considered this outcome an indicator of stockholder support for the overall philosophy and structure of
the Companys executive compensation policies and decisions. As a result, the Committee did not make any significant changes to the executive compensation program that were based specifically on the results of the 2018
Say-on-Pay
advisory vote.
In recent years, including 2018,
members of Company management have held
in-person
meetings with some of the Companys largest stockholders to obtain feedback on the Companys compensation program, among other topics. Several of the
Companys largest stockholders have informed the Company that scheduling such visits every two to three years is appropriate. Management engages with the Companys stockholders in telephone conferences and intends to schedule
in-person
meetings in 2019, if desired. The Board has directed management to continue to engage as appropriate with interested stockholders, and to inform it of any requests for meetings with members of the Board.
The Board and management believe that engagement with stockholders facilitates important dialogue from which we gather various important viewpoints.
Additional Information
The Companys executive compensation is described and explained in the CD&A, in the tabular disclosure starting with
the Fiscal 2018 Summary Compensation Table, and in the Proxy Statement Overview & Summary included at the front of this proxy statement. We urge stockholders to carefully review this information to understand how the Companys
executive compensation is designed and how it compares with other similar companies.
Approval of this proposal requires a
majority of the votes cast with respect to this proposal. This
non-binding,
advisory vote is currently scheduled to be conducted every year, and it is anticipated that the next
non-binding
advisory vote will take place at the 2020 Annual Meeting of Stockholders. Consistent with SEC rules, the vote on this proposal is advisory and is not binding on the Board. The vote on this
proposal will not be construed as overruling any decision by the Board.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR
APPROVAL OF THE COMPANYS NAMED EXECUTIVE OFFICER COMPENSATION.
68
PROPOSAL 3. APPROVAL OF THE AMENDED AND RESTATED
2010 EQUITY COMPENSATION PLAN
We are seeking your approval of the amended and restated National Fuel Gas Company 2010 Equity Compensation Plan (the
Plan) for the purposes of increasing the number of shares authorized for issuance under the Plan by an additional 2,700,000 shares of our Common Stock, par value $1.00 per share, and extending the termination date of the Plan by five
years. The summary of the Plan that follows is not intended to be exhaustive and is qualified in its entirety by the terms of the Plan, a copy of which is included at Appendix C to this proxy statement.
Note that Proposal 4 of this proxy statement seeks your approval of an increase in the number of shares of our Common Stock to
be made available for issuance under another plan, namely, the amended and restated National Fuel Gas Company 2009
Non-Employee
Director Equity Compensation Plan. We urge you to read both this Proposal 3 and
Proposal 4 carefully.
Equity is the Sole Component of Long-Term Incentive Compensation
We traditionally have structured a portion of our managements compensation in the form of equity awards that directly
align the interests of key executives and other key management employees with the interests of the Companys stockholders in growing the market value of the Company. In recent years, consistent with feedback received from stockholders, the
Compensation Committee of the Board of Directors (consisting solely of independent Directors) has structured long-term incentive compensation opportunities entirely in the form of equity awards. Our current approach and philosophy with respect to
the grant of such equity awards is summarized in this proxy statement under the heading Compensation Discussion and Analysis. Actual grants made to our named executive officers in our last completed fiscal year are listed in the Grants
of Plan-Based Awards Table, and the outstanding equity awards held by our named executive officers as of September 30, 2018 are listed in the Outstanding Equity Awards Table.
The Companys use of equity as the sole component of long-term incentives better aligns the Companys compensation
policies and procedures with the long-term interests of the Companys stockholders. These efforts naturally result in additional shares being used against the currently authorized number of shares to grant. Moreover, all of the types of equity
currently being granted under the Plan are subject to the 1.8 multiplier discussed below.
Approval to Increase Shares Available to Grant
We are seeking approval of an increase by 2,700,000 in the number of shares authorized for issuance under the Plan
to continue this strategy. As of September 30, 2018, we had available 1,478,086 shares for future awards. We believe this is an insufficient amount to attract and retain needed talent on a going-forward basis, particularly as equity awards have
become more common in the energy industry.
As initially approved by stockholders in 2010, the Plan authorized the grant of
awards in respect of a total of 3,000,000 shares. In 2015, stockholders approved an amendment to the Plan to make an additional 3,000,000 shares available for awards. The Plan is designed to efficiently utilize the authorized shares by debiting the
pool of shares allocated to the Plan by 1 share for each share subject to a stock option or stock appreciation right (SAR) granted under the Plan, and by 1.8 shares for each share subject to any other type of award (such as RSUs and
performance shares) granted under the Plan (Fungible Share Counting). Thus, for example, an option or SAR grant in respect of 1,000 shares counts as relating to only 1,000 shares, while an award of 1,000 RSUs would count against the
shares available for awards as though pertaining to 1,800 shares. An award of 1,000 performance shares, if designed to result in a payout of up to 2,000 shares of Common Stock upon achievement of maximum performance, would count against the
shares available for awards as though pertaining to 3,600 shares. This formula affords us greater flexibility in designing awards under the Plan, while at the same time giving appropriate weight to the financial accounting costs and the
dilutive effects of these awards. This formula will apply to the additional shares for which approval is being sought.
69
In arriving at the maximum number of additional shares to be sought, the Board
determined that targeting our projected needs over the next three to five years struck the appropriate balance between the need to incent and retain key management personnel and the dilutive effect on stockholders of the additional shares
authorized. In reaching this conclusion, the Board considered the
so-called
overhang related to the Plan and the 1997 Award and Option Plan. As noted in the Equity Compensation Plan
Information table on page 24, at the end of fiscal 2018 there were 2,826,984 shares in the aggregate committed to awards outstanding under these plans (approximately 3.29% of our outstanding Common Stock at September 30, 2018). With respect to
these awards, 1,299,088 shares related to then outstanding SARs (which SARs had a weighted average grant price of $50.70 and a weighted average remaining term of 1.77 years), 245,316 shares related to then outstanding RSUs, and 1,282,580 shares
related to then outstanding performance shares (determined assuming achievement at the maximum level of performance). The total shares of Common Stock committed to outstanding awards under the 1997 Award and Option Plan and the Plan (2,826,984),
plus the number of shares of Common Stock remaining available for future awards under the Plan (1,478,086), plus the proposed additional shares of Common Stock to be made available for future awards under the Plan (2,7000,000), represent a total
potential overhang of 7,005,070 shares (8.15%) under the 1997 Award and Option Plan and the Plan.
The table set forth
below illustrates the utilization of the shares previously authorized under the Plan over the last three completed fiscal years. To have the rate of utilization compare on a consistent basis, the shares are shown as a percentage of the weighted
average shares outstanding both as of the immediately preceding fiscal year and as of the fiscal year in which the grants were made.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
Number of Shares
Charged Against Plan
Limit With Respect to
Stock Option/SAR
Awards
|
|
Number of Shares
Charged Against Plan
Limit With Respect to
Full Value Awards(1)
|
|
Percentage of
Weighted Average
Common Shares
Outstanding
Represented by Such
Awards as of
the
Immediately Prior
Fiscal Year
|
|
Percentage of
Weighted Average
Common Shares
Outstanding
Represented by Such
Awards as of
the
Fiscal Year in Which
the Awards Were Made
|
September 30, 2016
|
|
|
|
0
|
|
|
|
|
803,511
|
|
|
|
|
0.95
|
%
|
|
|
|
0.95
|
%
|
September 30, 2017
|
|
|
|
0
|
|
|
|
|
488,324
|
|
|
|
|
0.58
|
%
|
|
|
|
0.57
|
%
|
September 30, 2018
|
|
|
|
0
|
|
|
|
|
536,868
|
|
|
|
|
0.63
|
%
|
|
|
|
0.63
|
%
|
Average Percentage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.72
|
%
|
|
|
|
0.71
|
%
|
The numbers shown in this table for grants of full value awards reflect the 1.8 to 1 ratio
described above and the following performance parameters. The shares listed in the table with respect to performance shares granted in fiscal 2016 (which had a three-year performance cycle covering fiscal years 2016 through 2018) are based on the
level of performance actually achieved. The shares listed in the table with respect to performance shares granted in fiscal 2017 and fiscal 2018 (which have three-year performance cycles ending September 30, 2019 and September 30, 2020,
respectively) are based on the number of shares that would be payable in respect of such awards upon the achievement of the target level of performance. The actual number of shares issuable in respect of fiscal 2017 and fiscal 2018 performance share
awards may be greater or lesser depending on whether actual achievement of the performance objectives is greater or lesser than target. If performance occurs at the maximum level for fiscal 2017 and fiscal 2018 performance share awards, the number
of shares charged against the plan limit for the fiscal years ended September 30, 2017 and 2018 noted in the above table would be 819,790 and 912,326, respectively; the percentages for fiscal 2017 would be 0.97% and 0.96%, respectively; the
percentages for fiscal 2018 would be 1.07% and 1.06%, respectively; and the average percentages would be 1.00% and 0.99%, respectively.
(1)
|
Full value awards include grants of RSUs and performance shares.
|
As of December 31, 2018, the closing price of the Common Stock on the New York Stock Exchange was $51.18.
70
Approval to Extend Plan Termination Date
We are seeking approval of a five-year extension of the automatic termination date of the Plan. As previously approved by our
stockholders, the Plan provides that it will continue in effect, unless sooner terminated pursuant to its terms, until the tenth anniversary of the effective date. The effective date was March 11, 2010, the date on which the Plan was initially
approved by the Companys stockholders. Accordingly, the current automatic termination date is March 11, 2020. We are seeking to extend this termination date by five years, to March 11, 2025. We believe that the Plan has served its
intended purposes well and will continue to do so over the next five to six years.
Principal Terms of the Plan
The principal terms of the Plan, as amended to increase the number of shares authorized for issuance thereunder and to extend
the Plans termination date, are summarized below. In evaluating this Proposal 3, stockholders should consider all factors set forth under this Proposal 3.
If stockholders do not reapprove the Plan, the Plan will continue in effect as last approved by stockholders (that is, the
number of shares available for issuance will not be increased and the termination date will not be extended).
Administration
The Plan generally provides for administration by the Committee. Among the powers granted to the Committee (which
are further described in the Plan) are the authority to interpret the Plan, establish administrative rules, regulations and procedures, select employees of the Company and its subsidiaries to receive awards, determine the form, amount and other
terms and conditions of an award, grant waivers of Plan terms and conditions or modify awards (subject to the terms of the Plan), and take all action it deems advisable for the proper administration of the Plan. The Plan authorizes the Committee to
delegate its authority and duties under the Plan, in certain circumstances and subject to limitations described in the Plan, to the Chief Executive Officer and other senior officers of the Company.
Eligibility for Participation
All officers or other management employees of the Company or a subsidiary of the Company are eligible to be selected to
participate in the Plan. In fiscal 2018, the Committee granted awards to 36 officers and 77 other management employees. The Committee has the discretion to choose which eligible individuals shall receive awards under the Plan, as well as the
type, number and terms of the awards. The basis for participation in the Plan is selection for participation by the Committee.
Amendment, Modification and Termination of Plan
The Board or the Committee may amend or modify the plan, provided that, without the approval of stockholders, no amendment may:
(i) materially increase the benefits to the participants of the Plan, (ii) increase the number of shares subject to the Plan or the individual award limitations (described below), (iii) modify the class of persons eligible for
participation in the Plan, or (iv) materially modify the Plan in any other way that would require stockholder approval. Unless otherwise terminated earlier, the Plan, as amended to extend the termination date by five years, will automatically
terminate on March 11, 2025, which is the fifteenth anniversary of the date on which the Plan was initially approved by the Companys stockholders. The Board or Committee may at any time in its sole discretion, for any reason, terminate or
suspend the Plan.
Shares Available for Grant
As amended to increase the current share authorization of 6,000,000 shares by a subsequent 2,700,000 shares, the Plan
authorizes for issuance a maximum of 8,700,000 shares of Common Stock of
71
the Company, plus the number of shares subject to awards (or any portion of awards) issued under either the 1997 Award and Option Plan or the Plan that, from and after March 11, 2010, lapse
or are cancelled, forfeited, terminated or otherwise settled without the issuance of Common Stock. Shares are counted against the Plan limit (and added back to the Plan) using the Fungible Share Counting described above. If an award is issued in
tandem with any other award (such that it is only possible to benefit under either but not both awards), the shares subject to such awards will be counted only once against such limit, based on the award that represents the greatest allocation of
shares for this purpose.
The following shares of Common Stock may not again be made available for reissuance as awards
under the Plan: (i) shares of Common Stock not issued or delivered as a result of the net settlement of an outstanding stock appreciation right or option, (ii) shares of Common Stock used to pay the exercise price or withholding taxes
related to an outstanding award, or (iii) shares of Common Stock repurchased on the open market with the proceeds of the option exercise price.
No participant in the Plan may receive awards of options and/or stock appreciation rights (SARs) covering more than
750,000 shares of Common Stock of the Company in any calendar year. Additionally, under the Plan as originally adopted, awards granted to an Executive Officer (as defined in the Plan) during any 12-month period, other than options or
SARs, that were intended when granted to be other performance-based compensation under Section 162(m) of the Code generally could not exceed 375,000 shares underlying any performance share award, or $2,500,000 underlying any performance
unit award, although amounts actually payable in respect of such awards could be up to twice the initial award, if there were superior achievement of the applicable performance goals.
Section 162(m) of the Code was amended, effective for taxable years beginning after December 31, 2017, to eliminate the
exception to its limitation previously available for other performance-based compensation, except to the extent such compensation is provided pursuant to a binding written agreement in effect on November 2, 2017. Thus, under current law,
any award granted under the Plan after November 2, 2017 and payable after the Companys 2018 fiscal year cannot be other performance-based compensation, and the corresponding limitation on the number of shares granted will not have
any practical effect. Accordingly, we have modified Section 5(b)(ii) of the Plan to indicate that the share limit related to other performance-based compensation will be effective only if an exception for such compensation is
available under applicable law. To be clear, stockholders are not being asked to approve the Plan (or any of its provisions) for purposes of Section 162(m) of the Code or the performance-based exception. As a result of the amendment of
Section 162(m) of the Code, we do not currently anticipate that we would be able to make any future grants under the Plan that will be intended to qualify for the performance-based exception.
The maximum limits of stock underlying awards (including the aggregate Plan limit and individual participant limits) are
subject to equitable adjustment as further described in the Plan in the event of any stock dividend, stock split or share combination in respect of, or extraordinary cash dividend on, our Common Stock or any recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, dissolution, liquidation, exchange of shares, warrants or rights offering to purchase our Common Stock at a price substantially below fair market value (as defined in the Plan), or other similar event
affecting the Common Stock (an Adjustment Event).
Types of Awards
The Plan provides for the grant of any or all of the following types of awards: (i) stock options, including incentive
stock options (as defined in Section 422 of the Code) that are subject to additional limitations under the Plan, (ii) SARs, (iii) restricted shares of our Common Stock (Restricted Stock), (iv) RSUs, (v) performance
shares, (vi) performance-based dollar denominated awards (performance units), and (vii) certain other stock-based awards. Such awards may be granted singly or in combination, as determined by the Committee.
72
(a) Stock Options
Under the Plan, the Committee may grant awards to participants in the form of stock options to purchase shares of the
Companys Common Stock. Stock options may be
non-qualified
stock options or incentive stock options, except that no option that is intended to be an incentive stock option may be granted under the Plan
after March 10, 2020 (the tenth anniversary of the date the Plan became effective upon its initial approval by our stockholders). Unless the award notice provides otherwise, each option would be a
non-qualified
option. The Committee determines the number of shares subject to the option, the manner and time that the option may be exercised and the exercise price per share of Common Stock subject to the
option. In no event, however, may the exercise price of a stock option be less than the fair market value of the Companys Common Stock on the date of the stock options grant.
Dividend Equivalents may not be paid on stock options, and stock options may not be repriced (as further described in the
Plan). Stock options will expire no later than the tenth anniversary of the date granted.
Unless the award notice provides
otherwise, each option will vest in three equal annual installments, subject to the participants continued employment with the Company or subsidiary through such date (except as provided below). The Committee may provide that options may also
become exercisable, in whole or in part, upon the occurrence of any event specified in the Plan or other condition specified by the Committee at or after the grant date of the applicable option. In its discretion, the Committee may establish in the
award notice, conditions based on performance goals (in lieu of, or in addition to,
time-based
vesting) with respect to the exercisability of any option. Unless the award notice provides otherwise:
|
(i)
|
if a participants employment with the Company or a subsidiary terminates for Cause (as defined in the
Plan), all options, vested or unvested, shall be forfeited and cancelled,
|
|
(ii)
|
upon the termination of a participants employment with the Company or a subsidiary due to death or
disability (as defined in the Plan), or on or after his or her 60
th
birthday other than for Cause (Retirement), all outstanding options shall immediately vest and remain exercisable
for a period equal to five years or, if earlier, until the original expiration date of the option,
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(iii)
|
if a participants employment with the Company or subsidiary terminates due to the divestiture by the
Company of one or more subsidiaries or other business segments, divisions or operations in a transaction that does not otherwise qualify as a Change in Control (a Divestiture), all outstanding options shall immediately vest and remain
exercisable for a period equal to three years following the Divestiture or, if earlier, until the original expiration date of the option,
|
|
(iv)
|
if a participants employment with the Company or a subsidiary terminates without cause due to a
reduction in force or similar downsizing at the Company or any subsidiary unit that affects a significant number of employees (a Reduction in Force), all unvested options shall be cancelled and forfeited and all vested options shall
remain exercisable until the first anniversary of the date of the participants termination of service or, if earlier, the original expiration date of the option, and
|
|
(v)
|
if a participants employment with the Company or a subsidiary terminates for any other reason, all
unvested options are cancelled and forfeited and any vested options remain exercisable for a period of 90 days after such termination or, if earlier, the original expiration date of the option.
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Upon exercise of a stock option, the exercise price may, at the discretion of the Committee, be paid by a participant in cash
or its equivalent, shares of Common Stock or Restricted Stock, or a combination thereof (or by other arrangements as the Committee may deem appropriate). The Plan allows options to be exercised using the cashless exercise of options by
payment of the exercise price from the sale proceeds of a portion of the shares otherwise receivable upon exercise of the option and by net settlement, whereby the appreciation, if any, in value of the shares as to which the stock option is being
73
exercised above the exercise price set at the date of grant is issued in shares without any other payment in respect of the exercise price. The Company may not make a loan to a participant to
facilitate such participants exercise of any of his or her options or payment of taxes.
(b) Stock Appreciation Rights
Under the Plan, the Committee may grant awards to participants in the form of SARs, which may be granted on a stand-alone basis
or in tandem with another award granted under the Plan (for example, SARS may be granted in tandem with an option award). A SAR is a right to receive a payment in cash, in shares of Common Stock or in a combination thereof, as determined by the
Committee, equal to the appreciation, if any, in the fair market value of a stated number of shares of Common Stock from the SARs exercise price to the fair market value on the date the SAR is exercised. The Committee determines the number of
shares subject to the SAR, the manner and time that the SAR may be exercised and the exercise price of the SAR. The exercise price related to a SAR must be at least equal to the fair market value of our Common Stock on the date the SAR is granted.
If a SAR is to be paid in cash, the Committee may also establish in the applicable award notice a maximum amount per share which will be payable upon the exercise of such SAR.
Dividend Equivalents may not be paid on SARs, and SARs may not be repriced (as described in the Plan). SARs will expire no
later than the tenth anniversary of the date granted.
Unless otherwise provided in the award notice, SARs become
exercisable in three equal annual installments, subject to the participants continued employment with the Company or a subsidiary through such date (except as provided below). SARs may also become exercisable, in whole or in part, upon the
occurrence of any event or events as specified in the Plan or specified by the Committee, in its discretion, either at or after the grant date of the applicable SARs. In its discretion, the Committee may also establish conditions based on
performance goals (in lieu of, or in addition to, time based vesting) with respect to the exercisability of any SARs. Unless the award notice provides otherwise:
|
(i)
|
if a participants employment with the Company or a subsidiary terminates for Cause, all SARs, vested
or unvested, shall be forfeited and cancelled,
|
|
(ii)
|
if a participants employment with the Company or a subsidiary terminates due to death, disability, or
Retirement, all outstanding SARs shall immediately vest and remain exercisable for a period equal to five years or, if earlier, until the original expiration date of the SAR,
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(iii)
|
if a participants employment with the Company or subsidiary terminates due to Divestiture, all
outstanding SARs shall immediately vest and remain exercisable for a period equal to three years following the Divestiture or, if earlier, until the original expiration date of the SAR,
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(iv)
|
if a participants employment with the Company or a subsidiary terminates due to a Reduction in Force,
all unvested SARs shall be cancelled and forfeited and all vested SARs shall remain exercisable until the first anniversary of the date of the participants termination of service or, if earlier, the original expiration date of the SAR, and
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(v)
|
if a participants employment with the Company or a subsidiary terminates for any other reason, all
unvested SARs are cancelled and forfeited and any vested SARs remain exercisable for a period of 90 days after such termination or, if earlier, the original expiration date of the SAR.
|
Any SAR not already exercised shall be deemed to be exercised at the close of business on the scheduled expiration date of such
SAR, if at such time the SAR by its terms remains exercisable and, if so exercised, would result in a payment to the holder of such SAR.
(c) Restricted Stock and Restricted Stock Unit Awards
The Plan authorizes the Committee to grant awards to participants in the form of Restricted Stock and RSUs. Such awards will be
subject to such restrictions, terms and conditions as the Committee
74
deems appropriate, including restrictions on transferability and continued employment. The lapsing of restrictions associated with such awards may be conditioned upon the passage of time while
employed and/or the attainment of one or more performance goals.
The restricted period may lapse with respect to portions
of Restricted Stock and RSUs on a pro rata basis, or it may lapse at one time with respect to all Restricted Stock and RSUs in an award. The restricted period will also lapse, in whole or in part, upon the occurrence of any event or events,
including a Change in Control, specified in the Plan. Unless the Committee determines otherwise at or after grant, (1) the restricted period with respect to Restricted Stock and RSUs that vest solely based on the passage of time while employed shall
lapse in three approximately equal annual installments on the first through third anniversaries of the grant date, and (2) the restricted period with respect to Restricted Stock and RSUs that vest upon the satisfaction of performance goals shall
lapse, to the extent performance goals have been achieved, not earlier than one year after the commencement of the applicable performance cycle. Unless the award notice provides otherwise,
|
(i)
|
upon termination of a participants employment due to death, disability, Retirement, or a Divestiture,
all restrictions relating to Restricted Stock and RSUs lapse and such awards become immediately vested, and
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|
(ii)
|
upon termination of a participants employment due to a Reduction in Force, for Cause or for any other
reason, all Restricted Stock and RSUs for which the restricted period has not lapsed are immediately forfeited.
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Unless the Committee determines otherwise, if an award is granted in the form of Restricted Stock, the participant will have
all the rights of a stockholder with respect to such shares, including the rights to vote and to receive dividends. A participant who is awarded RSUs will not have voting rights with respect to such RSUs. The Committee shall determine whether
dividend equivalents will be provided in respect of any RSU award, the manner in which any such dividend equivalent will be deemed invested, the time or times at which such dividend equivalent shall be deemed payable and any other terms and
conditions thereon that the Committee shall deem appropriate.
At the expiration of the restricted period for any
outstanding Restricted Stock, the Company shall evidence the issuance of such shares free of any restrictions imposed under the Plan. At the expiration of the restricted period with respect to any outstanding RSU, the participant shall receive, in
the Committees discretion, one share of Common Stock, a cash payment equal to the fair market value of the underlying share of Common Stock as of the payment date or any combination of cash and Common Stock equal to that fair market value.
(d) Performance Shares and Performance Units
Under the Plan, the Committee may grant awards to participants in the form of performance shares or performance units. Vesting
of these awards is generally contingent upon the attainment of specified performance goals over a period to be determined by the Committee. Performance shares and performance units may also become earned and vested based on the occurrence of any
event or events, including a Change in Control, as the Committee determines, either at or after the grant date. Unless otherwise determined by the Committee, the performance cycle for performance shares and performance units is three years, and may
not be less than one year. Except in the case of awards to Executive Officers intended to be other performance-based compensation under Section 162(m)(4) of the Code, the Committee may adjust the performance goals for any performance
cycle as it deems equitable in recognition of events impacting the comparability of the Companys results of operations or financial condition, changes in applicable tax laws or accounting principles, or such other factors as the Committee may
determine. The performance goals to be achieved during a performance cycle and the measure of whether and to what degree such objectives have been attained will also be determined by the Committee. With respect to performance units, the Committee
also retains the discretion, even after the award is made, to establish written rules or procedures that have the effect of limiting the amount payable to each participant to an amount that is less than the maximum amount otherwise authorized.
75
Unless the Committee determines otherwise at or after grant,
|
(i)
|
upon the termination of a participants employment due to death or disability, Retirement or a
Divestiture, the participant will be entitled to receive the number of shares or cash value he or she would have received with respect to performance awards had the participant remained employed with the Company through the end of the performance
cycle,
pro-rated
to reflect the actual time that the participant was employed by the Company during the performance cycle, and
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(ii)
|
upon the termination of a participants employment due to a Reduction in Force, for Cause or for any
other reason not described in clause (i) above, any performance award for which the performance cycle has not yet been completed shall be cancelled and forfeited.
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No shares of Common Stock will be issued at the time a performance share award is made, and the Company is not required to set
aside a fund for the payment of performance shares or performance units. No dividend equivalents will be paid or payable on any performance shares or performance units before they become earned and vested.
Payment of both performance shares and performance units may be made in the form of cash, shares of Common Stock or in a
combination thereof, with the value or number of shares payable to be determined based on the fair market value of the Common Stock on the date the Committee certifies the extent to which performance goals have been attained.
(d) Other Stock-Based Awards
The Committee may grant other stock-based awards in accordance with the Plan. Other stock-based awards may take such form of an
interest in the Common Stock, the value of a specified number of shares of Common Stock or any combination thereof as the Committee determines, including outright awards of Common Stock in satisfaction of an obligation of an employer in respect of
compensation that would otherwise be payable to a participant in cash (each, a Cash Settlement Award). The number of shares of Common Stock that may be subject to other stock-based awards will not exceed five percent (5%) of the shares
authorized for issuance under the Plan, except that, the number of other stock-based awards that are Cash Settlement Awards shall not be subject to, or otherwise counted against, the foregoing 5% limit. In addition to any other terms and conditions
that may be specified by the Committee, each other stock-based award shall specify the impact of a termination of service upon the rights of a participant in respect of such award. At the discretion of the Committee, such conditions may be the same
as apply with respect to Restricted Stock or RSUs, or may contain terms that are more or less favorable to the participant. The terms of any other stock-based award need not be uniform in application to all (or any class of) participants, and each
other stock-based award granted to any participant (whether or not at the same time) may have different terms. Any such other stock-based award shall be evidenced by an award notice which specifies the terms and conditions applicable thereto.
Performance Measures
The performance measure(s) to be used for performance share awards and performance units (and any other award to which the
Committee attaches performance goals) shall include one or more of the following as applied to the Company or any subsidiary, or a combination of subsidiaries, whether on a relative or a comparative basis: (i) earnings per share, (ii) net
income (before or after taxes), (iii) return measures (including, but not limited to, return on assets, equity or sales), (iv) cash flow return on investments which equals net cash flows divided by owners equity, (v) earnings
before or after taxes, depreciation and/or amortization, (vi) gross revenues, (vii) operating income (before or after taxes), (viii) total shareholder return, (ix) corporate performance indicators (indices based on the level of
certain expenses, certain objectively measurable operational events or certain services provided to customers), (x) cash generation, profit and/or revenue targets, (xi) growth measures, including revenue growth, reserve growth or reserve
replacement, whether or not as compared to a peer group or other benchmark,
76
and/or (xii) share price (including, but not limited to, growth measures and total shareholder return). The Plan allows the Committee to exclude the effect of changes in accounting standards
and other events specified by the Committee (such as write-offs, capital gains and losses, and acquisitions and dispositions of businesses) that may impact the comparability of results of operations or financial condition in setting performance
goals using these performance measures, and in determining actual performance relative to these performance measures.
Other Terms
of Awards
Awards under the Plan will generally be evidenced by an award notice. Upon grant of any award, the
Committee may, by way of the award notice or otherwise, establish such other terms and conditions governing the grant of such award as are not inconsistent with the Plan. The Committee generally may unilaterally amend any award if such amendment is
not adverse to the participant (unless the Committee determines that such amendment is necessary or advisable to comply with applicable law as a result of changes in law or regulation or to avoid the imposition of an additional tax, interest or
penalty under Section 409A of the Code). The Company may deduct from any payment under the Plan the amount of any applicable income and employment taxes, or may require the participant to pay such taxes as a condition to making such payment. Subject
to the terms of the Plan, a participant may pay the amount of such taxes required to be withheld from any award, in whole or in part, by requesting that the Company withhold from any payment of Common Stock due as a result of such award, or by
delivering to the Company, shares of Common Stock with a fair market value not in excess of the amount of the applicable withholding taxes.
Nonassignability
Except as otherwise provided in an award notice, no awards under the Plan may be transferred (except by will or the laws of
descent and distribution), and during a participants lifetime may be exercised only by the participant except that, the Committee may permit awards to be transferred to: (i) members of a participants immediate family as defined in
Rule 16a-1 of the Exchange Act or any successor rule or regulation (or a participants former spouse, niece or nephew), or (ii) a trust in which these persons have more than fifty percent of the beneficial interest (a
Trust) and any other entity in which these persons (or the participant) own more than fifty percent of the voting interests (Permitted Transferees), provided that (a) there is no consideration for such transfer and
(b) the Plans transferability provisions do not prohibit the transfer of an award from a Trust back to a participant to whom the award was originally granted, in accordance with the terms of the Trust. Following transfer, any awards
continue to be subject to the same terms and conditions as were applicable immediately prior to transfer and, except that, for events related to the termination of employment of the participant, the term participant will refer to the
transferor.
Change in Control
In the event of a Change in Control (as that term is defined below), outstanding awards will vest and become fully
exercisable if such awards are not assumed or substituted with new ones by the surviving entity (as further described below). Specifically, the plan provides that: (i) each outstanding option and SAR shall become fully exercisable,
(ii) the restricted period shall lapse as to each share of outstanding Restricted Stock then outstanding, (iii) each outstanding RSU shall become fully vested and payable, (iv) each outstanding performance share award and performance
unit award shall be deemed earned at the target level of performance for such award, and (v) each outstanding other stock-based award shall become fully vested and payable.
In addition, in connection with a Change in Control, the Committee may, in its discretion, provide that each option and/or SAR
shall be canceled in exchange for a payment per share in cash (Settlement Payment) in an amount equal to the excess, if any, of the fair market value over the exercise price of the option or grant price of the SAR. Should the Committee
authorize any Settlement Payments in respect of
77
options, the Committee may determine that any options which have an exercise price per share below the fair market value will be deemed cancelled and satisfied in full for a deemed Settlement
Payment of zero. The Committee may also decide that each restricted stock unit, other stock-based award, performance share and/or performance unit shall be settled in cash with its value determined based on the value received by the stockholders in
any transaction that itself constitutes a Change in Control.
If the Committee reasonably determines in good faith, prior
to the occurrence of a Change in Control, that outstanding awards under the Plan shall be honored or assumed, or new rights substituted therefore immediately following the Change in Control, the outstanding awards will not vest as described above.
However, such new award must: (i) be based on stock which is traded on an established U.S. securities market, (ii) provide the participant with rights and entitlements substantially equivalent to or better than those applicable to the
outstanding award under the Plan, (iii) have substantially equivalent economic value as the outstanding awards (as described in the Plan), and (iv) provide that the awards will vest (as described in the Plan) in the event that, during the
24-month
period following the Change in Control, the participants employment or service is involuntarily terminated for any reason (including, but not limited to a termination due to death or disability) other
than for Cause, or the participants employment or service is Constructively Terminated (as defined below).
If any award granted under the Plan and outstanding at the time of a Change in Control is treated as deferred
compensation under Section 409A of the Code, and not exempt from its requirements, no acceleration of payment of such award shall be made upon a Change in Control, even if such award vests and becomes fully exercisable upon a Change in
Control, unless such event is also a change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the corporation within the meaning of Section 409A of the Code. In such case,
such award will be paid out at the date or event that such award would have been payable without regard to the occurrence of such Change in Control.
For purposes of the Plan, a Change in Control shall occur whenever (in each case, as further described in the Plan):
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(i)
|
any person, other than the Company, one of our subsidiaries, or any employee benefit plan or plans sponsored
by the Company or any such subsidiary, is or has become the beneficial owner of twenty percent (20%) or more of the combined voting power of the outstanding securities of the Company ordinarily having the right to vote at the election of directors,
or more than twenty percent (20%) of the fair market value of all classes of the Companys outstanding stock,
|
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(a)
|
any consolidation or merger of the Company immediately following which the persons who, immediately prior to
the consolidation or merger, held the capital stock of the Company do not hold, immediately following such transaction, (x) at least a majority of the stock ordinarily entitled to vote in the election of directors of the corporation surviving
such consolidation or merger (or the ultimate parent corporation in an unbroken chain which owns, directly or indirectly, a majority of the capital stock of such entity) or (y) stock in the entity described in subclause (x) above that
represents at least 50% of the fair market value of all classes of stock of such entity, in either case, in substantially the same proportionate ownership as such persons held immediately before such consolidation or merger, or
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|
(b)
|
any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all
or substantially all the assets of the Company, or
|
|
(iii)
|
individuals who constituted the Board at the beginning of a 12 month period (the Incumbent
Board) have ceased for any reason to constitute at least a majority thereof, provided that any person who becomes a director and whose election, or nomination for election, was approved by a vote of at least three-quarters (3/4) of the
directors comprising the Incumbent Board shall be considered as though such person were a member of the Incumbent Board.
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78
A participant in the Plan shall undergo a Constructive Termination
if, without the participants written consent, the participant terminates employment or service within 120 days following either (x) a material reduction in the participants base salary or a participants incentive
compensation opportunity, or (y) the relocation of the participants principal place of employment or service to a location more than 35 miles away from the participants prior principal place of employment or service.
Adjustment of Shares Available
In the event of the occurrence of an Adjustment Event, equitable adjustment will be made by the Committee, in its discretion,
in: (i) the aggregate number of shares of Common Stock available for awards under the Plan, (ii) the aggregate limitations on the number of shares that may be awarded as a particular type of award or that may be awarded to any particular
participant in any particular period under the Plan and (iii) the aggregate number of shares subject to outstanding awards and the respective exercise prices or grant prices applicable to outstanding awards.
U.S. Federal Income Tax Consequences
This is a brief summary of some of the U.S. federal income tax consequences of certain transactions under the Plan based on
U.S. federal income tax laws in effect. This summary, which is presented for the information of stockholders considering how to vote on this proposal and not for Plan participants, is not intended to be complete and does not describe federal taxes
other than income taxes (such as Medicare and Social Security taxes), state, local or foreign tax consequences.
A
participant who is granted an incentive stock option is not required to recognize taxable income at the time of the grant or at the time of exercise. If a participant does not dispose of the shares acquired pursuant to the exercise of an incentive
stock option before the later of two years from the date of grant of the option and one year from the transfer of the shares to him, any gain or loss realized on a subsequent disposition of the shares will be treated as long-term capital gain or
loss.
If a participant disposes of the shares received upon the exercise of any incentive stock option either
(i) within one year of the transfer of the shares to him or her or (ii) within two years after the incentive stock option was granted, the participant will generally recognize ordinary compensation income equal to the lesser of
(a) the excess of the fair market value of the shares on the date the incentive stock option was exercised over the purchase price paid for the shares upon exercise, and (b) the amount of gain realized on the sale.
A participant who is granted a
non-qualified
stock option does not have taxable income
at the time of grant, but does have taxable ordinary income at the time of exercise equal to the difference between the exercise price of the shares and the market value of the shares on the date of exercise.
The grant of a SAR will produce no federal tax consequences for the participant or the Company. The exercise of a SAR results
in taxable ordinary income to the participant, equal to the amount of cash received and the fair market value of any shares received on the exercise.
A participant who is granted shares of Restricted Stock will not be required to recognize taxable income at the time of the
grant, assuming that the restrictions constitute a substantial risk of forfeiture for federal income tax purposes. When such restrictions lapse, the participant will recognize taxable income in an amount equal to the excess of the fair market value
of the shares at such time over the amount, if any, paid for such shares. However, a recipient who so elects under Section 83(b) of the Code within 30 days of the date of transfer of the shares will have taxable ordinary income on the date of
transfer of the shares equal to the excess of the fair market value of such shares (determined without regard to the Restrictions) over the purchase price, if any, of such Restricted Stock. If a Section 83(b) election has not been made, any
dividends received with respect to Restricted Stock that are subject to the restrictions generally will be treated as compensation that is taxable as ordinary income to the recipient.
A participant who is granted RSUs will generally be subject to tax at ordinary income rates on the fair market value of
unrestricted shares of Common Stock on the date that such shares are transferred to the
79
participant under the award (reduced by any amount paid by the participant for such RSUs), and the capital gains/loss holding period for such shares will also commence on such date.
A participant who is granted a performance share or performance unit will not be required to recognize taxable income at the
time of the grant. A participant will be required to recognize ordinary income either at the time the award vests or is paid, depending upon the terms and conditions of the award.
To the extent that a participant recognizes ordinary income in the circumstances described above, the Company or the subsidiary
for which the participant performs services will be entitled to a corresponding deduction provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an excess parachute
payment within the meaning of Section 280G of the Code and is not disallowed by the $1 million limitation on certain executive compensation under Section 162(m) of the Code.
New Plan Benefits
Awards under the Plan are made at the discretion of the Committee. While the Committee has established guidelines for making
awards to the Companys executive officers, the number of shares that are granted subject to any award is subject to a number of variables, including the value of the Common Stock at or about the time the award is granted. Therefore, the awards
that may be made under the Plan at a future date are not currently determinable. Accordingly, in accordance with the interpretations of the SEC staff, no new plan benefit table is required with respect to the Plan.
We intend to file a Registration Statement on Form
S-8
relating to the issuance of the
additional shares of Common Stock under the Plan with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the Securities Act), as soon as practicable after approval of Proposal 3 by our
stockholders. The affirmative vote of a majority of the votes cast with respect to the approval of the Plan is required for approval of the proposed amendments to the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR
THIS PROPOSAL.
80
PROPOSAL 4. APPROVAL OF THE AMENDED AND RESTATED
2009
NON-EMPLOYEE
DIRECTOR EQUITY COMPENSATION PLAN
We are seeking your approval of the amended and restated National Fuel Gas Company 2009
Non-Employee
Director Equity Compensation Plan (the Director Plan) for the purpose of increasing the number of shares authorized for issuance under the Director Plan by an additional 250,000 shares
of our Common Stock, par value $1.00 per share. The summary of the Director Plan that follows is not intended to be exhaustive and is qualified in its entirety by the terms of the Director Plan, a copy of which is included at Appendix D to this
proxy statement.
Note that Proposal 3 of this proxy statement seeks your approval of an increase in the number of shares
of our Common Stock to be made available for issuance under another plan, namely, the amended and restated National Fuel Gas Company 2010 Equity Compensation Plan. We urge you to read both Proposal 3 and this Proposal 4 carefully.
The Board of Directors believes that the Companys ability to attract and retain highly qualified
non-employee
directors is critical to the Companys long-term success. The Board also wishes to encourage individual directors to acquire a proprietary interest in the long-term success of the Company, thereby
aligning their financial interests with those of the Companys stockholders. The Director Plan is designed to serve these purposes.
The Director Plan provides for the issuance of shares of Common Stock to
non-employee
directors, as compensation in whole or in part for their service on the Board. The Director Plan initially became effective as of March 12, 2009, the date of the Companys 2009 Annual Meeting of Stockholders, upon approval of the
Companys stockholders at such meeting. As last approved by stockholders in 2016, the Director Plan authorized the issuance of a total of 200,000 shares.
We are seeking stockholder approval to make an additional 250,000 shares of Common Stock available for issuance under the
Director Plan. As of September 30, 2018, we had issued 146,368 of the 200,000 shares previously approved by stockholders for issuance. As of December 31, 2018, the closing price of the Common Stock on the New York Stock Exchange was
$51.18.
We believe the addition of 250,000 shares to the Director Plan will enable us to continue to attract and retain
highly qualified
non-employee
directors. The 250,000 shares we seek to add to the Director Plan equal approximately 0.29% of the 85,956,814 shares of Common Stock issued and outstanding as of September 30,
2018. As of that date, the total number of shares of Common Stock remaining available under the Director Plan (53,632), plus the proposed additional shares of Common Stock to be made available for future issuance under the Director Plan (250,000),
represent a total potential overhang of 303,632 shares (0.35%) under the Director Plan. The shares of Common Stock available for issuance under the Plan may be authorized and unissued shares or treasury shares.
The Company currently has ten directors, all of whom are
non-employee
directors except
Ronald Tanski, the Companys President and Chief Executive Officer. Each of the nine
non-employee
directors receives shares under the Director Plan, and the basis for their participation is their status
as
non-employee
directors. The compensation of the Companys directors is discussed in considerable detail under Proposal 1 of this proxy statement. In fiscal years 2018, 2017 and 2016, the Company issued
an aggregate of 28,044 shares, 24,028 shares and 18,184 shares, respectively, under the Director Plan. The shares issued under the Director Plan represented 0.03% of the Companys weighted average shares outstanding for each of fiscal years
2018 and 2017, and 0.02% of the Companys weighted average shares outstanding for fiscal year 2016.
Shares will be
issued under the Director Plan on a quarterly basis, in advance (as of the first business day of the quarter). The Board will determine from time to time in its discretion the value of the shares or the number of shares to be issued per quarter,
provided that the aggregate number of shares to be issued to any one
non-employee
director in any
12-month
period may not exceed 5,000. The number of shares to be issued
to a participant will be prorated as applicable for the quarter in which the participant joins the Board and the quarter in which the participant is scheduled to retire or resign from the Board. Shares will
81
not be issued under the Director Plan to any
non-employee
director who declines receipt of the shares or whose compensation is otherwise determined by
written agreement between the Company and the
non-employee
director.
The number of
shares available for issuance under the Director Plan is subject to adjustment in the event certain transactions occur. For example, in the event of changes in the Common Stock by reason of a Common Stock dividend, stock split, reverse stock split
or other combination, the Board will make appropriate adjustment in the aggregate number of shares available under the Director Plan and in the rate of payment of shares under the Director Plan, as further described in the Director Plan. In the
event of a merger or consolidation, reorganization, reclassification of the Common Stock, spinoff of a significant asset or other changes in the capitalization of the Company, the Board may make appropriate provision with respect to shares issued
under the Director Plan for (i) the substitution, on an equitable basis, of appropriate stock or other securities or consideration to which holders of Common Stock will be entitled pursuant to such transaction, or (ii) adjustment in the
number of shares available for issuance under the Director Plan and in the rate of payment of shares under the Director Plan, in each case, as deemed appropriate by the Board, and as further described in the Director Plan.
Each share of Common Stock issued to a
non-employee
director under the Director Plan
will be
non-transferable
until the later of two years after its issuance or six months after the
non-employee
directors cessation of service on the Board, except
as follows. Upon a
non-employee
directors death, whether in office or after his or her service as a director ceases, all restrictions on transferability imposed under the Director Plan will lapse.
Non-employee
directors will be entitled to all of the rights of stockholders with
respect to shares issued under the Director Plan, including the right to vote the shares, the right to receive dividends and the right to reinvest dividends, outside of the Director Plan, into additional shares of Common Stock. Shares issued under
the Director Plan will not be subject to forfeiture or cancellation for any reason.
The Board will administer the Director
Plan and will have the authority to interpret the Director Plan, establish administrative rules, grant waivers of Director Plan terms and conditions and take other actions it deems advisable, subject to the terms of the Director Plan. The
Boards determinations with respect to the Director Plan will be made by a majority of the Board and will be final, binding and conclusive.
The Board may suspend or terminate the Director Plan at any time. In addition, the Board generally may amend the Director Plan,
subject to the terms of the Director Plan. Any amendment to the Director Plan will be subject to stockholder approval (i) at the discretion of the Board, and (ii) to the extent that stockholder approval may be required by law or under the
applicable requirements of the New York Stock Exchange or any other exchange on which the Common Stock is listed to trade. Unless earlier terminated by the Board, the Director Plan will expire when all of the shares available for issuance under the
Director Plan have been issued. The expiration of the Director Plan will not adversely affect the rights of any participant without such participants consent.
The Director Plan is not the only means of compensating
non-employee
directors for
their service on the Board. The Board may continue to provide, outside of the Director Plan, for payment of
non-equity
compensation for such service, including cash, on terms and in amounts as determined by
the Board in its discretion.
U.S. Federal Income Tax Consequences
This is a brief summary of some of the U.S. federal income tax consequences of certain transactions under the Director Plan
based on U.S. federal income tax laws in effect. This summary, which is presented for the information of stockholders considering how to vote on this proposal and not for Director Plan participants, is not intended to be complete and does not
describe federal taxes other than income taxes (such as Medicare and Social Security taxes), state, local or foreign tax consequences. The recipient of shares under the Director Plan generally will be subject to tax at ordinary income rates at the
fair market value of the shares at the time of issuance.
82
New Plan Benefits
Shares are issued under the Director Plan, which was last approved by stockholders at the Companys 2016 Annual Meeting,
as determined by the Board, which reviews the level of director compensation at least every other year with the assistance of Korn Ferry, its compensation advisor. The Board determined the current rate of equity compensation in March 2017, and may
make changes to that rate from time to time in its discretion, subject to the 5,000 share
per-director
annual limit described above. In determining director compensation, the Board reviews a number of factors,
including but not limited to director compensation at peer companies. The Director Plan does not include a formula or other objective criteria to determine the rate of equity compensation or the number of shares to be issued, and there are no
outstanding grants or awards under the Director Plan that require stockholder approval to be effective. Accordingly, the shares that may be issued under the Director Plan at a future date are not currently determinable, and in accordance with the
interpretations of the SEC staff, no new plan benefits table is required with respect to the Director Plan.
Registration with the
SEC
Shares issued under the Director Plan are issued in reliance on the exemption from registration under Section
4(a)(2) of the Securities Act as transactions not involving a public offering. It is possible that the Company may determine in the future to change its practice of reliance on the exemption and file a Registration Statement on Form S-8 relating to
the issuance of shares under the Director Plan.
The affirmative vote of a majority of the votes cast with respect to the
approval of the Director Plan is required for approval of the proposed amendment to the Director Plan.
THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE
FOR
THIS PROPOSAL.
83
PROPOSAL 5. RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
At the Annual Meeting, stockholders will be asked to ratify the Audit Committees appointment of PricewaterhouseCoopers
LLP as the independent registered public accounting firm for the Companys fiscal year ending September 30, 2019 (fiscal 2019). The independent registered public accounting firm will examine the financial statements of the
Company and its subsidiaries and report upon the annual consolidated financial statements for fiscal 2019. PricewaterhouseCoopers LLP served as the Companys independent registered public accounting firm for fiscal 2018.
One or more representatives of PricewaterhouseCoopers LLP are expected to attend the Annual Meeting. They will have an
opportunity to make a statement if they wish and are expected to be available to respond to appropriate stockholder questions.
The affirmative vote of a majority of the votes cast with respect to the ratification of the appointment of the independent
registered public accounting firm by the holders of shares of Common Stock entitled to vote is required for ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm.
If the necessary votes are not received, the Audit Committee will reconsider whether to retain PricewaterhouseCoopers LLP and
may retain PricewaterhouseCoopers LLP or appoint another independent registered public accounting firm, without resubmitting the matter to stockholders. Even if the appointment is ratified, the Audit Committee in its discretion may appoint a
different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders. Unless they are otherwise directed by the stockholders, the
Proxies intend to vote for ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR
RATIFICATION OF THIS APPOINTMENT.
84
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Companys directors and officers, and persons who own more than 10% of
a registered class of the Companys equity securities, to file reports of ownership and changes in ownership with the SEC and the NYSE. Directors, officers and greater-than 10% stockholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file. Based solely on review of information furnished to the Company, reports filed through the Company and/or written representations that no Form 5 was required, the Company believes that all
Section 16(a) filing requirements applicable to its officers, directors and greater-than 10% beneficial owners were complied with during fiscal 2018.
CODE OF ETHICS
The Company has adopted a Code of Business Conduct and Ethics that applies to the Companys directors, principal executive
officer, principal financial officer, controller, other officers and employees that is designed to deter wrongdoing and to promote honest and ethical conduct. The text of the code of ethics is available on the Companys website at
www.nationalfuel.com
. Upon request, the Company will provide to any person without charge a copy of the code of ethics. Requests must be made to the Secretary at the principal offices of the Company.
IMPORTANT NOTICE REGARDING DELIVERY OF STOCKHOLDER DOCUMENTS
Only one copy of this proxy statement, the Companys Summary Annual Report and financial statements for the 2018 fiscal
year are being delivered to some multiple stockholders who share an address unless the Company has received contrary instructions from one or more of the stockholders. A separate proxy card and a separate notice of the Annual Meeting are being
included for each account at the shared address.
Registered stockholders who share an address and would like to receive a
separate annual report to stockholders and/or a separate proxy statement for the Annual Meeting or future Annual Meetings of Stockholders, or have questions regarding the householding process, may call Broadridge, toll-free at
1-866-540-7095.
You will need your
12-digit
Investor ID number. Simply follow the prompts. You
may also write to Broadridge Householding Department, 51 Mercedes Way, Edgewood, NY 11717. Promptly upon request, additional copies of the Companys Summary Annual Report and financial statements for fiscal 2018 and separate proxy statements
for the Annual Meeting will be sent. By contacting Broadridge, registered stockholders sharing an address can also request delivery of a single copy of annual reports to stockholders or proxy statements in the future if registered stockholders at
the shared address are receiving multiple copies.
Many brokerage firms and other holders of record have also instituted
householding procedures. If your family has one or more street name account under which you beneficially own shares of Common Stock, you may have received householding information from your broker, financial institution or other nominee
in the past. Please contact the holder of record directly if you have questions, require additional copies of this proxy statement or our Summary Annual Report to Stockholders and financial statements for fiscal 2018 or wish to revoke your decision
to household and thereby receive multiple copies. You should also contact the holder of record if you wish to institute householding and see the section Multiple Copies of Proxy Statement within this proxy statement. These options are
available to you at any time.
PROPOSALS OF SECURITY HOLDERS FOR THE 2020 ANNUAL MEETING
Proposals that security holders intend to present at the 2020 Annual Meeting of Stockholders must be received by the Secretary
at the principal offices of the Company no later than September 20, 2019, in
85
order to be considered for inclusion, pursuant to SEC Rule
14a-8
under the Exchange Act, in the Companys proxy statement and proxy for that meeting.
Notice of a stockholder proposal submitted outside the processes of SEC Rule
14a-8
under the Exchange Act, or a notice of a stockholders intent to nominate one or more directors, for consideration at the
2020 Annual Meeting of Stockholders, shall be considered untimely unless received by the Secretary at the Companys principal office between October 9, 2019 and November 8, 2019.
OTHER BUSINESS
The Board of Directors does not know of any business that will be presented for consideration at the Annual Meeting except as
set forth above. However, if any other business is properly brought before the Annual Meeting, or any adjournment or postponement thereof, the Proxies will vote in regard thereto according to their discretion.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file periodic reports and other information with the SEC. Our SEC filings are available to the public at the SECs
website at
www.sec.gov
and at the Companys website at
www.nationalfuel.com
.
Statements contained in
this proxy statement, or in any document incorporated in this proxy statement by reference regarding the contents of any contract or other document, are not necessarily complete and each such statement is qualified in its entirety by reference to
that contract or other document filed as an exhibit with the SEC. The SEC allows the Company to incorporate by reference the information that it files with the SEC. Incorporation by reference means that the Company can disclose important information
to you by referring you to other documents filed separately with the SEC that are legally considered to be part of this document, and such documents are automatically updated and superseded by this proxy statement. Later information that is filed by
the Company with the SEC will automatically update and supersede the information in this document.
B
Y
O
RDER
OF
THE
B
OARD
OF
D
IRECTORS
S
ARAH
J. M
UGEL
Secretary
January 18, 2019
86
APPENDIX A TO PROXY STATEMENT
NATIONAL FUEL GAS COMPANY
REPORTING PROCEDURES FOR ACCOUNTING AND AUDITING MATTERS
National Fuel Gas Company (Company) has a longstanding commitment to comply with federal and state securities laws
and regulations, accounting standards, accounting controls and audit practices. In furtherance of this commitment, the Audit Committee of the Companys Board of Directors has established these Reporting Procedures for Accounting and Auditing
Matters (Procedures), which provide for (i) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and (ii) the confidential,
anonymous submission by employees of the Company of concerns regarding accounting or auditing matters.
These Procedures apply to all employees of all divisions and subsidiaries of the Company.
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A.
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Making a Report of Accounting and Auditing Matters
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1.
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An employee with a concern or complaint regarding accounting, internal accounting controls, or auditing
matters (collectively Accounting and Auditing Matters) may report such concerns, on a confidential and anonymous basis if the employee so desires, as follows:
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a.
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Via the Companys dedicated toll-free hotline
(1-800-605-1338)
operated by a third party service company; or
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b.
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In writing in a sealed envelope addressed to the Chairman of the Audit Committee, National Fuel Gas Company,
6363 Main Street, Williamsville, New York 14221. The sealed envelope should be labeled with a legend such as:
Submitted pursuant to the Reporting Procedures for Accounting and Auditing Matters.
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2.
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A sufficiently detailed description of the factual basis for the report should be given in order to allow
appropriate investigation into the matter.
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1.
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All reports will be forwarded to the Chairman of Audit Committee, the Chief Auditor, and General Counsel.
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2.
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Upon receipt of a report, the Chief Auditor will determine whether the complaint pertains to Accounting and
Auditing Matters. If the report does not pertain to Accounting and Auditing Matters, the Chief Auditor and General Counsel will decide together on the appropriate disposition.
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3.
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Reports relating to Accounting and Auditing Matters will be promptly investigated by the Chief Auditor under
the Audit Committees direction and oversight, and may involve the assistance of other Company resources as needed. To the fullest extent possible, such investigations and reports will be kept confidential.
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4.
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If the results of an investigation indicate that corrective action is required, the Audit Committee will
decide what steps should be taken to rectify the problem and reduce the likelihood of recurrence, and may also recommend appropriate discipline.
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5.
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No person making a report under these Procedures shall be subject to retaliation because of making a good
faith report. In addition, any employee of the Company responsible for
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A-1
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retaliating against individuals who in good faith report concerns regarding Accounting and Auditing Matters will be subject to disciplinary action, up to and including termination. Any employee
making a bad faith report, including a report made for the purpose of harassing or maliciously injuring the subject of the report, will be subject to disciplinary action, up to and including termination.
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C.
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Retention of Reports and Investigation Documents
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The Chief Auditor will maintain, in accordance with the Companys document retention policy, a complete record of all
reports received (including those determined not to pertain to Accounting and Auditing Matters), all records associated with reports of Accounting and Auditing Matters, the treatment of reports of Accounting and Auditing Matters under these
Procedures, and the ultimate disposition of Accounting and Auditing Matters reports. In addition, the Chief Auditor shall prepare an update on the status of (i) all reports of Accounting and Auditing Matters under investigation, and
(ii) those reports of Accounting and Auditing Matters whose investigation has been concluded since the previous status update. Status updates shall be provided as required to the Chairman of the Audit Committee and shall be provided on a
quarterly basis for the entire Audit Committee.
IV.
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Administration of Procedures
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The Audit Committee is the issuer and owner of these Procedures. These Procedures shall be subject to periodic review and
revision by the Audit Committee as necessary or appropriate. The Audit Committee, in consultation with the Companys Chief Auditor, shall have the authority to make any interpretations regarding the operation of these Procedures.
A-2
APPENDIX B TO PROXY STATEMENT
NATIONAL FUEL GAS COMPANY
CORPORATE GOVERNANCE GUIDELINES
AMENDED EFFECTIVE JANUARY 1, 2019
The business of National Fuel Gas Company (the Company) is conducted by its employees, managers and officers, under
the oversight of the Board of Directors (the Board), in order to serve the long-term interests of its stockholders. The Board and management recognize that the long-term interests of stockholders are served by considering the interests
of customers, employees and the communities in which the Company operates. In addition, the Board requires directors, officers and employees to comply with all legal and regulatory requirements and to adhere to the highest ethical standards in the
performance of their duties. To help discharge its responsibilities, the Board has adopted the following guidelines on corporate governance matters.
The Board shall consist of a number of directors, not less than seven nor more than eleven, as determined by a majority vote of
the full Board.
The business and affairs of the Company shall be managed by or under the direction of the Board, acting as
a body, in accordance with
Section 14A:6-1
of the New Jersey Business Corporation Act. Individual directors shall have no authority to act for or on behalf of the Company without the express authorization
of the Board, or as may be provided by law, the Certificate of Incorporation or the
By-Laws.
A majority of the Board must qualify as independent directors under the listing standards of the New York Stock Exchange. The
Board will annually review the relationship that each director has with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). All determinations of director independence
will be disclosed in the Companys annual proxy statement.
3.
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Director Qualifications
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The Board, with input from the Nominating/Corporate Governance Committee, is responsible for periodically determining the
appropriate skills, perspectives, experiences, and characteristics required of Board candidates, taking into account the Companys needs and current
make-up
of the Board. This assessment should include
knowledge, experience, and skills in areas critical to understanding the Company and its business; personal characteristics, such as integrity and judgment; and candidates commitments to the boards of other publicly-held companies. Each Board
member is expected to ensure that other existing and planned future commitments do not materially interfere with the members service as a director and that he or she devotes the time necessary to discharge his or her duties as a director.
The Nominating/Corporate Governance Committee is responsible for periodically reviewing these qualification guidelines and
recommending modifications, as appropriate. The Board believes the qualification guidelines included as
Exhibit A
are currently appropriate, but it may change these guidelines as the Companys and Boards needs warrant.
Directors are expected to carry out the functions of the Board in a professional and diligent manner, and to spend the time and
effort necessary to properly discharge such responsibilities. Accordingly, a director is expected to regularly attend meetings of the Board and Committees on which such director sits, with the understanding that on occasion a director may be unable
to attend a meeting. A director who is unable to attend a meeting is expected to notify the Chairman of the Board or the Chair of the appropriate Committee in advance of such meeting. A director is also expected to review provided materials in
advance of a meeting.
B-1
4.
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Selection of New Directors
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The Board is responsible for selecting Board candidates and nominating them for election by the stockholders and for filling
vacancies on the Board. The Nominating/Corporate Governance Committee will recommend to the Board nominees for election, including, as appropriate, incumbent directors for
re-election.
Stockholders may propose candidates for consideration by the Nominating/Corporate Governance Committee in accordance with the
Process for Identifying and Evaluating Nominees for Director included as
Exhibit B
. In addition, the Companys
By-Laws
provide a process for stockholders meeting certain requirements to have
nominees included in the Companys proxy materials.
In recommending individuals for nomination, the
Nominating/Corporate Governance Committee will seek the input of the Chairman of the Board and Chief Executive Officer and will evaluate candidates using the qualification guidelines included as
Exhibit A
and the Process for Identifying and
Evaluating Nominees for Director included as
Exhibit B
, as they may be supplemented from time to time. Once a candidate is selected to join the Board, the Chairman of the Board and/or the Chair of the Nominating/Corporate Governance Committee
will extend the invitation to join the Board on the Boards behalf.
The Board does not believe it should limit the number of terms for which an individual may serve as a director. While term
limits could help ensure fresh ideas, they also would force the Board to lose the contributions of directors who have developed an insight into the Company. This insight and continuity of directors is an advantage, not a disadvantage. As an
alternative to term limits, the Nominating/Corporate Governance Committee will review a directors continuation on the Board whenever the director experiences a change in professional responsibilities, as a way to assure that the
directors skills and experience continue to match the needs of the Board. In addition, in connection with nomination of the slate of directors that the Board proposes for election by stockholders each year, the Nominating/Corporate Governance
Committee will consider
re-nominated
directors continuation on the Board and take steps as may be appropriate to ensure that the Board maintains an openness to new ideas.
A director shall normally serve on the Board for a three-year term, except that subject to paragraph 7, a director appointed to
fill a vacancy shall stand for election at the next annual meeting of stockholders.
In an uncontested election of
directors, a nominee for director who fails to receive a majority FOR vote of votes cast, as defined under New Jersey law, for election in accordance with the Companys
By-Laws
is expected to
tender, promptly following certification of the stockholder vote, his or her resignation from the Board, which resignation may be conditioned upon Board acceptance of the resignation.
The Nominating/Corporate Governance Committee will consider the tendered resignation of a director who fails to receive a
majority of votes cast for election, as well as any other offer to resign that is conditioned upon Board acceptance, and recommend to the Board whether or not to accept such resignation. The Nominating/Corporate Governance Committee in deciding what
action to recommend, and the Board in deciding what action to take, may consider any factors they deem relevant. The director whose resignation is under consideration shall abstain from participating in any decision of the Nominating/Corporate
Governance Committee or the Board regarding such resignation. If the Board does not accept the resignation, the director will continue to serve until his or her successor is elected and qualified. The Board shall publicly disclose its decision
regarding a resignation tendered by a director who fails to receive a majority of votes cast for election within 90 days after certification of the stockholder vote.
6.
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Change in Professional Responsibilities
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It is the view of the Board that each director who experiences a change in his or her business or professional affiliation or
responsibilities should bring this change to the attention of the Board and
B-2
should offer to resign. The Board does not believe that each director who retires or has a change in position or responsibilities should necessarily leave the Board. The Nominating/Corporate
Governance Committee will, however, review the continued appropriateness of Board membership under these circumstances and make a recommendation to the Board.
This same guideline applies to any inside directors, including the Chief Executive Officer of the Company, in the event he or
she no longer serves in that position.
A Company director must submit his or her resignation from the Board at the annual meeting of stockholders immediately
following his or her 75
th
birthday. Directors may stand for
re-election
even though this guideline would prevent them from completing a full term.
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A.
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Chairman of the Board and Chief Executive Officer
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1. The Chairman of the Board, who may also be the Chief Executive Officer, shall be a director and preside at all meetings of
the Board and meetings of the stockholders. The Chairman of the Board is chosen on an annual basis by at least a majority vote of the remaining directors.
2. The Chief Executive Officer, who may also be the Chairman of the Board, shall be appointed by the Board and serve at the
pleasure of the Board.
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B.
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Lead Independent Director
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The Lead Independent Director will preside at all meetings of the
non-management
directors at which he or she is present and all meetings of the independent directors at which he or she is present. The Lead Independent Director will perform such other functions as the Board may direct. The Lead Independent Director is chosen on
an annual basis by at least a majority vote of the remaining directors.
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C.
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Succession Planning and Leadership Development
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Each year, the Chief Executive Officer will report to the Compensation Committee on succession planning and his or her
recommendation as to a potential successor, along with a review of any development plans recommended for such individuals. The Committee will make an annual report to the Board on succession planning, and the Board will work with the Committee to
evaluate potential successors to the Chief Executive Officer. When the Compensation Committee and the Board review management succession plans for the Chief Executive Officer, they will consider succession in the event of an emergency or retirement
of the Chief Executive Officer. The Committee and the Board will also review succession candidates for executive officers other than the Chief Executive Officer and other senior managers as it deems appropriate.
Currently there are five Committees: Executive, Audit, Compensation, Nominating/Corporate Governance, and Financing. The Board
believes the current Committee structure is appropriate. From time to time, depending upon the circumstances, the Board may form a new Committee or disband a current Committee.
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B.
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Assignment of Committee Members
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The Board appoints members of the Committees on an annual basis. Vacancies in the Committees will be filled by the Board. In
making assignments to the Committees, only independent directors may
B-3
serve on the Audit Committee, the Compensation Committee, or the Nominating/Corporate Governance Committee, and at least one member of the Audit Committee must have accounting or financial
management experience, as defined by the U.S. Securities and Exchange Commission rules or as required under applicable New York Stock Exchange listing requirements. Additionally, a member of the Audit Committee may not sit on more than three other
Audit Committees of other public companies, unless the Board determines that such commitments would not impair his or her effective service to the Company.
The Board will take into account tenure on a Committee and give consideration to rotating Committee members periodically, but
the Board does not feel that rotation should be mandated as a policy.
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C.
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Committee Charters and Authority
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The Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee, each have a written charter, which
has been approved by the Board. Each charter delegates certain responsibilities to the respective Committee.
The Executive
Committee may exercise Board authority with respect to matters other than those for which action of the full Board is required under applicable law. The Financing Committee may exercise Board authority with respect to specific matters for which the
Board has delegated responsibility to it.
Unless delegated to one of the Committees either in the Charter, the
By-Laws,
a resolution of the Board or a vote of stockholders, each Committee shall make recommendations to the Board and the Board will consider and approve the recommendations. The Committee charters may be changed
from time to time by approval of the Board.
The Board has at least four scheduled meetings per year at which it reviews and discusses reports by management on the
performance of the Company, its plans and prospects, as well as immediate issues facing the Company.
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B.
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Role of the Chairman of the Board
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The Chairman of the Board shall preside at all meetings of the Board. The Chairman of the Board shall determine the agenda for
all Board meetings with the assistance of the Chief Executive Officer. Each director shall be entitled to suggest the inclusion of items on the agenda, with the final determination of the agenda to be made by the Chairman of the Board. The Chairman
of the Board shall also determine the timing and length of Board meetings, and the time to be devoted to each topic on the agenda. All procedural matters with respect to the conduct of Board meetings shall be determined by the Chairman of the Board,
including whether any individuals other than Board members shall be invited to attend and/or participate in all or any portion of any meetings, and the conditions of such individuals attendance and/or participation. In the absence of the
Chairman of the Board, the Chief Executive Officer shall exercise all powers and authority conferred herein.
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C.
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Distribution of Board Materials in Advance
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Materials for review, discussion and/or action of the Board should be distributed to Board members in advance of meetings
whenever practicable.
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D.
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Non-Management
Director Meetings/Independent Director
Meetings
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The
non-management
directors will meet at
regularly scheduled executive sessions without management. The Audit Committee Chair, Nominating/Corporate Governance Committee Chair and
B-4
Compensation Committee Chair may call the
non-management
directors to additional sessions without management. The independent directors will meet in
executive session without management at least once per year. The Board shall not take formal actions at meetings of the
non-management
directors or independent directors, although the participating directors
may make recommendations for consideration by the full Board.
Pursuant to their fiduciary duties, directors are required to protect and hold confidential all
non-public
information obtained by reason of their directorship position absent the express or implied permission of the Board of Directors to disclose such information or the written agreement of the Company
to permit disclosure. No director shall use Confidential Information for his or her own personal benefit or to benefit persons or entities outside the Company. No director shall disclose Confidential Information outside the Company, either during or
after his or her service as a director of the Company, except (i) with authorization of the Board of Directors, (ii) as may be permitted by written agreement with the Company, or (iii) as may be otherwise required by law.
Confidential Information is all
non-public
information entrusted to or
obtained by a director by reason of his or her position as a director of the Company. It includes, but is not limited to,
non-public
information that might be of use to competitors or harmful to the Company or
its customers if disclosed, such as
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information about the Companys financial condition, results of operations, prospects, plans, objectives
or strategies, and information relating to mergers and acquisitions, stock splits, stock repurchases, divestitures and other transactions;
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trade secrets, information or techniques, marketing and research and development information, drilling and
exploration data, information concerning customers, suppliers, producers and joint venture partners, payroll and benefits information, current/past employee information, technical and computer/software related information, and legal information;
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information about discussions and deliberations relating to business issues and decisions, between and among
employees, officers and directors.
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To promote a free and unfettered exchange of ideas among directors,
the directors will treat all discussions and deliberations that take place at Board meetings as confidential unless disclosure of those discussions is otherwise required by law or permitted by written agreement with the Company. No video or
electronic recording of Board proceedings shall be made without the consent of the Chairman of the Board and a majority of the Board.
12.
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Board and Committee Performance Evaluations
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The Board and the Audit, Compensation and Nominating/Corporate Governance Committees will perform an annual self-evaluation.
Each year the directors will provide assessments of the effectiveness of the Board, and the members of the Audit, Compensation and Nominating/Corporate Governance Committees will provide assessments of the effectiveness of their respective
committees. These evaluations will be submitted to the Nominating/Corporate Governance Committee which will review them and determine if any additional evaluation is necessary. If the Nominating/Corporate Governance Committee determines that
additional evaluation is necessary, it may elect to have such evaluation performed internally, or by an independent corporate governance expert. The Nominating/Corporate Governance Committee will report all evaluation results to the Board and make
recommendations for areas which, in its judgment, require improvement.
The Boards compensation philosophy is that directors (other than those who are also salaried officers of the Company or
any of its subsidiaries) are entitled to receive reasonable compensation for
B-5
their services and reimbursement for certain expenses, as may be determined by the Board. The Compensation Committee shall have the responsibility for recommending to the Board changes in
compensation levels for
non-employee
directors. In discharging this duty, the Committee shall be guided by four general principles: compensation should fairly pay directors for work required; compensation
should attract and retain highly qualified candidates for Board membership; compensation should align directors interests with the long-term interests of stockholders; and compensation should be transparent and as simple as possible within the
limitations of tax and legal considerations.
Reasonable compensation also may be paid to any person (other than a salaried
officer or employee of the Company or any of its subsidiaries) formally requested by the Board to attend a meeting.
14.
|
Board Access to Company Officers
|
Board members will have access to all officers of National Fuel Gas Company. Independent Board members may consult with such
officers without senior corporate management present. Members of committees of the Board will also have such access to management as is provided in committee charters or as may otherwise be authorized by the Board. Management is encouraged to invite
Company personnel to any Board meeting at which their presence and expertise would help the Board to have a full understanding of matters being considered and to introduce managers with significant potential.
15.
|
Access to Independent Advisors
|
The Board shall have the power at any time by majority vote to retain independent outside financial, legal or other advisors,
at the Companys expense.
16.
|
Director Contact with the Companys Constituencies
|
Except as otherwise required by New York Stock Exchange listing standards or applicable law, or as authorized by the Board,
communications with parties external to the Company (including but not limited to stockholders, the media, attorneys, vendors, service providers, etc.) shall be the responsibility of the Chief Executive Officer or delegated by the Chief Executive
Officer to the appropriate area of the Company. The directors will be consulted from time to time for their advice, as the Chief Executive Officer so determines.
17.
|
Director Orientation and Continuing Education
|
All directors, upon their initial appointment to the Board, shall attend an educational session, thereby enabling them to
better perform their duties and recognize and deal with various issues that may arise during their tenure as directors. Subsequently, the directors shall attend ongoing educational programs related to their Board service as the Board deems
appropriate.
18.
|
Risk Oversight and Oversight of Environmental, Social and Corporate Governance Concerns
|
The Board retains risk oversight and oversight of environmental, social and corporate governance
concerns, and any related health and safety issues that might arise from the Companys operations rather than delegating that responsibility to a Committee of the Board. Management is expected to integrate these corporate responsibility
concerns into decision-making throughout the organization.
If the Company is required to restate its financial results due to material noncompliance with any financial reporting
requirement under the securities laws as a result of misconduct by a current or former executive officer, the Board would exercise its business judgment to determine what action it believes is appropriate to address the conduct, prevent its
recurrence, and impose such discipline as would be appropriate. In addition to other potential action, the Board may, in its discretion after considering the
B-6
costs and benefits of doing so, seek to recover that portion of any incentive-based compensation received by such officer (including compensation received upon exercise or payment of stock
options and other equity awards) during the three-year period preceding the date on which the Company was required to prepare the accounting restatement, which exceeds the amount or value that the Board determines would have been payable or received
in respect of such incentive awards had the revised financial statement(s) reflected in the restatement been applied to determine the incentive compensation or been available to the market at the time of exercise or payment of any incentive award.
Subject to any limits imposed by applicable law, the Board may seek to recover such excess compensation by requiring the officer to pay such amount to the Company; by
set-off;
by reducing future compensation;
or by such other means or combination of means as the Board determines to be appropriate.
20.
|
Hedging or Pledging of Company Stock
|
It is the view of the Board that directors and executive officers should not purchase or sell options on Company stock, nor
engage in short sales with respect to Company common stock. Trading by executive officers and directors in puts, calls, straddles, equity swaps or other derivative securities that are directly linked to Company stock is prohibited. Directors and
executive officers may not pledge Company equity as security for an extension of credit.
21.
|
Amendment and Interpretation
|
These Guidelines are in addition to and are not intended to change or interpret any federal or state law or regulation, or the
Companys Certificate of Incorporation or
By-Laws
or any Committee Charter reviewed and approved by the Board. The Guidelines are subject to modification from time to time by the Board.
B-7
EXHIBIT A
TO
NATIONAL FUEL GAS
COMPANY
CORPORATE GOVERNANCE GUIDELINES
NATIONAL FUEL GAS COMPANY
DIRECTOR QUALIFICATION GUIDELINES
The Board of Directors in considering qualifications of directors standing for
re-election
and candidates for Board membership will consider the following factors, in addition to those other factors it may deem relevant:
1. Strong management experience, ideally with major public companies.
2. Other areas of expertise or experience that are desirable given the Companys business and the current
make-up
of the Board, such as expertise or experience in: the natural gas industry, information technology businesses, manufacturing, financial or investment banking, scientific research and development, senior
level government experience, and academic administration or teaching.
3. Desirability of range in age, so that retirements
are staggered to permit replacement of directors of desired skills and experience in a way that will permit appropriate continuity of Board members.
4. Independence, as defined by the Board.
5. Diversity of perspectives, including all aspects of diversity, brought to the Board by individual members.
6. Knowledge and skills in accounting and finance, business judgment, general management practices, crisis response and
management, industry knowledge and leadership.
7. Personal characteristics matching the Companys values, such as
integrity, accountability, financial literacy, and high performance standards.
8. Additional characteristics, such as:
a.) willingness to commit the time required to fully discharge their responsibilities to the Board,
including the time to prepare for Board and Committee meetings by reviewing the material supplied before each meeting;
b.) commitment to attend a minimum of 75% of meetings;
c.) ability and willingness to represent the stockholders long and short-term interests;
d.) awareness of the Companys responsibilities to its customers, employees, suppliers, regulatory
bodies, and the communities in which it operates; and
e.) willingness to advance their opinions, but once
a decision is made by a majority of the Board, a willingness to support the majority decision assuming questions of ethics or propriety are not involved.
9. The number of commitments to other entities, with one of the more important factors being the number of other public-company
boards on which the individual serves.
10. In order to qualify for election as a director, a nominee must be a stockholder
of the Company.
B-8
EXHIBIT B
TO
NATIONAL FUEL GAS
COMPANY
CORPORATE GOVERNANCE GUIDELINES
NATIONAL FUEL GAS COMPANY
NOMINATING/CORPORATE GOVERNANCE COMMITTEE
Process for Identifying and Evaluating Nominees for Director
1. The Nominating/Corporate Governance Committee (the Committee) will observe the following procedures in identifying and
evaluating candidates for election to the Companys Board of Directors.
2. The Company believes that the continuing
service of qualified incumbents promotes stability and continuity in the boardroom, contributing to the Boards ability to work as a collective body, while giving the Company the benefit of the familiarity and insight into the Companys
affairs that its directors have accumulated during their tenure. Accordingly, the process of the Committee for identifying nominees shall reflect the Companys practice of
re-nominating
incumbent
directors who continue to satisfy the Boards criteria for membership on the Board, whom the Committee believes continue to make important contributions to the Board and who consent to continue their service on the Board.
3. Consistent with this policy, in considering candidates for election at annual meetings of stockholders, the Committee will
consider the incumbent directors whose terms expire at the upcoming meeting and who wish to continue their service on the Board.
4. The Board will evaluate the qualifications and performance of the incumbent directors who desire to continue their service.
In particular, as to each such incumbent director, the Committee will
|
(a)
|
consider if the director continues to satisfy the Director Qualification Guidelines which are Exhibit A to
the Companys Corporate Governance Guidelines;
|
|
(b)
|
review any prior assessments of the performance of the director during the preceding term made by the
Committee; and
|
|
(c)
|
determine whether there exist any special, countervailing considerations against
re-nomination
of the director.
|
5. If the Committee determines that:
|
(a)
|
an incumbent director consenting to
re-nomination
continues to be
qualified and has satisfactorily performed his or her duties as a director during the preceding term; and
|
|
(b)
|
there exist no reasons, including considerations relating to the composition and functional needs of the
Board as a whole, why in the Committees view the incumbent should not be
re-nominated,
the Committee will, absent special circumstances, propose the incumbent director for
re-nomination.
|
6. The Committee will identify and evaluate new
candidates for election to the Board, including for the purpose of filling vacancies arising by reason of the resignation, retirement, removal, death or disability of an incumbent director or the desire of the directors to expand the size of the
Board.
7. The Committee will accept recommendations for nominees from persons that the Committee believes are likely to be
familiar with qualified candidates. These persons may include members of the Board, including members of the Committee, and management of the Company. The Committee may also determine to engage a professional search firm to assist in identifying
qualified candidates. If such a firm is engaged, the Committee shall set its fees and the scope of its engagement.
8. As
to each recommended candidate that the Committee believes merits consideration, the Committee will:
|
(a)
|
cause to be assembled information concerning the background and qualifications of the candidate;
|
B-9
|
(b)
|
determine if the candidate satisfies the Director Qualification Guidelines which are Exhibit A to the
Companys Corporate Governance Guidelines; if so, then
|
|
(c)
|
consider the contribution that the candidate can be expected to make to the overall functioning of the
Board.
|
9. The Committee shall solicit the views of the Chief Executive Officer and the Chairman of the
Board, and the views of such other persons as the committee deems appropriate, regarding the qualifications and suitability of candidates to be nominated as directors.
10. In its discretion, the Committee may designate one or more of its members (or the entire Committee) to interview any
proposed candidate.
11. Based on all available information and relevant considerations, the Committee will select a
candidate who, in the view of the Committee, is suited for membership on the Board. The Committee will then recommend to the Board that the candidate be nominated. The Board would then, if it chooses, nominate the candidate by a resolution adopted
by the Board at a meeting or by unanimous written consent.
12. Stockholders may propose candidates for consideration by
the Committee by communication directed to the Companys Secretary at its principal office, received not less than 120 calendar days before the anniversary date of the Companys proxy statement released to stockholders in connection with
the previous years annual meeting of stockholders. However, if the date of the annual meeting is changed more than 30 days from the date corresponding to the date of the prior years annual meeting, then a stockholders communication
must be received not later than the close of business on the tenth day following the date on which notice of the meeting is given by the Company (or, if earlier, by the tenth day following public disclosure of the new date of the annual meeting).
The communication must include all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case under applicable SEC
regulations, including such persons written consent to be named in the proxy statement as a nominee and to serving as a director if elected. In making its selection, the Committee will evaluate candidates proposed by stockholders owning at
least five percent (5%) of the Companys outstanding Common Stock, under criteria similar to the evaluation of other candidates. The Committee shall have no obligation whatsoever to consider other unsolicited recommendations received from
stockholders proposing candidates for the Board. The Committee may consider, as one of the factors in its evaluation of stockholder recommended nominees, the size and duration of the interest of the recommending stockholder or stockholder group in
the equity of the Company, and the candidates relationship to that stockholder or group, in order to determine whether the candidate can effectively represent the interests of all stockholders. The Committee may also consider the extent to
which the recommending stockholder or group intends to continue holding its interest in the Company, including, in the case of nominees recommended for election at an annual meeting of stockholders, whether the recommending stockholder intends to
continue holding its interest at least through the time of such annual meeting.
B-10
APPENDIX C TO PROXY STATEMENT
NATIONAL FUEL GAS COMPANY
2010 EQUITY COMPENSATION PLAN
Amended and Restated December 5, 2018
SECTION 1
PURPOSE
The purpose of the Plan is to is advance the interests of the Company and its stockholders by (i) incentivizing superior
performance of Employees of the Company and its Subsidiaries by means of a long term, equity based compensation program and (ii) enhancing the ability of the Company and its Subsidiaries to attract and retain in its employ highly qualified
persons for the successful conduct of their businesses.
SECTION 2
DEFINITIONS
Adjustment Event
means any stock dividend, stock split or share combination in respect of, or extraordinary
cash dividend on, the Common Stock or any recapitalization, reorganization, merger, consolidation,
split-up,
spin-off,
combination, dissolution, liquidation, exchange of
shares, warrants or rights offering to purchase Common Stock at a price substantially below Fair Market Value, or other similar event affecting the Common Stock.
Alternative Award
has the meaning ascribed to it in Section 12 of this Plan.
Award
means any grant of an Option, a SAR, a Restricted Stock Unit, Restricted Stock, a Performance Award or
Other Stock-Based Award under this Plan.
Award Notice
means a notice from the Company to a Participant,
in electronic or written form, that sets forth the terms and conditions of an Award, in addition to those terms and conditions established by this Plan and by the Committees exercise of its administrative powers.
Board
means the Board of Directors of the Company.
Cause
means (i) the willful and continued failure by an Employee (regardless of the Employees
age) to substantially perform his duties with his Employer after written warnings specifically identifying the lack of substantial performance are delivered to him by his Employer, or (ii) the willful engaging by an Employee (regardless of the
Employees age) in illegal conduct which is materially and demonstrably injurious to the Company or a Subsidiary.
Change in Control
shall be deemed to have occurred at such time as:
(i) any person within the meaning of Section 13(d) of the Exchange Act, other than the
Company, a Subsidiary, or any employee benefit plan or plans sponsored by the Company or any Subsidiary, is or has become the beneficial owner, as defined in
Rule 13d-3
under the Exchange Act,
directly or indirectly, of twenty percent (20%) or more of the combined voting power of the outstanding securities of the Company ordinarily having the right to vote at the election of directors or more than twenty percent (20%) of the fair market
value of all classes of the Companys outstanding stock;
(ii) consummation of any consolidation
or merger immediately following which the persons who, immediately prior to the consolidation or merger, held the capital stock of the Company do not hold, immediately following such transaction, (x) at least a majority of the stock ordinarily
entitled to vote in the election of directors of the corporation surviving such consolidation or merger (or of the ultimate parent corporation in an unbroken chain which owns, directly or indirectly, a majority of the capital stock of such entity)
or (y) stock in the entity described in subclause (x) that represents at
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least 50% of the fair market value of all classes of stock of such entity, in either case, in substantially the same proportionate ownership as such persons held immediately before such
consolidation or merger,
(iii) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all the assets of the Company; or
(iv) individuals who constitute the Board at the beginning of the 12 month period ended on the date
of determination (the Incumbent Board) have ceased for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to such date whose election, or nomination for election by the
Companys stockholders, was approved by a vote of at least 75% of the directors then comprising the Incumbent Board (either by specific vote or by approval of the proxy statement of the Company in which such person is named as nominee for
director without objection to such nomination) shall be, for purposes of this Plan, considered as though such person were a member of the Incumbent Board.
C
ode
means the Internal Revenue Code of 1986, as amended from time to time.
Committee
means the Compensation Committee of the Board, or such other committee designated by the Board,
authorized to administer the Plan.
Common Stock means the common stock of the Company.
Comp
any
means National Fuel Gas Company.
Disability
, with respect to any Participant occurs, unless otherwise provided for in an Award Notice, when
and if, as a result of disease, injury or mental disorder, the Participant is incapable of engaging in regular employment or occupation with the Company or a Subsidiary and if and so long as the Social Security Administration has determined that the
Participant is disabled; provided that, the Participant will not be considered to have a Disability under the Plan if the condition giving rise to the disability (i) was contracted, suffered or incurred by reason of being or having been engaged
in any criminal or illegal activity, (ii) resulted from the Participants habitual drunkenness or narcotic or drug addiction, (iii) resulted from an intentionally self-inflicted injury or (iv) resulted from service in the armed
forces for which a military allowance or pension is paid.
Dividend Equivalents
means an amount equal to
the regular cash dividends paid by the Company upon one share of Common Stock.
Effective Date
means the
date following adoption of this Plan by the Board, on which this Plan is approved by a majority of the votes cast at a duly constituted meeting of the shareholders of the Company.
Employee
means an officer or other management employee of the Company or Subsidiary.
Employer
means, with respect to any Employee or Participant, whichever of the Company or any of its
Subsidiaries employs such person.
Exchange Act
means the Securities Exchange Act of 1934, as amended
from time to time.
Executive Officer
means any officer within the meaning of
Rule 16a-1(f)
promulgated under the Exchange Act.
Fair Market Value
of a share of Common Stock on any date means the average of the high and low sales prices of a share of Common Stock as reflected in the next day reports of the high and low sales prices of a share of Company Common Stock, as reported on either
www.bloomberg.com or www.yahoo.com (or, if no such shares were publicly traded on that date, the next preceding date that such shares were so traded); provided, however, that if shares of Common Stock shall not have been traded for more than five
(5) trading days immediately preceding such date, Fair Market Value shall mean the closing price on the immediately preceding date on which stock transactions were so reported.
C-2
Grant Price
means, with respect to a SAR
,
the Fair
Market Value of a share of Common Stock measured as of the date the SAR is granted to a Participant or such greater amount as shall be determined by the Committee and specified in the applicable Award Notice.
ISO
means an Option that is an incentive stock option within the meaning of section 422 of the
Code.
Nonqualified Stock Option
means an Option that is not an ISO.
Option
means the right to purchase Common Stock at a stated price for a specified period of time. For
purposes of the Plan, an Option may be either (i) an ISO or (ii) Nonqualified Stock Option.
Other
Stock-Based Award
means an Award made pursuant to, and in accordance with the requirements of Section 10 of the Plan.
Participant
means any individual to whom an Award has been granted by the Committee under this Plan.
Performance Awards
means Awards of Performance Shares or Performance Units, or any other Award granted under
this Plan, the vesting of which is conditioned upon attainment of Performance Goals.
Performance Cycle
means the period selected by the Committee during which the performance of the Company or any Subsidiary or unit thereof or any individual is measured for the purpose of determining the extent to which an Award subject to Performance Goals has
been earned.
Performance Goals
means the objectives for the Company, any Subsidiary or business unit
thereof, or Participant that may be established by the Committee for a Performance Cycle with respect to any performance-based Awards contingently granted under the Plan. The performance measure(s) to be used for purposes of Awards granted under the
Plan shall include one or more measures chosen from among the following, as applied to the Company or to any Subsidiary or combination of Subsidiaries, whether on a relative or a comparative basis: (i) earnings per share, (ii) net income
(before or after taxes), (iii) return measures (including, but not limited to, return on assets, equity or sales), (iv) cash flow return on investments which equals net cash flows divided by owners equity, (v) earnings before or after
taxes, depreciation and/or amortization; (vi) gross revenues, (vii) operating income (before or after taxes); (viii) total shareholder return, (vi) corporate performance indicators (indices based on the level of certain expenses,
certain objectively measurable operational events or certain services provided to customers), (x) cash generation, profit and/or revenue targets, (xi) growth measures, including revenue growth, reserve growth or reserve replacement,
whether or not as compared to a peer group or other benchmark and/or (xii) share price (including, but not limited to, growth measures and total shareholder return). In setting performance goals using these performance measures, and in
determining actual performance relative to these performance measures, the Committee may exclude the effect of changes in accounting standards and events impacting the comparability of results of operations or financial condition, as specified by
the Committee, such as write-offs, capital gains and losses, and acquisitions and dispositions of businesses.
Performance Shares
means an Award constituting units denominated in Common Stock, the number of which such
units may be adjusted over a Performance Cycle based upon the extent to which Performance Goals have been satisfied.
Performance Unit
means a dollar denominated unit (or a unit denominated in the Participants local
currency) granted pursuant the Plan, payable upon the extent of the achievement of the applicable Performance Goals.
Permitted Transferees
has the meaning ascribed to it in Section 14 of this Plan.
Plan
means this National Fuel Gas Company 2010 Equity Compensation Plan. Any reference in the Plan to a
Section or paragraph number refers to that portion of the Plan.
C-3
Restricted Period
means the period of time during which
Restricted Stock Units or shares of Restricted Stock are subject to forfeiture or restrictions on transfer (if applicable) pursuant to Section 8 of the Plan.
Restricted Stock
means Common Stock awarded to a Participant pursuant to the Plan that is subject to
forfeiture and restrictions on transferability in accordance with Section 8 of the Plan.
Restricted Stock
Unit
means a Participants right to receive, pursuant to Section 8 of this Plan, one share of Common Stock (or the equivalent value thereof in cash), at the end of a specified period of time, which right is subject to forfeiture
in accordance with Section 8 of the Plan.
Retirement
means, unless another definition is
incorporated into the applicable Award Notice, a termination of the Participants employment or service at or after the Participant reaches age 60, but not including a termination for Cause.
Section
409A
means Section 409A of the Code and the applicable rules, regulations
and guidance promulgated thereunder.
Settlement Payment
has the meaning ascribed to it in
Section 12 of this Plan.
Stock Appreciation Right or SAR
means a stock appreciation
right granted under Section 7 of the Plan in respect of one or more shares of Common Stock that entitles the holder thereof to receive, in cash or Common Stock as determined by the Committee in its discretion (which discretion may be exercised
at or after grant, including after exercise of the SAR), an amount per share of Common Stock equal to the excess, if any, of the Fair Market Value on the date the SAR is exercised over the Grant Price.
Subsidiary
means a corporation or other business entity in which the Company directly or indirectly has an
ownership interest of more than fifty percent (50%).
Trust
has the meaning ascribed to it in
Section 14(a) of the Plan.
SECTION 3
ADMINISTRATION
(a)
Administration
.
The Plan shall be administered by the Committee. The Committee shall have sole
and complete authority to (i) interpret the Plan and Awards made under the Plan, including by resolving any omission or correcting any defect in the Plan or any Award, (ii) establish such administrative rules, regulations and procedures as
it deems necessary or appropriate for the proper administration of the Plan, (iii) select the Employees to receive Awards under the Plan, (iv) determine the form of each Award, the number of shares subject to each Award and all the terms
and conditions of each Award, (v) determine whether Awards are to be granted singly, in combination or in the alternative, (vi) grant waivers of Plan terms and conditions (vii) modify an Award, to the extent permissible by applicable
law, including without limitation Section 409A, and (viii) take any and all other action it deems advisable for the proper administration of the Plan. Notwithstanding the foregoing, without the express approval of stockholders, the
Committee shall not have the authority to grant Awards in replacement of Awards previously granted under the Plan. All determinations of the Committee shall be final, binding and conclusive.
(b)
Delegation by the Committee
.
Notwithstanding any other provision of this Plan or an
Award Notice, but subject to applicable law, the Committee, in its discretion, may delegate its authority and duties under the Plan to the Chief Executive Officer or to other senior officers of the Company, provided, however, that only the Committee
may select and grant Awards and render other decisions as to the timing, pricing and amount of Awards to Participants who are Executive Officers.
(c)
Indemnification
.
No member of the Committee shall be personally liable for any act,
omission or determination relating to the Plan, and the Company shall indemnify and hold harmless each member of the Committee and each other director or employee of the Company to whom any duty or power relating
C-4
to the administration or interpretation of the Plan has been delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the
approval of the Committee) arising out of any action, omission or determination related to the Plan, if, in any case, such member, director or employee made or took such action, omission, or determination in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, such person had no reasonable cause to believe his or her conduct was unlawful.
(d)
409A Compliance
.
The Plan is intended to be administered in a manner consistent
with the requirements, where applicable, of Section 409A. Where reasonably possible and practicable, the Plan shall be administered in a manner to avoid the imposition on Participants of immediate tax recognition and additional taxes pursuant
to Section 409A. Notwithstanding the foregoing, neither the Company nor the Committee, nor any of the Companys directors, officers or employees shall have any liability to any person in the event Section 409A applies to any such
Award in a manner that results in adverse tax consequences for the Participant or any of his beneficiaries or transferees.
SECTION 4
ELIGIBILITY
The Committee may grant an Award pursuant to the Plan to any Employee it shall designate. The Committee may grant any or all of
the Awards specified herein to any particular Participant (subject to the applicable limitations set forth in the Plan). Receipt of an Award of one type, or in any year or other period, shall neither entitle an Employee to receive, nor disqualify an
Employee from receiving, another type of Award, or an Award in any future year or period. An Award may be made for one year or multiple years without regard to whether any other type of Award is made for the same year or years.
SECTION 5
SHARES AVAILABLE FOR AWARDS
(a)
Number
.
Subject to the provisions of this Section 5, the maximum number of
shares of Common Stock that are available for Awards under the Plan shall not exceed eight million, seven hundred thousand (8,700,000) shares. For purposes of determining compliance with the limit set forth in this Section 5(a), any shares
subject to an Award which is (i) an Option or SAR shall be counted against this limit as one (1) share for every share subject to such Award, and (ii) not an Option or SAR shall be counted against such limit as 1.8 shares for
every share subject to such Award. Notwithstanding the foregoing, if an Award is issued in tandem with any other Award (such that it is only possible to benefit under either but not both Awards), the shares subject to such Awards shall be counted
only once against such limit, based on the Award that represents the greatest allocation of shares for this purpose.
(b)
Individual Limitations
.
Subject to the provisions of Section 5(d), the
following individual Award limits apply:
(i)
Options, SARs
.
No
Participant may receive in any calendar year a grant of Options and/or SARs in respect of more than 750,000 shares of Common Stock.
(ii)
Performance-Based Limitations
.
To the extent that any Award, other
than an Option or SAR, granted to an Executive Officer is intended to satisfy the requirements of Code section 162(m)(4)(C) as other performance-based compensation, if available under applicable law, the maximum aggregate amount of
such Award(s) granted to such Participant in any 12 month period shall not exceed 375,000 shares with respect to any Performance Share Award or $2,500,000 with respect to any Performance Unit Award; provided, however, that the amount of
shares or cash payable in respect of any such Award upon superior achievement in respect of the applicable Performance Goal may equal up to twice the amount specified above.
(c)
Canceled, Terminated, or Forfeited Awards, etc
.
Any shares of Common Stock subject
to an Award (or any portion thereof) which for any reason lapses, is canceled, forfeited or terminated or otherwise is
C-5
settled without the issuance of Common Stock shall be available for future grants under the Plan. The number of shares available for grant pursuant to the immediately preceding sentence shall be
determined based on the number of shares counted against the limit in Section 5(a) with respect to the grant of the corresponding Award. Similarly, any shares subject to an award previously granted under the 1997 Award and Option Plan which for
any reason lapses, is canceled, forfeited or terminated or otherwise is settled without the issuance of Common Stock, in each such case after the Effective Date, shall be available for future grants under the Plan in addition to those shares made
available under Section 5(a). Notwithstanding the foregoing, the following shares of Common Stock shall not be available for the grant of Awards under the Plan: (i) shares of Common Stock not issued or delivered as a result of the net
settlement of a Stock Appreciation Right or Option, (ii) shares of Common Stock used to pay the exercise price or withholding taxes related to an Award, or (iii) shares of Common Stock repurchased on the open market with the proceeds from
the exercise of any Option.
(d)
Adjustment in Capitalization
. In the event of any Adjustment
Event, (i) the aggregate number of shares of Common Stock available for Awards under this Section 5, (ii) the aggregate limitations on the number of shares that may be awarded as a particular type of Award or that may be awarded to
any particular Participant in any particular period under Section 5(c) and (iii) the aggregate number of shares subject to outstanding Awards and the respective exercise prices or Grant Prices applicable to outstanding Awards shall be
equitably adjusted by the Committee, in its discretion, with respect to such Adjustment Event. To the extent deemed equitable and appropriate by the Committee and subject to any required action by shareholders of the Company or of any successor in
interest to the Company or any direct or indirect parent corporation of the Company or any such successor, in any Adjustment Event that is a merger, consolidation, reorganization, liquidation, dissolution or similar transaction, any Award granted
under the Plan shall be deemed to pertain to the securities and other property, including cash, to which a holder of the number of shares of Common Stock covered by the Award would have been entitled to receive in connection with such Adjustment
Event. Any determination made by the Committee pursuant to this Section 5(d) shall be final, binding and conclusive.
SECTION 6
STOCK OPTIONS
(a)
Grants
.
ISOs and Nonqualified Stock Options may be granted to Participants at such
time or times as shall be determined by the Committee. Except as otherwise provided herein, the Committee shall have complete discretion in determining the number of Options, if any, to be granted to a Participant, provided that ISOs may only be
granted to eligible Participants who satisfy the requirements for eligibility set forth under section 424 of the Code, and further provided that Dividend Equivalents shall not be paid or payable on any Option. The grant date of an Option under
the Plan will be the date on which the Option is awarded by the Committee, or a specified date in the future including a date relating to the satisfaction of any condition or conditions to the effectiveness of such grant as the Committee shall
specify in its sole discretion. Each Option shall be evidenced by an Award Notice that shall specify the type of Option granted, the exercise price, the duration of the Option, the number of shares of Common Stock to which the Option pertains, the
conditions upon which the Option or any part thereof shall become vested or exercisable and such other terms and conditions not inconsistent with the Plan as the Committee shall determine. An Award Notice which does not specify the type of Option
granted shall be deemed to specify that each Option granted in that Award Notice shall be a Nonqualified Stock Option.
(b)
Exercise Price; No Repricing
.
The price at which Common Stock may be purchased upon
exercise of an Option shall be established by the Committee, but such price shall not be less than the Fair Market Value of the Common Stock on the grant date of the Option. The Committee shall not have the right to reprice an Option under this
Plan, including by (i) amending an Option to reduce its exercise price, (ii) canceling an Option at a time when its exercise price exceeds the Fair Market Value of one share in exchange for an Option, SAR, Restricted Stock, Stock Unit or
other equity award, unless the cancellation or exchange occurs in connection with a merger, acquisition,
spin-off
or other similar corporate
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transaction or (iii) taking any other action that is treated as a repricing under generally accepted accounting principles, provided, however, that adjustments pursuant to Section 5(d)
shall not be deemed to be a repricing that is prohibited by this Section 6(b).
(c)
Vesting
and Exercisability
.
Unless otherwise provided in Section 11 hereof or in the Participants Award Notice, each Option awarded to a Participant under the Plan shall become vested and exercisable in three equal annual
installments, subject to the Participants continued employment with the Company or Subsidiary through such date. The Committee may provide that Options may also become exercisable, in whole or in part, upon the occurrence of any event
specified in the Plan or other condition specified by the Committee at or after the grant date of the applicable Option. In its discretion, the Committee may establish in the Award Notice, conditions based on Performance Goals (in lieu of, or in
addition to, time-based vesting) with respect to the exercisability of any Option. No Option shall be exercisable after the tenth anniversary of its grant date.
(d)
ISOs
.
Notwithstanding anything in the Plan to the contrary, no Option that is
intended to be an ISO may be granted after the tenth anniversary of the Effective Date of the Plan. No term of this Plan relating to ISOs shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify the ISO or the Plan under Section 422 of the Code, or, without the consent of any Participant affected thereby, to disqualify any ISO under such Section 422. The number of shares of Common Stock that shall be
available for ISOs granted under the Plan is three million (3,000,000) shares.
(e)
Payment
.
The Committee shall establish procedures governing the exercise of
Options. No shares shall be delivered pursuant to any exercise of an Option unless arrangements satisfactory to the Committee have been made to assure full payment of the exercise price therefore. Payment of the exercise price of an Option may be
paid (i) in cash or its equivalent, (ii) by exchanging shares of Common Stock or shares of Restricted Stock, (iii) a combination of the foregoing or (iv) pursuant to such other arrangements as the Committee may deem appropriate,
including a cashless exercise program. The Committee, in its sole discretion, may adopt administrative rules, regulations or procedures with respect to any method of exercising an Option, including pursuant to a cashless exercise program, if
permitted. The Company may not make a loan to a Participant to facilitate such Participants exercise of any of his or her Options or payment of taxes.
SECTION 7
STOCK
APPRECIATION RIGHTS
(a)
Grants
.
Awards may be granted in the form of Stock
Appreciation Rights and may be granted to any Employee at such time or times as shall be determined by the Committee. Stock Appreciation Rights may be granted on a stand-alone basis or in tandem with another Award granted under the Plan. The grant
date of a Stock Appreciation Right under the Plan will be the date on which the Stock Appreciation Right is awarded by the Committee, or a specified date in the future, including a date relating to the satisfaction of any such condition or
conditions to the effectiveness of such grant as the Committee shall specify in its sole discretion. Stock Appreciation Rights shall be evidenced by an Award Notice, whether as part of an Award Notice governing the terms of the Options, if any, to
which such Stock Appreciation Rights relate or pursuant to a separate Award Notice with respect to freestanding Stock Appreciation Rights, in each case containing such provisions not inconsistent with the Plan as the Committee shall determine,
provided that Dividend Equivalents shall not be paid or payable on any Stock Appreciation Right.
(b)
Terms and Conditions of SARs
.
Except as otherwise determined by the Committee at or
after grant and subject to the Participants continued employment or service with the Company or a Subsidiary through such date, each Stock Appreciation Right awarded to a Participant under the Plan shall become vested and exercisable in
accordance with the vesting schedule provided in the applicable Award Notice, but in no event later than ten years from the date of grant. Unless otherwise provided in Section 11 hereof
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or in the Participants Award Notice, each SAR awarded to a Participant under the Plan shall become vested and exercisable in three equal annual installments, subject to the
Participants continued employment with the Company or Subsidiary through such date. Stock Appreciation Rights may also become exercisable, in whole or in part, upon the occurrence of any event or events as specified in the Plan or specified by
the Committee, in its discretion, either at or after the grant date of the applicable Stock Appreciation Right. In its discretion, the Committee may also establish conditions based on Performance Goals (in lieu of, or in addition to, time based
vesting) with respect to the exercisability of any Stock Appreciation Rights. No Stock Appreciation Rights shall be exercisable after the tenth anniversary of their grant date. The Committee may impose such conditions with respect to the exercise of
Stock Appreciation Rights, including without limitation, any conditions relating to the application of federal or state securities laws, as it may deem necessary or advisable. Notwithstanding the foregoing sentence, the Committee shall not have the
right to reprice a SAR under this Plan, including by (i) amending a SAR to reduce its Grant Price, (ii) canceling a SAR at a time when its Grant Price exceeds the Fair Market Value of one share in exchange for an Option, SAR, Restricted
Stock, Stock Unit or other equity award, unless the cancellation or exchange occurs in connection with a merger, acquisition,
spin-off
or other similar corporate transaction or (iii) taking any other
action that is treated as a repricing under generally accepted accounting principles, provided, however, that adjustments pursuant to Section 5(d) shall not be deemed to be a repricing that is prohibited by this Section 7(b).
(c)
Deemed Exercise
.
Any SAR not already exercised shall be deemed to be exercised at
the close of business on the scheduled expiration date of such SAR, if at such time the SAR by its terms remains exercisable and, if so exercised, would result in a payment to the holder of such SAR.
(d)
Payment of SAR Amount
.
Upon exercise of a SAR, the holder shall be entitled to
receive payment, in cash, in shares of Common Stock or in a combination thereof, as determined by the Committee, of an amount determined by multiplying:
(i) the excess, if any, of the Fair Market Value at the date of exercise over the Grant Price, by
(ii) the number of shares of Common Stock with respect to which the SARs are then being exercised;
provided that, at the time of grant with respect to any SAR payable in cash, the Committee may establish in the Award Notice, in its sole discretion, a maximum amount per share which will be payable upon the exercise of such SAR.
SECTION 8
RESTRICTED STOCK; RESTRICTED STOCK UNITS
(a)
Grants
.
Restricted Stock and Restricted Stock Units may be granted to Participants
at such time or times as shall be determined by the Committee. The grant date of any Restricted Stock or Restricted Stock Units under the Plan will be the date on which such Restricted Stock or Restricted Stock Units are awarded by the Committee, or
a specified date in the future, including a date related to the satisfaction of any such condition or conditions to the effectiveness of such grant as the Committee shall specify in its sole discretion. Restricted Stock and Restricted Stock Units
shall be evidenced by an Award Notice that shall specify (i) the number of shares of Restricted Stock and the number of Restricted Stock Units to be granted to each Participant, (ii) the applicable Restricted Period(s) and (iii) such
other terms and conditions, not inconsistent with the Plan, as the Committee shall determine. Any shares of Restricted Stock granted under the Plan may be evidenced in such manner as the Company deems appropriate, including, without limitation,
book-entry registration of the shares on the Companys books and records or the issuance of a stock certificate or certificates that shall be held in the custody of the Secretary of the Company until the Restricted Period applicable to the
Award lapses.
(b)
Vesting
.
Restricted Stock and Restricted Stock Units granted to
Participants under the Plan shall be subject to a Restricted Period established pursuant to the terms of the Plan or by the Committee. Except as otherwise specified in the Plan or determined by the Committee at or after grant, the Restricted Period
with respect to Restricted Stock and Restricted Stock Units that vest (i) solely based on the
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passage of time and the continued performance of services shall lapse in three approximately equal annual installments on the first through third anniversaries of the grant date and
(ii) upon the satisfaction of Performance Goals shall lapse, to the extent Performance Goals have been achieved, not earlier than one year after the commencement of the applicable Performance Cycle. The Restricted Period applicable to any
Restricted Stock grant or Restricted Stock Award shall be specified in the Participants Award Notice. The Restricted Period may lapse with respect to portions of Restricted Stock and Restricted Stock Units on a pro rata basis, or it may lapse
at one time with respect to all Restricted Stock and Restricted Stock Units in an Award. The Restricted Period shall also lapse, in whole or in part, upon the occurrence of any event or events, including a Change in Control, specified in the Plan.
(c)
Settlement of Restricted Stock and Restricted Stock Units
.
At the expiration
of the Restricted Period for any outstanding Restricted Stock Awards, the Company shall evidence the lapse of the restrictions applicable to the Restricted Stock Award and shall, upon request, deliver stock certificates evidencing the shares related
to such Restricted Stock Awards to the Participant or the Participants legal representative (or otherwise evidence the issuance of such shares free of any restrictions imposed under the Plan). At the expiration of the Restricted Period with
respect to any outstanding Restricted Stock Unit, the Participant shall receive, in the Committees discretion (i) a cash payment equal to the Fair Market Value of the underlying share of Common Stock as of such payment date, (ii) one
share of Common Stock or (iii) any combination of cash and Common Stock.
(d)
Restrictions on
Transferability
.
Shares of Restricted Stock and Restricted Stock Units may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered by the Participant during the Restricted Period, except that the Committee
may permit (on such terms and conditions as it shall establish) shares of Restricted Stock and Restricted Stock Units to be transferred during the Restricted Periods to a Permitted Transferee, in accordance with Section 14(a), provided that any
shares of Restricted Stock or Restricted Stock Units so transferred shall remain subject to the provisions of this Section 8.
(e)
Rights as a Shareholder
.
Except for the restrictions set forth herein and unless
otherwise determined by the Committee, the Participant shall have all the rights of a shareholder with respect to shares of Restricted Stock, including but not limited to, the right to vote and the right to receive dividends. A Participant shall not
have any right, in respect of Restricted Stock Units awarded pursuant to the Plan, to vote on any matter submitted to the Companys stockholders until such time as the shares of Common Stock attributable to such Restricted Stock Units have been
issued. The Committee shall determine whether Dividend Equivalents will be provided in respect of any Restricted Stock Unit Award, the manner in which any such Dividend Equivalents will be deemed invested, the time or times at which such Dividend
Equivalents shall be deemed payable, and any other terms and conditions thereon that the Committee shall deem appropriate.
(f)
Legending
.
To the extent that certificates are issued to a Participant in respect
of shares of Restricted Stock awarded under the Plan (or in the event that such Restricted Stock are held electronically), such shares shall be registered in the name of the Participant and shall have such legends (or account restrictions)
reflecting the restrictions of such Awards in such manner as the Committee may deem appropriate.
SECTION 9
PERFORMANCE SHARES AND PERFORMANCE UNITS
(a)
Generally
.
Awards may be granted in the form of Performance Shares and Performance
Units and may be granted to Participants at such time or times as shall be determined by the Committee. The Committee shall have the authority to determine the Participants who shall receive Performance Shares and Performance Units, the number of
Performance Shares and the number and value of Performance Units each Participant receives for each or any Performance Cycle, and the Performance Goals applicable in respect of such Performance Shares and Performance Units for each Performance
Cycle. The
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Committee shall determine the duration of each Performance Cycle (the duration of Performance Cycles may differ from each other), and there may be more than one Performance Cycle in existence at
any one time. Unless otherwise determined by the Committee, the Performance Cycle for Performance Shares and Performance Units shall be three years, and shall in no event be less than one year. The Committee shall be entitled to make such rules,
determinations and adjustments as it deems appropriate with respect to any Participant who becomes eligible to receive a performance-based Award after the commencement of a Performance Cycle. Performance Shares and Performance Units shall be
evidenced by an Award Notice that shall specify the number of Performance Shares and the number and value of Performance Units awarded to the Participant, the Performance Goals applicable thereto, and such other terms and conditions not inconsistent
with the Plan as the Committee shall determine, provided that no Dividend Equivalents shall be paid or payable on any Performance Shares or Performance Units before they become earned and vested. No shares of Common Stock will be issued at the time
an Award of Performance Shares is made, and the Company shall not be required to set aside a fund for the payment of Performance Shares or Performance Units.
(b)
Earned Performance Shares and Performance Units
.
Performance Shares and Performance
Units shall become earned and vested, in whole or in part, based upon the attainment of specified Performance Goals or the occurrence of any event or events including a Change in Control, as the Committee shall determine, either at or after the
grant date. In addition to the achievement of the specified Performance Goals, the Committee may, in the Award Notice, condition payment of Performance Shares and Performance Units on such conditions as the Committee shall specify. The Committee may
also require the completion of a minimum period of service (in addition to the achievement of any applicable Performance Goals) as a condition to the vesting of any Performance Share or Performance Unit Award.
(c)
Performance Goals
.
Performance Goals shall be determined by the Committee, in its
discretion, and shall be set out in the Award Notice. Except in the case of Awards to Executive Officers intended to be other performance-based compensation under Section 162(m)(4) of the Code, the Committee may also adjust the
Performance Goals for any Performance Cycle as it deems equitable in recognition of events impacting the comparability of the Companys results of operations or financial condition, changes in applicable tax laws or accounting principles, or
such other factors as the Committee may determine. Notwithstanding anything contained in the Plan to the contrary, to the extent the Committee intends that an Award granted to an Executive Officer qualify as other performance-based
compensation within the meaning of Section 162(m)(4)(c) of the Code, the Committee shall (i) specify and approve the specific terms of any Performance Goals with respect to such Awards in writing no later than ninety (90) days
from the commencement of the Performance Cycle to which the Performance Goals relate, and (ii) not be entitled to exercise any subsequent discretion otherwise authorized under the Plan (such as the right to authorize payout at a level above
that dictated by the achievement of the relevant Performance Goals) with respect to such Award if the ability to exercise discretion (as opposed to the exercise of such discretion) would cause such Award to fail to qualify as other performance-based
compensation.
(d)
Negative Discretion
.
Notwithstanding anything in this
Section 9 to the contrary, with respect to any Performance Unit Awards, the Committee shall have the right to establish written rules or procedures that have the effect of limiting the amount payable to each Participant to an amount that is
less than the maximum amount otherwise authorized.
(e)
Certification of Attainment of Performance
Goals
.
As soon as practicable after the end of a Performance Cycle and prior to any payment or vesting in respect of such Performance Cycle, the Committee shall certify in writing the number of any Performance Shares and the number
and value of any Performance Units which have been earned or vested on the basis of performance in relation to the established Performance Goals.
(f)
Payment of Awards
.
Payment or delivery of Common Stock with respect to earned
Performance Shares and earned Performance Units shall be distributed to the Participant or, if the Participant has died, to the Participants legal representative, as soon as practicable after the expiration of the Performance
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Cycle and the Committees certification under Section 9(e) above, provided that payment or delivery of Common Stock with respect to earned Performance Shares and earned Performance
Units shall not be distributed to a Participant until any other conditions on payment of such Awards established by the Committee have been satisfied. The Committee shall determine whether earned Performance Shares and the value of earned
Performance Units are to be distributed in the form of cash, shares of Common Stock or in a combination thereof, with the value or number of shares payable to be determined based on the Fair Market Value of the Common Stock on the date of the
Committees certification under Section 9(e) above. The Committee shall have the right to impose whatever conditions it deems appropriate with respect to the award or delivery of shares of Common Stock, including conditioning the vesting
of such shares on the performance of additional service.
SECTION 10
OTHER STOCK-BASED AWARDS
The Committee may grant Other Stock-Based Awards in accordance with this Section 10. Other Stock-Based Awards may take
such form of an interest in the Common Stock, the value of a specified number of shares of Common Stock or any combination thereof as the Committee shall determine, including outright awards of Common Stock in satisfaction of an obligation of an
Employer in respect of compensation that would otherwise be payable to an Employee in cash (each, a Cash Settlement Award). The number of shares of Common Stock that may be subject to Other Stock-Based Awards shall not exceed five
percent (5%) of the shares authorized for issuance under Section 5(a) hereof, except that, the number of Other Stock-Based Awards that are Cash Settlement Awards shall not be subject to, or otherwise counted against, the foregoing 5% limit. In
addition to any other terms and conditions that may be specified by the Committee, each Other Stock-Based Award shall specify the impact of a termination of service upon the rights of a Participant in respect of such Award. At the discretion of the
Committee, such conditions may be the same as apply with respect to Restricted Stock or Restricted Stock Units, or may contain terms that are more or less favorable to the Participant. The terms of any Other Stock-Based Award need not be uniform in
application to all (or any class of) Participants, and each Other Stock-Based Award granted to any Participant (whether or not at the same time) may have different terms. Any such Other Stock-Based Award shall be evidenced by an Award Notice which
specifies the terms and conditions applicable thereto.
SECTION 11
TERMINATION OF EMPLOYMENT
(a)
Termination Due to Death, Disability, Retirement
.
Unless otherwise determined by
the Committee at or after the time the Award is granted and set forth in the Award Notice, if a Participants employment or service terminates due to the Participants death, Disability or Retirement:
(i)
Performance Awards
.
With respect to Performance Awards, the
Participant or Participants designated beneficiary, as the case may be, shall be entitled to a distribution of, and such Performance Awards shall be deemed vested to the extent of, the same number or value of Performance Awards that would have
been payable for the Performance Cycle had the Participants service with the Company or Subsidiary continued until the end of the applicable Performance Cycle,
pro-rated
to reflect the time period from
the commencement of the Performance Cycle through the date of the termination of the Participants service with the Company or Subsidiary. Any Common Stock issuable in respect of such Performance Awards or value of Performance Awards payable in
cash that become payable in accordance with the preceding sentence shall be paid on the date the Performance Award would have been paid had the Participant remained employed through the end of the Performance Cycle.
(ii)
Restricted Stock and Restricted Stock Unit Awards
. Unless
otherwise specified by the Committee in the corresponding Award Notice, all outstanding Awards of Restricted Stock and Restricted Stock Units shall become immediately and fully vested, regardless of the extent to which
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otherwise vested as of the date of such termination of service or employment. Any Common Stock issuable or cash payable in respect of any Restricted Stock Units that vest pursuant to the
preceding sentence shall be paid on the date the Restricted Stock Units would have been paid had the Participant remained employed through the end of the Restricted Period.
(iii)
Options/SARs
. Unless otherwise specified by the Committee in the
corresponding Award Notice, all outstanding Options and SARs shall become immediately and fully exercisable, regardless of the extent to which they are otherwise exercisable as of the date of such termination of service or employment. Unless
otherwise specified by the Committee in the corresponding Award Notice, all outstanding Options and SARs awarded to a Participant whose employment terminates due to death, Disability or Retirement shall remain exercisable by the Participant, his
legal representative or his Permitted Transferee, until the fifth anniversary of the date of the Participants termination of service or the Awards original expiration date, whichever is earlier, after which date any unexercised Options
and SARs shall terminate.
(b)
Termination for Cause
.
Unless otherwise determined
by the Committee at or after the grant date and set forth in the Award Notice covering such Award, if a Participants employment or service terminates for Cause, all Options and SARs, whether vested or unvested, and all other Awards that are
unvested, unexercisable or with respect to which the Restricted Period has not lapsed shall be immediately forfeited and cancelled, effective as of the date of the Participants termination of service.
(c)
Termination due to a Divestiture
.
Unless otherwise specified by the Committee in
the corresponding Award Notice, if a Participants employment or service terminates due to the divestiture by the Company of one or more Subsidiaries or other business segments, divisions or operations in a transaction that does not otherwise
qualify as a Change in Control:
(i)
Performance Awards
. With
respect to Performance Awards, the Participant shall be entitled to a distribution of, and such Performance Awards shall be deemed vested to the extent of, the same number or value of Performance Awards that would have been payable for the
Performance Cycle had the Participants service with the Company or Subsidiary continued until the end of the applicable Performance Cycle,
pro-rated
to reflect the time period from the commencement of
the Performance Cycle through the date of the termination of the Participants service due to the divestiture (including a termination of service occurring by reason of the sale of a Subsidiary). Any Common Stock issuable in respect of such
Performance Awards or value of Performance Awards payable in cash that become payable in accordance with the preceding sentence shall be paid on the date the Performance Award would have been paid had the Participant remained employed through the
end of the Performance Cycle.
(ii)
Restricted Stock and Restricted Stock
Unit Awards
. Unless otherwise specified by the Committee in the corresponding Award Notice, all outstanding Awards of Restricted Stock and Restricted Stock Units shall become immediately and fully vested, regardless of the extent to which
otherwise vested as of the date of such termination of service or employment due to such divestiture. Any Common Stock issuable or cash payable in respect of any Restricted Stock Units that vest pursuant to the preceding sentence shall be paid
promptly (but in no event later than 60 days) after the date of such divestiture.
(iii)
Options/SARs
: Unless otherwise specified by the Committee in the
corresponding Award Notice, all outstanding Options and SARs shall become immediately and fully exercisable, regardless of the extent to which they are otherwise exercisable as of the date of such termination of service or employment due to the
divestiture and shall remain exercisable until the third anniversary of the date of such divestiture or the Awards original expiration date, whichever is earlier, after which date any unexercised Options and SARs shall terminate.
(d)
Termination due to a Reduction in Force
.
Unless otherwise specified by the
Committee in the corresponding Award Notice (or after the date of the issuance of such Award Notice, if more favorable to
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the Participant), if a Participants employment or service terminates without Cause due to a reduction in force or similar downsizing at the Company or any Subsidiary unit that affects a
significant number of employees, all Awards that are unvested, unexercisable or with respect to which the Restricted Period has not lapsed, and Performance Awards for which the applicable Performance Cycle has not been completed, shall be
immediately forfeited and cancelled, effective as of the date of the Participants termination of service. Unless otherwise specified by the Committee in the corresponding Award Notice, any Option or SAR that is vested not later than the date
of termination shall remain exercisable until the first anniversary of the date of the Participants termination of service or the Awards original expiration date, whichever is earlier, after which date any unexercised Option or SAR shall
terminate.
(e)
Termination for any Other Reason
.
Unless otherwise determined by
the Committee at or after the time the Award is granted, and except as may otherwise be provided in any agreement to which the Company and a Participant are parties, if a Participants employment or service with the Company or a Subsidiary is
terminated for any reason other than death, Disability, Retirement, Cause, divestiture or reduction in force, all Options and SARs that are not exercisable, and all other Awards that have not vested or become payable, as of the date of such
termination shall be immediately forfeited and cancelled, effective as of the date of the Participants termination of service. Unless otherwise specified in the Participants Award Notice, and except as may otherwise be provided in any
agreement to which the Company and a Participant are parties, any Options and SARs awarded to a Participant whose employment or service with the Company or a Subsidiary terminates other than due to death, Disability, Retirement or Cause (including,
without limitation, by reason of the fact that an entity that employs or employed the Participant ceases to be a Subsidiary) that are exercisable as of such termination shall remain exercisable for 90 days thereafter, or until the Awards
original expiration date, whichever is earlier, after which date any unexercised Options and SARs shall terminate.
SECTION 12
CHANGE IN CONTROL
(a)
Accelerated Vesting and Payment
.
Subject to the provisions of Section 12(b)
below, in the event of a Change in Control (i) each Option and SAR then outstanding shall be fully exercisable regardless of the exercise schedule otherwise applicable to such Option and/or SAR, (ii) the Restricted Period shall lapse as to
each share of Restricted Stock then outstanding, (iii) each outstanding Restricted Stock Unit shall become fully vested and payable, (iv) each outstanding Performance Share Award and Performance Unit Award shall be deemed earned at the
target level of performance for such Award, and (v) each outstanding Other Stock-Based Award shall become fully vested and payable. In addition, in connection with such a Change in Control, the Committee may, in its discretion, provide that
each Option and/or SAR shall, upon the occurrence of such Change in Control, be canceled in exchange for a payment per share in cash (the Settlement Payment) in an amount equal to the excess, if any, of the Fair Market Value over the
exercise price of such Option or the Grant Price of such SAR. Should the Committee authorize any Settlement Payments in respect of Options, the Committee may determine that any Options which have an exercise price per share below the Fair Market
Value shall be deemed cancelled and satisfied in full for a deemed Settlement Payment of zero. The Committee may also direct that each Restricted Stock Unit, Other Stock-Based Award, Performance Share and/or Performance Unit shall be settled in cash
with its value determined based on the value received by the shareholders in any transaction that itself constitutes a Change in Control.
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(b)
Alternative Awards
.
Notwithstanding
Section 12(a), no cancellation, acceleration of exercisability, vesting, cash settlement or other payment shall occur with respect to any Award if the Committee reasonably determines in good faith, prior to the occurrence of a Change in
Control, that such Award shall be honored or assumed, or new rights substituted therefor (such honored, assumed or substituted award hereinafter called an Alternative Award), by a Participants employer (or the parent or an
affiliate of such employer) immediately following the Change in Control;
provided
that any such Alternative Award must:
(i) be based on stock which is traded on an established U.S. securities market;
(ii) provide such Participant with rights and entitlements substantially equivalent to or better than the
rights, terms and conditions applicable under such Award, including, but not limited to, an identical or better exercise or vesting schedule and identical or better timing and methods of payment;
(iii) have substantially equivalent economic value to such Award (determined at the time of the Change in
Control and using valuation principles permitted under Treas. Reg.
§ 1.424-1); and
(iv) have terms and conditions which provide that in the event that, during the
24-month
period following the Change in Control, the Participants employment or service is involuntarily terminated for any reason (including, but not limited to a termination due to death or Disability) other
than for Cause or Constructively Terminated (as defined below), all of such Participants Options and/or SARs shall be deemed immediately and fully exercisable, the Restricted Period shall lapse as to each of the Participants outstanding
Restricted Stock awards, each of the Participants outstanding Restricted Stock Unit Awards and Other Stock-Based Awards shall be payable in full and each such Alternative Award shall be settled for a payment per each share of stock subject to
the Alternative Award in cash, in immediately transferable, publicly traded securities or in a combination thereof, in an amount equal to, in the case of an Option or SAR, the excess of the fair market value of such stock on the date of the
Participants termination over the corresponding exercise or base price per share and, in the case of any Restricted Stock, Restricted Stock Unit, or Other Stock-Based Award, the fair market value of the number of shares of stock subject or
related thereto.
(c)
Constructive Termination
.
For purposes of
Section 12(b)(iv), a Participants employment or service shall be deemed to have been Constructively Terminated if, without the Participants written consent, the Participant terminates employment or service within 120 days
following either (
x
) a material reduction in the Participants base salary or a Participants incentive compensation opportunity, or (
y
) the relocation of the Participants principal place of employment or
service to a location more than 35 miles away from the Participants prior principal place of employment or service.
(d)
Amounts Subject to Section
409A
.
Notwithstanding
the foregoing provisions of this Section 12, to the extent that any Award granted under the Plan and outstanding at the time of a Change in Control is treated as deferred compensation under Section 409A, and not exempt from its
requirements under any applicable exemption therefrom, no acceleration of payment of such Award shall be made upon a Change in Control unless such event is also a change in the ownership or effective control of the corporation, or in the ownership
of a substantial portion of the assets of the corporation within the meaning of Section 409A. Any Award which is not payable upon the occurrence of a Change in Control solely by reason of the operation of this Section 12(d) shall become
vested in accordance with Section 12(a) (unless the provisions of Section 12(b) apply to such Award), but shall be paid at the date or event that such Award would have been payable without regard to the occurrence of such Change in
Control.
SECTION 13
EFFECTIVE DATE, AMENDMENT,
MODIFICATION AND TERMINATION OF PLAN
(a)
Generally
.
The Plan shall be effective on the Effective Date, and shall continue in
effect, unless sooner terminated pursuant to this Section 13, until the fifteenth anniversary of the Effective Date. The
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Board or the Committee may at any time in its sole discretion, for any reason whatsoever, terminate or suspend the Plan, and from time to time, subject to obtaining any regulatory approval,
including that of the New York Stock Exchange, may amend or modify the Plan; provided that without the approval by a majority of the votes cast at a duly constituted meeting of shareholders of the Company, no amendment or modification to the Plan
may (i) materially increase the benefits accruing to Participants under the Plan, (ii) increase the number of shares of Common Stock subject to the Plan or the individual Award limitations, (iii) modify the class of persons eligible
for participation in the Plan or (iv) materially modify the Plan in any other way that would require shareholder approval under any regulatory requirement that the Committee determines to be applicable, including, without limitation, the rules
of the New York Stock Exchange.
SECTION 14
MISCELLANEOUS
(a)
Nonassignability
.
Except as provided herein or in an Award Notice, no Award may be
sold, assigned, transferred, pledged or otherwise encumbered except by will or the laws of descent and distribution; provided that the Committee may permit (on such terms and conditions as it shall establish) a Participant to transfer an Award for
no consideration to the Participants child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother-in-law,
or
sister-in-law,
including adoptive relationships, any person sharing the Participants household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the
beneficial interest (a
Trust
) and any other entity in which these persons (or the Participant) own more than fifty percent of the voting interests (
Permitted Transferees
), provided further that nothing in this
Section 14(a) shall prohibit the transfer of an Award from a Trust back to a Participant to whom the Award was originally granted, in accordance with the terms of the Trust. No amendment to the Plan or to any Award shall permit transfers other
than in accordance with the preceding sentence. Any attempt by a Participant to sell, assign, transfer, pledge or encumber an Award without complying with the provisions of the Plan shall be void and of no effect. Except to the extent required by
law, no right or interest of any Participant shall be subject to any lien, obligation or liability of the Participant. All rights with respect to Awards granted to a Participant under the Plan shall be exercisable during the Participants
lifetime only by such Participant or, if applicable, his or her Permitted Transferee(s). The rights of a Permitted Transferee shall be limited to the rights conveyed to such Permitted Transferee, who shall be subject to and bound by the terms of the
agreement or agreements between the Participant and the Company.
(b)
Tax
Withholding
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The Company shall be entitled to deduct from any payment under the Plan, regardless of the form of such payment, the amount of all applicable income and employment taxes required by law to be withheld with respect to such
payment or may require the participant to pay to it such tax prior to and as a condition of the making of such payment. Subject to any administrative rules, regulations or procedures established by the Committee, a Participant may pay the amount of
taxes required by law to be withheld from an Award, in whole or in part, by requesting that the Company withhold from any payment of Common Stock due as a result of such Award, or by delivering to the Company, shares of Common Stock having a Fair
Market Value less than or equal to the amount of such required withholding taxes.
(c)
Noncompetition and Other Adverse Actions
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Notwithstanding anything contained in
this Plan to the contrary, unless the Award Notice specifies otherwise, a Participant shall forfeit all unexercised, unearned, and/or unpaid Awards, including Awards earned but not yet paid, all unpaid Dividend Equivalents, and all interest, if any,
accrued on the foregoing if, (i) in the opinion of the Committee, the Participant, without the written consent of the Company, engages directly or indirectly in any manner or capacity as principal, agent, partner, officer, director, employee,
or otherwise, in any business or activity competitive with the business conducted by the Company or any Subsidiary or (ii) the Participant performs any act or engages in any activity which in the opinion of the Committee is adverse to the best
C-15
interests of the Company. Notwithstanding anything else in the Plan to the contrary, the Committee may suspend the exercisability or the payment of any Award hereunder during any period during
which the Company is determining whether the requirements of this Section 14(c) have been violated.
(d)
Amendments to Awards
.
The Committee may at any time unilaterally amend any
unexercised, unearned, or unpaid Award, including Awards earned but not yet paid, to the extent it deems appropriate, provided, however, that subject to Section 5(d) any such amendment which is adverse to the Participant shall require the
Participants consent unless the Committee determines that such amendment or modification is necessary or advisable to comply with applicable law as a result of changes in law or regulation or to avoid the imposition of an additional tax,
interest or penalty under Section 409A.
(e)
No Right, Title or Interest in Company
Assets
.
No Participant shall have any rights as a stockholder as a result of participation in the Plan until the date of issuance of a stock certificate or book entry shares in his name, and, in the case of Restricted Stock, Stock
Options or SARs, until such rights are granted to the Participant. To the extent any person acquires a right to receive payments from the Company under this Plan, such rights shall be no greater than the rights of an unsecured creditor of the
Company.
(f)
Regulatory Approvals and Listings
.
Notwithstanding anything contained
in this Plan to the contrary, the Company shall have no obligation to issue or deliver certificates of Common Stock evidencing Awards resulting in the payment of Common Stock prior to (i) the obtaining of any approval from any governmental
agency which the Company shall, in its sole discretion, determine to be necessary or advisable, (ii) the admission of such shares to listing on the stock exchange on which the Common Stock may be listed, and (iii) the completion of any
registration or other qualification of said shares under any state or federal law or ruling of any governmental body which the Company shall, in its sole discretion, determine to be necessary or advisable.
(g)
No Right to Continued Employment or Grants
.
Participation in the Plan shall not
give any Participant any right to remain in the employ of the Company or any Subsidiary. The Company or, in the case of employment with a Subsidiary, the Subsidiary, reserves the right to terminate any Participant at any time. Further, the adoption
of this Plan shall not be deemed to give any person the right to be selected as a Participant or to be granted an Award, nor shall the grant of one Award guarantee the grant of further Awards in the future.
(h)
No Constraint on Corporate Action
.
Nothing in this Plan shall be construed
(i) to limit, impair or otherwise affect the Companys right or power to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or
transfer all or any part of its business or assets or (ii) to limit the right or power of the Company or any Subsidiary to take any action which such entity deems to be necessary or appropriate.
(i)
Legal Fees
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The Company shall pay all legal fees and related expenses incurred by a
Participant in seeking to obtain or enforce any payment, benefit or right he may be entitled to under the Plan following the occurrence of a Change in Control, provided that the Participant shall be required to repay any such amounts to the Company
to the extent a court of competent jurisdiction issues a final and
non-appealable
order setting forth the determination that the position taken by the Participant was frivolous or advanced in bad faith.
(j)
Governing Law
.
The Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of New Jersey, without regard to principles of conflict of laws.
(k)
No Impact on Benefits
.
Except as may otherwise be specifically provided for under
any employee benefit plan, policy or program provision to the contrary, Awards shall not be treated as compensation for purposes of calculating a Participants right under any such plan, policy or program.
(l)
Captions
. The headings and captions appearing herein are inserted only as a matter of convenience. They do
not define, limit, construe, or describe the scope or intent of the provisions of the Plan.
C-16
APPENDIX D TO PROXY STATEMENT
NATIONAL FUEL GAS COMPANY
2009
NON-EMPLOYEE
DIRECTOR EQUITY COMPENSATION PLAN
Amended and Restated December 5, 2018
The purpose of the Plan is to advance the interests of the Company and its stockholders, by enhancing the Companys
ability to attract and retain highly qualified individuals to serve as
non-employee
members of the Board, and by encouraging such directors to acquire a proprietary interest in the long-term success of the
Company, thereby aligning their financial interests with those of the Companys stockholders.
2.1 1997 Retainer Policy means the Retainer Policy for
Non-Employee
Directors approved by the Companys stockholders at the 1997 Annual Meeting of Stockholders.
2.2 Board means the Board of Directors of the Company.
2.3 Code means the Internal Revenue Code of 1986, and the rules, regulations and interpretations promulgated
thereunder, as amended from time to time.
2.4 Common Stock means the common stock of the Company.
2.5 Company means National Fuel Gas Company.
2.6 Exchange Act means the Securities Exchange Act of 1934, as amended from time to time.
2.7 Participant means any individual to whom shares of Common Stock have been issued under this Plan.
2.8 Plan means the National Fuel Gas Company 2009
Non-Employee
Director Equity Compensation Plan, as amended from time to time. Any reference in the Plan to a paragraph number refers to that portion of the Plan.
The Plan shall be administered by the Board. The Board shall have the authority to: (a) interpret the Plan;
(b) establish such administrative rules, regulations and procedures as it deems necessary for the proper administration of the Plan; (c) grant waivers of Plan terms and conditions when any such action would be in the best interest of the
Company; and (d) take any and all other action it deems advisable for the proper administration of the Plan. All determinations of the Board shall be made by a majority of its members, and its determinations shall be final, binding and
conclusive. For the avoidance of doubt, the Board shall not take any action under the Plan, including without limitation pursuant to this paragraph 3, which would result in the imposition of an additional tax under Section 409A of the Code
on the Participant holding shares issued hereunder.
All
non-employee
directors of the Company are Participants in the Plan, and may receive
shares of Common Stock under the Plan, except as otherwise provided in this section. Shares of Common Stock will not be issued under the Plan to any
non-employee
director who declines receipt of such shares or
whose compensation as a
non-employee
director is otherwise determined by written agreement between the Company and the
non-employee
director.
D-1
The number of shares of Common Stock which shall be available for issuance under the Plan shall be 450,000, subject to
adjustment as provided in paragraph 8. The shares of Common Stock available for issuance under the Plan may be authorized and unissued shares or treasury shares.
The Plan became effective as of March 12, 2009, the date of the Companys 2009 Annual Meeting of Stockholders, upon
approval by the Companys stockholders at such meeting. Unless earlier terminated by the Board pursuant to the provisions of the Plan, the Plan shall expire when all of the shares of Common Stock available for issuance under the Plan have been
issued. The expiration of the Plan shall not adversely affect any rights of any Participant, without such Participants consent.
7.
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Shares Issued Under the Plan
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(a) Shares of Common Stock will be issued to Participants on a quarterly basis, in advance (as of the first business day
of the quarter), as compensation in whole or in part for the Participants service on the Board during the quarter. Shares will be issued in such amounts as the Board shall determine from time to time in its discretion, provided that the
aggregate number of shares to be issued to any one Participant in any 12 month period shall not exceed 5,000. The number of shares to be issued to a Participant will be prorated as applicable for the quarter in which the Participant joins the
Board and the quarter in which the Participant is scheduled to retire or resign from the Board, but shares actually issued under the Plan to a Participant shall not be subject to forfeiture or cancellation for any reason.
(b) Each share of Common Stock issued under the Plan shall be
non-transferable
until the later of two years after its issuance or six months after the Participants cessation of service on the Board; provided, however, that upon a Participants death, whether in office or after his or her service as a director
ceases, any restrictions on transferability imposed hereunder shall lapse.
(c) Participants shall be entitled to all
of the rights of stockholders with respect to shares issued under the Plan, including, but not by way of limitation, the right to vote such shares, the right to receive dividends and the right to reinvest dividends into additional shares of Common
Stock. Shares acquired by reinvesting dividends are not subject to the transferability restrictions in paragraphs 7(b) and/or 8.
(d) Shares of Common Stock issued under the Plan may be evidenced in such manner as the Board deems appropriate,
including, without limitation, book-entry registration or issuance of a stock certificate or certificates.
8.
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Adjustment of Shares Available
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(a)
Changes in Stock.
In the event of changes in the Common Stock by reason of a Common Stock dividend, stock
split, reverse stock split or other combination, appropriate adjustment shall be made by the Board in the aggregate number of shares available under the Plan and in the rate of payment of shares under the Plan. Such proper adjustment as may be
deemed equitable may be made by the Board in its discretion to give effect to any other change affecting the Common Stock. Any shares of Common Stock or other securities acquired by a Participant as a dividend shall (i) be deemed to have been
acquired at the same time as the securities on which the dividend or, if more than one, the initial dividend was paid, and (ii) be subject to the same terms and conditions, including restrictions on transfer, that apply to the securities on
which the dividend or, if more than one, the initial dividend was paid. Any shares of Common Stock or other securities acquired by a Participant pursuant to a stock split, reverse stock split or other combination shall (i) be deemed to have
been acquired at the same time as the securities involved in the stock split, reverse stock split or other combination, and (ii) be subject to the same terms and conditions, including restrictions on transfer, that apply to the securities
involved in the stock split, reverse stock split or other combination.
D-2
(b)
Changes in Capitalization.
In case of a merger or consolidation
of the Company with another corporation, a reorganization of the Company, a reclassification of the Common Stock of the Company, a spinoff of a significant asset or other changes in the capitalization of the Company, appropriate provision may be
made with respect to shares of Common Stock issued under the Plan for (i) the substitution, on an equitable basis, of appropriate stock or other securities or other consideration to which holders of Common Stock of the Company will be entitled
pursuant to such transaction or succession of transactions, or (ii) adjustment in the number of shares issuable pursuant to the Plan and in the rate of payment of shares under the Plan, in each case as deemed appropriate by the Committee. Any
securities acquired by a Participant pursuant to this paragraph shall (i) be deemed to have been acquired at the same time as the securities surrendered in or otherwise subject to the transaction or succession of transactions described in this
paragraph, and (ii) be subject to the same terms and conditions, including restrictions on transfer, that apply to the securities surrendered in or otherwise subject to such transaction or succession of transactions.
9.
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Regulatory Approvals and Listings
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Notwithstanding anything contained in this Plan to the contrary, the Company shall have no obligation to issue or deliver
shares of Common Stock prior to (a) the obtaining of any approval from any governmental agency which the Company shall, in its sole discretion, determine to be necessary or advisable, (b) the admission of such shares to listing on the
stock exchange on which the Common Stock may be listed, and (c) the completion of any registration or other qualification of said shares under any state or federal law or ruling of any governmental body which the Company shall, in its sole
discretion, determine to be necessary or advisable.
10.
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No Right to Continued Service on Board
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Participation in the Plan shall not give any Participant any right to remain on the Board.
11.
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Other Compensation of
Non-Employee
Directors
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The Plan is not the only means of compensating Participants for their service on the Board. The
Board may provide, outside of the Plan, for payment of
non-equity
compensation for such service, including cash, on terms and in amounts as determined by the Board in its discretion. The 1997 Retainer Policy
is hereby amended so as to provide that all restrictions on the transferability of shares ever issued under the 1997 Retainer Policy shall lapse upon the death of the holder of those shares.
The Board may suspend or terminate the Plan at any time. In addition, the Board may, from time to time, amend the Plan in any
manner, provided however, that any such amendment shall be subject to stockholder approval (i) at the discretion of the Board and (ii) to the extent that shareholder approval may be required by law or under the applicable requirements of
any exchange on which the Common Stock is listed to trade. Notwithstanding the foregoing, the Board may not amend the Plan in any manner that would either (i) result in the imposition of an additional tax under section 409A of the Code on
any Participant, or (ii) adversely affect any Participant with respect to shares already issued under the Plan, without that Participants consent.
13.
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No Right, Title or Interest in Company Assets
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To the extent any person acquires a right to receive payments from the Company under this Plan, such rights shall be no greater
than the rights of an unsecured creditor of the Company.
D-3
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NATIONAL FUEL GAS COMPANY
6363 MAIN STREET
WILLIAMSVILLE, NY 14221
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PROXY VOTING
INSTRUCTIONS
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up through March 6, 2019.
Have your proxy card in hand.
VOTE BY MAIL
Mark, sign and date your proxy card and return it (for receipt by March 6, 2019) in the postage-paid envelope we have provided or return it to Vote
Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
VOTE BY
INTERNET -
www.proxyvote.com/NFG
Use the Internet to transmit your voting instructions and for electronic delivery of information up
through March 6, 2019. Have your proxy card in hand when you access the web site.
Your QR vote, telephone vote or Internet vote authorizes the named proxies to vote the shares in the same manner as if you marked, signed and returned
your proxy card.
FOR EMPLOYEE BENEFIT PLAN VOTES:
Please note, all votes must be received by 11:59 p.m., Eastern Time on
March 5, 2019
.
Control Number located in box below:
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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E53313-P15589
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KEEP THIS PORTION FOR YOUR RECORDS
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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DETACH AND RETURN THIS PORTION ONLY
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NATIONAL FUEL GAS COMPANY
The Board of Directors recommends a vote
FOR
the Election of Directors
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For All
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Withhold
All
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For All Except
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To withhold authority to vote for any
individual nominee(s), mark For All Except and write the number(s) of the nominee(s) on the line below.
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☐
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☐
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☐
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PROPOSAL 1: ELECTION OF DIRECTORS
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01) David C. Carroll
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02) Steven C. Finch
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03) Joseph N. Jaggers
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04) David F. Smith
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For
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Against
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Abstain
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The Board of Directors recommends a vote
FOR
Proposals 2, 3, 4 and 5
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For
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Against
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Abstain
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PROPOSAL 4
. Approval of the amended and restated 2009 Non-Employee Director Equity Compensation Plan
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☐
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☐
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☐
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PROPOSAL 2
. Advisory approval of named executive officer compensation
PROPOSAL 3
. Approval of the amended and restated 2010 Equity
Compensation Plan
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☐
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PROPOSAL 5.
Ratification of the appointment of PricewaterhouseCoopers LLP as the Companys independent
registered public accounting firm for fiscal 2019
Question 1.
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☐
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☐
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For address changes and/or comments, please check this box and write them on the back where indicated.
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☐
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In appreciation for you casting your
vote prior to the meeting, we will
send you a $5 Dunkin Donuts gift
card.
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Please indicate if you plan to attend this meeting.
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☐
Yes
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☐
No
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To accept the gift card check YES. If you prefer
instead a donation to Make-A-Wish
®
check NO. If no selection is made, you will receive a card.
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Yes
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No
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Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement, 2018 Summary Annual Report to Stockholders and
fiscal 2018 financial statements are available at http://investor.nationalfuelgas.com/proxy.
E53314-P15589
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PROXY
NATIONAL FUEL GAS COMPANY
Annual Meeting of Stockholders - March 7, 2019
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints R. J. Tanski and S. J. Mugel, and each
of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of National Fuel Gas Company Common Stock
which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Stockholders of the Company to be held March 7, 2019 or at any adjournment or postponement
thereof, respecting (i) matters of which the Company did not have timely notice but that may be presented at the meeting; (ii) approval of the minutes of the prior meeting; (iii) the election of any person as a director if a nominee is unable to
serve or for good cause will not serve; (iv) any stockholder proposal omitted from the enclosed proxy statement pursuant to Rule 14a-8 or 14a-9 of the Securities and Exchange Commissions proxy rules, and (v) all matters incident to the conduct
of the meeting.
This proxy may be revoked by notice to the Secretary of the meeting as described in the Proxy Statement.
E
mployee Benefit Plans.
This card also provides voting instructions for shares held in the National Fuel Gas Company Employee Stock Ownership Plan
and the National Fuel Gas Company Tax-Deferred Savings Plans. If you are a participant in any of these plans and have shares of the Common Stock of the Company allocated to your account under these plans, please read the following authorization to
the Trustee of those plans as to the voting of such shares.
Trustees Authorization.
The undersigned on the reverse side of this card authorizes and instructs Vanguard Fiduciary Trust Company as Trustee
of the National Fuel Gas Company Tax Deferred Savings Plans and the National Fuel Gas Company Employee Stock Ownership Plan to vote all shares of the Common Stock of the Company allocated to the undersigneds account under such plan(s) (as
shown on the reverse side) at the Annual Meeting, or at any adjournment thereof, in accordance with the instructions on the reverse side. All shares of Company Stock for which the Trustee has not received timely directions shall be voted or
exercised by the Trustee in the same proportion as the shares of Company Stock for which the Trustee received timely directions, except in the case where to do so would be inconsistent with the provisions of Title I of ERISA
. You may revoke your
instructions by notice to the Trustee as described in the enclosed Proxy Statement.
This proxy, when properly executed, will be voted as directed by the stockholder. See below for important provisions and additional
instructions.
Incomplete Directions and Instructions. If
this card is returned signed but without directions marked for one or more items, regarding the unmarked items, you are instructing the Trustee and granting the Proxies discretion to vote
FOR items 1, 2, 3, 4 and 5
.
This proxy may be revoked by notice to the Secretary of the meeting
as described in the Proxy Statement.
THIS PROXY CARD IS
CONTINUED ON THE REVERSE SIDE. PLEASE VOTE BY QR CODE, TELEPHONE, INTERNET OR SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
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Address Changes/Comments:
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(If you noted any
Address Changes/Comments above, please mark corresponding box on the reverse side.)
(Continued and to be marked, dated and signed, on the other side)
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