UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant ☐¨
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x | Definitive Proxy Statement |
¨ | Definitive Additional Materials |
¨ | Soliciting Material under Rule 14a-12 |
SilverBow Resources, Inc. | ||
(Name of Registrant as Specified In Its Charter) | ||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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April 2, 2018
Dear SilverBow Resources, Inc. Shareholder:
Our 20182019 annual meeting of shareholders will be held on May 15, 2018.
Our proxy statement is enclosed, accompanied by a copy of our annual report for the fiscal year ended December 31, 2017.2018. The proxy statement describes the business we will conduct at the annual meeting and provides information about SilverBow Resources, Inc. that you should consider when you vote your shares.
With our rebrand and gas company, strategically focused on the Eagle Ford formation in South Texas. Among the many steps taken in order to drive this long-term value for our shareholders, we introduced a new executive management team, rebranded as SilverBow Resources, Inc. and listed our common stockrelisting on the New York Stock Exchange.
Your vote is important to us. Whether or not you can attend the annual meeting of shareholders, we encourage you to vote and submit your proxy. Voting over the Internetinternet or by telephone is fast and convenient, and your vote is immediately tabulated. By using the Internetinternet or telephone, you help SilverBow Resources, Inc. reduce the cost of postage and proxy tabulations. Regardless of your method of voting, we urge you to review the accompanying materials and vote as promptly as possible to ensure the presence of a quorum for the annual meeting.
On behalf of the Board of Directors, thank you for your support and trust as a shareholder of SilverBow Resources, Inc.
Sincerely, | ||
Sean C. Woolverton | ||
Chief Executive Officer and Director |
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held May 15, 2018
The annual meeting of shareholders of SILVERBOW RESOURCES, INC. (the “Company” or “SilverBow Resources”) will be held at the Embassy Suites Houston Energy Corridor, 11730 Katy Highway, Houston, Texas 77079, on May 15, 2018,21, 2019, at 10:00 a.m., Houston time, for the following purposes:
1. | To elect |
2. | To conduct a nonbinding advisory vote to approve the compensation of SilverBow Resources’ named executive officers as presented in this proxy statement; | |
3. | To approve a one-time exchange of certain equity awards granted to executives in August 2018 (the “Equity Award Exchange”); | |
4. | To approve the Second Amendment to the 2016 Equity Incentive Plan (the “2016 Plan”) to increase the number of shares of common stock available for issuance under the 2016 Plan; | |
5. | To ratify the selection of BDO USA, LLP as SilverBow Resources’ independent auditor for the fiscal year ending December 31, |
6. | To conduct such other business as may properly be presented at the annual meeting, or at any and all adjournments or postponements thereof. |
A record of shareholders has been taken as of the close of business on March 20, 2018,22, 2019, and only shareholders of record at that time will be entitled to vote at the annual meeting, or any adjournment or postponement thereof. A complete list of shareholders will be available commencing May 4, 2018,10, 2019, and may be inspected during normal business hours prior to the annual meeting at the offices of the Company, 575 North Dairy Ashford Road, Suite 1200, Houston, Texas 77079. This list will also be available at the annual meeting.
By Order of the Board of Directors, | ||
Christopher M. Abundis | ||
Senior Vice President, General Counsel and Secretary | ||
April 15, 2019 |
Your Vote Is Important!
Whether or not you plan to attend the annual meeting of shareholders, we urge you to vote and submit your proxy as promptly as possible to ensure the presence of a quorum for the annual meeting. For additional instructions on voting your shares, please refer to the proxy materials.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held On May 15, 2018
Your notice or proxy card will contain instructions on how to view our proxy materials for the Annual Meetingannual meeting of shareholders on the Internet.internet. Our proxy statement and the Company’s annual report to shareholders on Form 10-K10‑K are available at www.sbow.com.
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APPENDIX A — SECOND AMENDMENT TO THE SILVERBOW RESOURCES, INC. 2016 EQUITY INCENTIVE PLAN | 59 |
SILVERBOW RESOURCES, INC.
575 North Dairy Ashford Road, Suite 1200
Houston, Texas 77079
(281) 874-2700
for the
2019 ANNUAL MEETING OF SHAREHOLDERS
SolicitationSolicitation
These proxy materials are being made available to the shareholders of SilverBow Resources, Inc. (“SilverBow Resources,” “Company,” “we” or “us”) beginning on or about April 2, 2018. 15, 2019. The Board of Directors (the “Board”) of SilverBow Resources is soliciting your proxy to vote your shares of SilverBow Resources common stock at the annual meeting of shareholders (the “Annual Meeting”) to be held at the Embassy Suites Houston Energy Corridor, 11730 Katy Highway, Houston, Texas 77079, on Tuesday, May 15, 2018,21, 2019, at 10:00 a.m., Houston time. The Board is soliciting proxies to give all shareholders the opportunity to vote on the matters that will be presented at the Annual Meeting. This proxy statement provides you with the information on these matters to assist you in voting your shares.
What is a proxy?
A proxy is your legal designation of another person or persons (the “proxy” or “proxies”) to vote on your behalf. By voting your shares as instructed in the materials you received, you are giving the designated proxies appointed by the Board the authority to vote your shares in the manner you indicate on yourthe accompanying proxy card.
Who are the proxies appointed by the Board of Directors for the Annual Meeting?
The following officers of SilverBow Resources have been appointed to act as proxies for the Company inwith respect ofto shares of our issued and outstanding common stock at the Annual Meeting:
Sean C. Woolverton | Chief Executive Officer | |
G. Gleeson Van Riet | Executive Vice President and Chief Financial Officer | |
Christopher M. Abundis | Senior Vice President, General Counsel and Secretary |
Who is qualified to vote?
You are qualified to receive notice of and to vote at the Annual Meeting if you own shares of SilverBow Resources common stock as of the close of business on our record date of Tuesday,Friday, March 20, 2018.
How many shares of SilverBow Resources common stock are entitled to vote at the Annual Meeting?
As of the March 20, 201822, 2019 record date, there were 11,616,48211,712,270 shares of SilverBow Resources common stock issued, outstanding and entitled to vote at the Annual Meeting. Each share of SilverBow Resources common stock is entitled to one vote on each matter presented.
What is the difference between holding shares as a shareholder of record and as a beneficial owner?
Many of our shareholders hold their shares through a broker, trustee or other nominee rather than having the shares registered directly in their own name. There are some distinctions between shares held of record and those owned beneficially that are summarized below.
Shareholder of Record
– If your shares are registered directly in your name with our transfer agent, you are the shareholder of record of the shares. As the shareholder of record, you have the right to grant a proxy to vote your shares to the Company or another person, or to vote your shares in person at the Annual Meeting.Beneficial Owner
– If your shares are held through a broker, trustee or other nominee, it is likely that they are registered in the name of the nominee and you are the beneficial owner of shares held in “street name.” As the beneficial owner of shares held for your account, you have the right to direct the registered holder to vote your shares as you instruct, and you are also invited to attend the Annual Meeting. Your broker, trustee or other nominee has provided a voting instruction card for you to use in directing how your shares are to be voted. However, since a beneficial owner is not the shareholder of record, you may not vote your shares in person at the meeting unless you obtain a legal proxy from the registered holder of the shares giving you the right to do so.2019 Proxy Statement | SilverBow Resources, Inc. | 1 |
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If I am a shareholder of record, how do I vote?
You may vote using any of the following methods:
Via the Internet
– You may vote by proxy via theBy Telephone
– You may vote by proxy by calling the number found on the proxyBy Mail – You may vote by proxy by completing the proxy card accompanying the proxy materials you received by mail and returning it in the envelope provided.
In Person
– If you are a shareholder of record, you may vote in person at the Annual Meeting. We will give you a ballot during the meeting.If I am a beneficial owner, how do I vote?
You may vote using any of the following methods:
Via the Internet
– You may vote by proxy via theBy Telephone
– You may vote by proxy by calling the number found onBy Mail
In Person
– If you are a beneficial owner of shares and you wish to vote in person at the Annual Meeting, you must obtain a legal proxy from the organization that holds your shares.What is householding?
We follow an SEC-approved procedure approved by the SEC known as “householding.” Under this procedure, only one copy of the proxy statement and annual report on Form 10-K and Notice is being delivered to shareholders residing at the same address, unless the shareholders have notified SilverBow Resources of their desire to receive multiple copies. This allows us to reduce the environmental impact of printing and providing proxy materials and associated printing and mailing costs.
If you received a householded mailing this year and would like additional copies of the proxy statement and annual report on Form 10-K and/or Notice mailed to you, please contact Broadridge Financial Solutions, Inc. (“Broadridge”) by telephone at 1-800-579-1639, or by email at sendmaterial@proxyvote.com. Broadridge will promptly deliver any additional copies requested. If you would like to enroll in or withdraw from householding, please contact the Company’s transfer agent, American Stock Transfer & Trust Company (if you hold your shares “of record”), or the bank or broker through which you hold your shares.
Householding is limited to accounts within the same bank or brokerage firm. Therefore, if you have accounts containing our common stock at more than one brokerage firm, you may receive a copy of the proxy statement and annual report on Form 10-K and notice regarding the availability of proxy materials from each firm.
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What are the Board’s recommendations on how I should vote my shares?
The Board recommends that you vote your shares as follows:
Proposal 1 — | FOR the election of | |
Proposal 2 — | FOR the approval of the compensation of SilverBow Resources’ named executive officers as presented in this proxy statement; | |
Proposal 3 — | FOR the approval of the one-time exchange of certain equity awards granted to executives in August 2018; | |
Proposal 4 — | FOR the approval of the Second Amendment to the 2016 Equity Incentive Plan to increase the number of shares of common stock available for issuance under the 2016 Plan; and | |
Proposal 5 — | FOR the ratification of the selection of BDO USA, LLP as SilverBow Resources’ independent auditor for the fiscal year ending December 31, | |
What are my choices when voting?
Proposal 1 — You may cast your vote in favor“for” electing each of electing the nominees as directors or withhold“withhold” your vote on one or more nominees.
Proposals 2, 3, 4, and 35 — You may cast your vote “for” or “against” or you may abstain with respect to each proposal.
How will my shares be voted if I do not specify how they should be voted?
If you vote by proxy, the individuals named on the proxy card (your “proxies”) will vote your shares in the manner you indicate. If you sign and return the proxy card without indicating your instructions, your shares will be voted as follows:
Proposal 1 — | FOR the election of | |
Proposal 2 — | FOR the approval of the compensation of SilverBow Resources’ named executive officers as presented in this proxy statement; | |
Proposal 3 — | FOR the approval of the one-time exchange of certain equity awards granted to executives in August 2018; | |
Proposal 4 — | FOR the approval of the Second Amendment to the 2016 Equity Incentive Plan to increase the number of shares of common stock available for issuance under the 2016 Plan; and | |
Proposal 5 — | FOR the ratification of the selection of BDO USA, LLP as SilverBow Resources’ independent auditor for the fiscal year ending December 31, | |
What is a quorum? How are votes withheld, abstentions and broker non-votes treated?
The holders of a majority of the voting power of the outstanding shares of stock of SilverBow Resources entitled to vote at the Annual Meeting, present in person or represented by proxy, shall constitute a quorum at the Annual Meeting. Votes withheld and abstentions are deemed as “present” at the Annual Meeting and are counted for quorum purposes. For Proposal 1, the election of directors, votes withheld will have the same effect as not voting. For Proposals 2 and 3, abstentions will have the same effect as a vote against the matter. For all proposals, broker non-votes, if any, while counted for general quorum purposes, are not deemed to be “present” with respect to any matter for which a broker does not have authority to vote and also will have the same effect as not voting.
Can I change my vote after I have voted?
You may revoke your proxy and change your vote at any time before the final vote at the Annual Meeting. If you submit a vote and wish to change it prior to the Annual Meeting, you may vote again via the Internetinternet or by telephone (onlybefore the date and time that internet and telephone voting is no longer available, as set forth on the proxy card. Only your latest Internetinternet or telephone proxy submitted prior to the Annual Meeting will be counted) before the date and time that Internet and telephone voting is no longer available (as set forth on the Notice or proxy card),counted. You may also change your vote by signing and returning a new proxy card or voting instruction form with a new date, or by attending the Annual Meeting and voting by ballot at the Annual Meeting.
2019 Proxy Statement | SilverBow Resources, Inc. | 3 |
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What vote is required to approve each proposal?
For Proposal 1, our Bylaws provide for directors to be elected by a plurality of the votes cast by the holders of shares entitled to vote at the Annual Meeting. Each of the remaining proposals requires the affirmative vote of the holders of a majority of the shares present in person or by proxy at the Annual Meeting and entitled to vote that proposal.
For these proposals,Proposal 1, the election of directors, votes withheld will have the same effect as not voting. For Proposals 2, 3, 4, and 5, abstentions will have the same effect as a vote against the matter. For all proposals, broker non-votes, if any, while counted for general quorum purposes, are not deemed to be “present” with respect to any matter for which a broker does not have authority to vote and will have no effect on the outcome of any such proposal for which the broker does not have authority to vote. Brokers who do not receive voting instructions from beneficial owners will only have authority to vote on Proposal 2.
Who pays the cost of this proxy solicitation?
The cost of preparing, printing and mailing the proxy materials and soliciting proxies is paid for by SilverBow Resources. SilverBow Resources will also request brokerage firms, banks, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of shares of SilverBow Resources common stock as of the record date and will reimburse these entities for the costs of forwarding the proxy materials in accordance with customary practice. Your cooperation in promptly voting your shares will help to avoid additional expense.
Is this proxy statement the only way the proxies are being solicited?
In addition to this solicitation by the Board, employees of SilverBow Resources may solicit proxies in person or by mail, delivery service, telephone or facsimile, without additional compensation. The Company has retained Alliance Advisors, LLC (“Alliance Advisors”) to perform proxy watch services which includes monitoring and reporting on voting for the Annual Meeting. The Company has agreed to pay this firm $3,500, plus reasonable out-of-pocket expenses, for such proxy watch services. Pursuant to our agreement with Alliance Advisors, at the Company’s discretion, we may later engage Alliance Advisors to act as a proxy solicitor in conjunction with the Annual Meeting for an additional fee to be determined at that time.
SilverBow Resources’ governance structure as a whole, including our amended and restated certificateCertificate of incorporation (our “Charter”Incorporation (“Charter”), amended and ourrestated Bylaws (“Bylaws”), and Nomination Agreement (as defined below), the board of directors of SilverBow Resources (the “Board”) is made up of three classes. Class II directors’ terms expire at this Annual Meeting; Class III directors’ terms expire at the 2019 annual meeting of shareholders;was negotiated and Class I directors’ terms expire at the 2020 annual meeting of shareholders. At each annual meeting of shareholders, directors elected to succeed those whose term has expired will be elected to three year terms.
As a piece of our governance framework, on April 22, 2016, we entered into the Director Nomination Agreement (the “Nomination Agreement”) between SilverBow Resources and the “Consenting Noteholders” (as defined in the Nomination Agreement, which includes Strategic Value Partners, LLC (“SVP”) and certain other former holders of our cancelled senior notes (the “Other Noteholders”)), who currently represent over a majority of our shares outstanding). Among other things,rights, the Consenting Noteholders have the right to nominate directors to the Board and maintain the right to remove and replace their respective directors at any time. As such, our current Board nomination process and Board members are effectively approved by a majority of shareholders prior to the annual election process. The Nomination Agreement is included by reference in our Charter as necessary to effectuate its terms.
Pursuant to our Charter, the Board of Directors of SilverBow Resources (the “Board”) is made up of three classes. Class III directors’ terms expire at this Annual Meeting; Class I directors’ terms expire at the 2020 annual meeting of shareholders; and Class II directors’ terms expire at the 2021 annual meeting of shareholders. At each annual meeting of shareholders, directors elected to succeed those whose term has expired will be elected to three-year terms.
Directors standing for election at this Annual Meeting:
Class III (For term to expire at the |
David Geenberg |
Marcus C. Rowland |
Sean C. Woolverton |
Set forth below are the names and remaining terms of the other fivefour directors, who are not standing for election at this Annual Meeting:
Class I (Term to expire at the 2020 annual meeting) | Class II (Term to expire at the 2021 annual meeting) | |||
Michael Duginski | Gabriel L. Ellisor | |||
Christoph O. Majeske | Charles W. Wampler |
2019 Proxy Statement | SilverBow Resources, Inc. | 5 |
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Under the Nomination Agreement and SilverBow Resources’ Charter, we have three classes of directors. Messrs. Gabriel L. EllisorDavid Geenberg, Marcus C. Rowland and Charles W. Wampler,Sean C. Woolverton have been nominated by the Board to stand for election at this Annual Meeting as Class IIIII Directors. SilverBow Resources’ Bylaws, put in place by a majority of the Company’s current shareholders on April 22, 2016, provide for directors to be elected by a plurality of votes cast by holders of shares entitled to vote in the election of directors at a meeting of the shareholders at which a quorum is present, subject to the then-existing terms of our Nomination Agreement and our Principles for Corporate Governance.
The biographies of each of the nominees and continuing directors below contain information regarding the person’sperson's service as a director of SilverBow Resources, business experience, director positions with other companies held currently or at any time during the last five years, information regarding involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes or skills that were considered by the Nominating and Strategy Committee and the Board in determining that the person should serve as a director for the Company.
David Geenberg,
Marcus C. Rowland,
Sean C. Woolverton,
Subject to the then-existing terms of our Nomination Agreement, SilverBow Resources’ Bylaws provide that a plurality of the votes cast (including votes withheld) by holders of shares entitled to vote is necessary to elect each nominee. Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote.
The Board of Directors unanimously recommends that shareholders vote “FOR” all director nominees identified in this proxy statement to serve as Class III directors. |
The persons named as proxies in these proxy materials, unless otherwise directed by a shareholder on a proxy card, intend to vote “FOR” the election of all nominees named in this proxy statement standing for election as Class III directors. If any nominee should become unavailable or unable to serve as a director, the persons named as proxies may vote for a substitute nominee, the size of the Board may be reduced accordingly, or a new nominee or director may be appointed pursuant to the then-applicable terms of the Nomination Agreement; however, the Board is not aware of any circumstances likely to render any nominee unavailable.
6 | SilverBow Resources, Inc. | 2019 Proxy Statement |
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CONTINUING MEMBERS OF THE BOARD OF DIRECTORS
Michael Duginski, 53, has served as a director of SilverBow Resources since April 2016. He is classified as an “independent director,” as such term is specifically used in the Nomination Agreement, meaning he was not designated by any of the Consenting Noteholders including SVP. Mr. Duginski is the President and CEO of Sentinel Peak Resources, a role he assumed in 2015. Previously, Mr. Duginski was Chief Operating Officer and Executive Vice President of Berry Petroleum from 2007 to 2013, where he led all operations including corporate development, production, reserves, drilling, EH&S and land, including corporate strategic planning, until Berry's sale to Linn Energy. Mr. Duginski has served on the public board of Madagascar Oil Limited from April 2015 to April 2016, and several private boards. Mr. Duginski received his Master of Business Administration from California State University, Bakersfield, and his Bachelor of Science in Mechanical Engineering from the University of Arizona. His qualifications to serve on the Board include his approximately thirty years of experience in the oil and gas industry along with his executive and directorship experience.
Christoph O. Majeske, 40, has served as a director of SilverBow Resources since September 2016. He was designated as a director by SVP pursuant to the Nomination Agreement. Mr. Majeske is a Director of Strategic Value Partners and is a member of the North American investment team with a focus on energy, transportation and industrials. From 2006 to 2015, he was a Vice President and Operating Executive of Cerberus Capital Management (“Cerberus”). At Cerberus, Mr. Majeske executed private equity transactions and held various interim executive roles at portfolio companies, including Chief Financial Officer and Chief Restructuring Officer, in both North America and Europe across a range of industries. From 2000 to 2006, Mr. Majeske was a member of the M&A Advisory team at PricewaterhouseCoopers. He received a Bachelor of Business Administration in Finance, Accounting and Economics with High Distinction from the University of Michigan in 2000. He also serves on the Boards of Genco Shipping & Trading and White Energy. Mr. Majeske brings a wealth of financial and restructuring experience to the Board.
Gabriel L. Ellisor, 45, was named a director of SilverBow Resources in April 2016. He was designated as a director by the Consenting Noteholders (excluding SVP) pursuant to the Nomination Agreement. Mr. Ellisor served as Chief Financial Officer of Three Rivers Operating Company II from July 2012 to February 2015 and as Chief Financial Officer for Three Rivers Operating Company I from 2010 to 2012, until such acquisition vehicles were sold. Prior to joining Three Rivers, Mr. Ellisor was a principal at Rivington Capital Advisors from 2008 to 2010. Mr. Ellisor has approximately 20 years of experience in the finance sector of the oil and gas industry, including holding various positions at First Interstate Bank, Wells Fargo, and BNP Paribas. He also serves on the board of Salt Creek Midstream LLC and served on the board of Energy XXI from April 2018 until its merger with Cox Oil in October 2018. Mr. Ellisor earned a B.B.A., with a major in Finance, from Texas Christian University. Mr. Ellisor’s qualifications to serve on the Board include his vast financial and transactional experience.
Charles W. Wampler, 64, has served as a director of SilverBow Resources since April 2016. He was also designated as a director by the Consenting Noteholders (excluding SVP) pursuant to the Nomination Agreement. Mr. Wampler is the Chairman, CEO and President of Resource Rock Exploration II LLC, a role he assumed in June 2017. Previously, Mr. Wampler served as Chief Operating Officer of Aspect Holdings, President of Aspect Energy and General Exploration Partners (“GEP”) and Board Member for GEP from 2007 to 2012. Mr. Wampler directed the day-to-day management of Aspect’s domestic operations in the US Gulf Coast and international operations in Hungary and Kurdistan, Iraq. Before joining Aspect, Mr. Wampler was Chief Operating Officer and a Board member of Lewis Energy Group from 2004 to 2007. Prior to joining Lewis Energy, Mr. Wampler was Division Operations Manager and Drilling Manager of EOG Resources from 1984 to 2004, and prior to joining EOG, he held several engineering positions. Mr. Wampler served on the Board of Directors of Energy XXI from December 2016 until its merger with Cox Oil in October 2018. Mr. Wampler earned his BS in Petroleum Engineering from University of Louisiana at Lafayette. Mr. Wampler is qualified to serve on the Board due to his decades of operational experience in various facets of the oil and gas industry.
The biographies for the Class III director nominees are set forth above under “Proposal 1—Election of Directors.”
2019 Proxy Statement | SilverBow Resources, Inc. | 7 |
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Affirmative Determinations Regarding Independent Directors and Financial Experts
The Board has determined that each of the following directors is an “independent director” as such term is defined in Section 303A.02 of the Listed Company Manual of the New York Stock Exchange, Inc. (“NYSE”): Michael Duginski, Gabriel L. Ellisor, David Geenberg, Christoph O. Majeske, Marcus C. Rowland and Charles W. Wampler; inWampler. In reaching this determination, the Board has affirmatively determined that each of these directors has no material relationship with the Company as contemplated under Section 303A.02. The Board has determined that each of these same directors is independent for the purposes of Nominating and Strategy Committee service, although each does not currently serve on the Nominating and Strategy Committee. The Board also has determined that these same directors are each “independent” under the heightened standards set forth in Section 303A of the Listed Company Manual of the NYSE for the purposes of Compensation Committee service. Althoughservice, although these directors do not all serve on the Compensation Committee, six of our seven directors are independent for Compensation Committee purposes at this Annual Meeting.Committee. These independent directors represent a majority of the Company’s Board of Directors. Mr. Woolverton is not an independent director because he also serves as Chief Executive Officer of the Company.
The Board has also determined that each of the following directors is “independent” under the heightened standard set forth in Section 303A of the Listed Company Manual of the NYSE for the purposes of Audit Committee service (including, by reference, the standards set forth under Rule 10A-3 under the Securities Exchange Act of 1934 (the “Exchange Act”)): Michael Duginski, Gabriel L. Ellisor, Marcus C. Rowland, and Charles W. Wampler. Although these directors do not all serve on the Audit Committee, four of our seven directors are independent for Audit Committee purposes at this Annual Meeting. Mr. Woolverton is not an independent director because he also serves as Chief Executive Officer of the Company, and Messrs. Geenberg and Majeske are not independent directors for Audit Committee purposes because they are employees of SVP, a substantial shareholder of SilverBow Resources at the time of this Annual Meeting.
As discussed above, the Board has determined that each member of the Audit, Compensation and Nominating and Strategy committees of the Board meets the independence requirements applicable to those committees prescribed by the NYSE and the SEC. Further, the Board has determined that Mr. Gabriel L. Ellisor, Audit Committee Chair, and Mr. Michael Duginski, also a member of the Audit Committee, are each an “audit committee financial expert,” as such term is defined in Item 407(d) of Regulation S-K promulgated by the SEC.
The Board reviewed the applicable standards for Board member and Board committee independence and the criteria applied to determine “audit committee financial expert” status, as well as the answers to annual questionnaires completed by each of the independent directors. On the basis of this review, the Board made its independence and “audit committee financial expert” determinations.
The following standing committees have been established by the Board: Audit, Compensation and Nomination and Strategy. Descriptions of the membership and functions of these committees are set forth below.
The following chart identifies the committees upon which each member of the Board serves, the chairs of the committees, and the number of meetings and actions by consent of the Board and the committees during 2017:
Board of Directors | Audit | Compensation | Nominating and Strategy(1) | ||||
Number of meetings held | 9 | 4 | 4 | 2 | |||
Number of actions by consent | 6 | 0 | 0 | 0 | |||
Marcus C. Rowland | C | M | |||||
Michael Duginski | M | M | C | ||||
Gabriel L. Ellisor | M | C | M | ||||
David Geenberg | M | M | |||||
Christoph O. Majeske(2) | M | C | |||||
Charles W. Wampler | M | M | M | ||||
Sean C. Woolverton(3) | M |
| Board of Directors |
| Audit |
| Compensation |
| Nominating and Strategy | |
| ||||||||
Number of meetings held |
| 7 |
| 5 |
| 3 |
| 4 |
Number of actions by consent |
| 2 |
| 0 |
| 2 |
| 0 |
| ||||||||
Marcus C. Rowland |
| C |
| M | ||||
Michael Duginski |
| M |
| M |
| C | ||
Gabriel L. Ellisor |
| M |
| C |
| M |
| |
David Geenberg |
| M |
| M | ||||
Christoph O. Majeske |
| M |
| C |
| |||
Charles W. Wampler |
| M |
| M |
| M |
| |
Sean C. Woolverton |
| M |
C | = Chair | |
M | = Member |
8 | SilverBow Resources, Inc. | 2019 Proxy Statement |
Table of Contents |
During the period in 2017 that2018, each director, was onwith the Board or a memberexception of a committee, each directorMr. Rowland, attended at least 75% of the aggregate of (i) the total number of meetings of the Board andplus (ii) the total number of meetings of all committees of the Board on which he served.
Audit Committee
The Audit Committee assists the Board in fulfilling its responsibilities with respect to oversight in monitoring: (i) the integrity of the financial statements of the Company; (ii) SilverBow Resources’ compliance with legal and regulatory requirements; (iii) the independent auditor’s selection, qualifications and independence;independence of the independent auditor; and (iv) the performance of SilverBow Resources’ internal audit function and independent auditor. The committee is required to be comprised of three or more non-employee directors, each of whom is determined by the Board to be “independent” under the rules promulgated by the SEC under the Exchange Act and meets the financial literacy and experience requirements under the rules or listing standards established by the NYSE, as may be amended. In addition, at least one member of the committee must satisfy the definition of “audit committee financial expert” as such term may be defined from time to time under the rules promulgated by the SEC. The Board has determined that Messrs. Ellisor and Duginski qualify as audit“audit committee financial expertsexperts” and that each member of the Audit Committee is independent as defined in the NYSE listing standards and the Exchange Act rules, and each meets the financial literacy and experience requirements established by the NYSE. A report of the Audit Committee appears later in this proxy statement. Mr.Messrs. Ellisor (Committee Chair) and Messrs., Duginski and Wampler are members of our Audit Committee.
Compensation Committee
The Compensation Committee holds the responsibilities of the Board relating to compensation of the Company’s executive officers. This includes evaluating the compensation of the executive officers of the Company and its primary operating subsidiary, SilverBow Resources Operating, LLC, and their performance relative to their compensation to assure that such executive officers are compensated effectively in a manner consistent with the strategy of SilverBow Resources, competitive practices and the requirements of the appropriate regulatory bodies. In addition, this committee evaluates and makes recommendations to the Board regarding the compensation of the directors. The Compensation Committee may evaluateevaluates and approveapproves any amendment, some of which may require shareholder approval, to the Company’s existing equity-related plans and approves the adoption of any new equity-related plans, subject to shareholder and Board approval. The Compensation Committee may delegate its authority to subcommittees constituted of a member or members of the Compensation Committee, but generally does not delegate authority to members of management to oversee executive compensation matters or compensation plan matters, including both equity-related and cash incentive compensation plans. The Compensation Committee is required to be comprised of at least three directors who are non-employee directors and determined by the Board to be independent under applicable Exchange Act rules and NYSE listing standards. The Board has determined that all Compensation Committee members qualify as non-employee directors under applicable Exchange Act rules and NYSE listing standards. The report of the Compensation Committee is included as part of “Compensation Discussion and Analysis” of this proxy statement. Messrs. Majeske (Committee Chair), Ellisor and Wampler are members of our Compensation Committee.
Frederic W. Cook & Co., Inc. (“FW Cook”) has been engaged by the Compensation Committee since October 31, 2017, to serve as its independent compensation consultant. FW Cook reports directly to our Compensation Committee and has provided expert advice on the design and implementation of the Company’s compensation policies and programs. Prior to FW Cook, Longnecker and Associates (“Longnecker”) had served as the Company’s independent compensation consultant from the Company’s emergence from bankruptcy on April 22, 2016, through October 31, 2017. To the best of the Company’s knowledge, there are no conflicts between FW Cook or Longnecker and any member of the Board.
Compensation Committee Interlocks and Insider Participation
During 2017,2018, the Compensation Committee consisted of Messrs. Majeske, Ellisor and Wampler, all of whom are independent directors for Compensation Committee standards. Mr. Majeske joined the Company’s Compensation Committee in March 2017 and was appointed Chairman. To the Company’s knowledge, there are no compensation committee interlocks involving members of the Compensation Committee or other directors of the Company.
Nominating and Strategy Committee
The Nominating and Strategy Committee identifies individuals qualified to become directors, nominates candidates for directorships and also recommends to the Board the membership of each of the Board’s committees. Subject to the Nomination Agreement, this committee may consider nominees recommended by shareholders upon written request by a shareholder. The Nominating and Strategy Committee develops, monitors and recommends to the Board corporate governance principles and practices applicable to SilverBow Resources. The committee also assists management of the Company in identifying, screening and recommending to the Board individuals qualified to become executive officers of the Company. In addition, this committee administers the Company’s Conflict of Interest Policy. The Nominating and Strategy Committee is required to be comprised of at least three directors who are non-employee directors and determined by the Board to be independent under the NYSE listing standards and the Exchange Act rules. Messrs. Duginski (Committee Chair), Geenberg and Rowland are members of the Nominating and Strategy Committee and, as determined by the Board, all are independent as defined in the NYSE listing standards and rules of the SEC.
2019 Proxy Statement | SilverBow Resources, Inc. | 9 |
Table of Contents |
Board Leadership Structure; Meetings of Independent Directors; Role in Risk Oversight
While our Principles for Corporate Governance do not require that our Non-ExecutiveIndependent Chairman of the Board and Chief Executive Officer positions be separate, effective upon the Company’s emergence from bankruptcy and under the Plan of Reorganization and the present terms of the Nomination Agreement, the Non-ExecutiveIndependent Chairman position and the Chief Executive Officer position wereare separated. Mr. Rowland was appointed as the Non-ExecutiveIndependent Chairman when he joined the Board in September 2016 and Mr. Woolverton was named Chief Executive Officer in March 2017.
The Board believes that this leadership structure is appropriate at this time as it allows our Chief Executive Officer to manage and lead the day-to-day business while allowing the Non-ExecutiveIndependent Chairman to provide independent leadership to the Board. At each executive session of the independent directors, Mr. Rowland as the Non-ExecutiveIndependent Chairman of the Board presides.
Along with our separation of the Chairman of the Board and Chief Executive Officer roles, we also have other checks and balances for our Board structure:
· | our Audit, Compensation and Nominating and Strategy committees are all completely independent, as required; |
· | six of our seven Board members are independent for Compensation and Nominating and Strategy committee standards; |
· | four of our seven Board members are independent for Audit Committee standards; |
· | our independent Nominating and Strategy Committee (in conjunction with the Nomination Agreement in effect) has responsibility for Board and management succession planning and related recommendations to the full Board; |
· | led by the Nominating and Strategy Committee, a Board assessment is conducted annually, assessing the entire Board (not just the current class of nominees) and its committees; |
· | following most meetings of the Board, the |
· | as provided in “Communications with the Board of Directors” in this proxy statement, any shareholder may communicate with the Board of Directors or non-management independent directors, as appropriate. |
The full Board is responsible for general oversight of enterprise risk concerns inherent in our business. At each Board meeting, the Board receives reports from members of our senior management that help the Board assess the risks we face in the conduct of our business. Members of our seniorSenior technical staffmanagement frequently makemakes presentations to the Board about current and planned exploration and development activities that may subject us to operational and financial risks. In addition, the Audit Committee reviews the effectiveness of our internal controls over financial reporting, which are designed to address risks specific to financial reporting, with our internal auditorsauditor and independent accountantsaccountant at least annually. The Audit Committee is also responsible for oversight of the Company’s cyber risk management. Periodic cyber risk updates are provided by Company management to the full Board and Audit Committee, and such committee annually reviews the effectiveness of such controls. Through the Company’s independent committees, SilverBow Resources has established processes for the effective oversight of critical issues, such as integrity of our financial statements by our Audit Committee, executive compensation by our Compensation Committee, and corporate governance, including the selection of directors and director nominees, by our Nominating and Strategy Committee.
In accordance with its charter, the Compensation Committee periodically evaluates the compensation of non-employee directors for service on the Board and on Board committees. In consultation with an independent compensation consultant, the Compensation Committee recommends annual retainer and meeting fees for non-employee directors and fees for service on Board committees, sets the terms and awards of any stock-based compensation and submits these recommendations to the Board for approval. Directors who are also employees of the Company or our significant shareholder, SVP, receive no additional compensation for service as directors.
As an inducement to attract qualifiedserve on the Board, each non-employee director (other than Messrs. Geenberg and Majeske, who are employed and designated to serve as directors followingby SVP) who joined the Company’s reorganizationBoard in 2016 was granted a one-time, long-term, inducement equity award, which was subject to a multi-year vesting period (rather than the typical one-year vesting period for annual director awards granted by our peers). Since the inducement awards described in the preceding sentence were still outstanding and emergence from bankruptcy, one-time inducementsubject to vesting in 2018, no equity awards were granted to our non-employee directors in 2018. Further, given the fact that such inducement awards were all fully vested as further described below; at this time,of March 22, 2019, the Compensation Committee has not approved anexpects to revert to a more routine, annual equity award program that is in line with our peers for our non-employee directors. The value of the one-time inducement awards to our non-employee directors was determined after consideration of the following:
The following table shows the annual cash compensation payable to our non-employee directors. The Compensation Committee has not approved an annual cash retainer for service as Chairman of the Board at this time.
Annual Board Retainer |
| $ | 70,000 | (1) |
Committee Chair Premiums: |
|
|
|
|
Audit Committee Chair |
| $ | 20,000 | (2) |
Compensation Committee Chair |
| $ | — | (3) |
Nominating and Strategy Committee Chair |
| $ | 5,000 | (4) |
_____________________
(1) | Annual cash compensation for all non-employee directors other than the Chairman of the Board or an SVP Designated Director. Directors who are employees of our significant shareholder, SVP, have elected to receive no additional compensation (neither cash nor equity) for their service as directors. |
(2) | Annual fee for serving as Audit Committee Chair. |
(3) | Annual fee for serving as Compensation Committee Chair. As the Compensation Committee Chair is an SVP employee, no compensation has been tied to such position. |
(4) | Annual fee for serving as Nominating and Strategy Committee Chair. |
The below table sets forth certain summary information regarding compensation paid or accrued by the Company to or on behalf of the Company’s non-employee directors for the fiscal year ended December 31, 2017:
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Total ($) | ||||||||||||
(a) | (b) | (c) | (d) | (h) | ||||||||||||
Michael Duginski | $ | 75,000 | $ | 389,376 | $ | 149,664 | $ | 614,040 | ||||||||
Gabriel L. Ellisor | $ | 90,000 | $ | 389,376 | $ | 149,664 | $ | 629,040 | ||||||||
David Geenberg(2) | $ | — | $ | — | $ | — | $ | — | ||||||||
Christoph O. Majeske(2) | $ | — | $ | — | $ | — | $ | — | ||||||||
Marcus C. Rowland(3) | $ | — | $ | 2,498,587 | $ | 1,193,955 | $ | 3,692,542 | ||||||||
Charles W. Wampler | $ | 70,000 | $ | 389,376 | $ | 149,664 | $ | 609,040 |
Name |
| Fees Earned or Paid in Cash ($) |
|
| Stock Awards ($)(1) |
|
| Option Awards ($)(1) |
|
| Total ($) |
| ||||
(a) |
| (b) |
|
| (c) |
|
| (d) |
|
| (h) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Michael Duginski |
| $ | 75,000 |
|
| $ | — |
|
| $ | — |
|
| $ | 75,000 |
|
Gabriel L. Ellisor |
| $ | 90,000 |
|
| $ | — |
|
| $ | — |
|
| $ | 90,000 |
|
David Geenberg(2) |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Christoph O. Majeske(2) |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Marcus C. Rowland |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Charles W. Wampler |
| $ | 70,000 |
|
| $ | — |
|
| $ | — |
|
| $ | 70,000 |
|
__________________
(1) | None of the non-employee directors received an equity award in |
(2) | Directors who |
2019 Proxy Statement | SilverBow Resources, Inc. | 11 |
Identifying Candidates
Subject to the then-applicable terms of the Nomination Agreement, the Nominating and Strategy Committee, in consultation with the Chairman of the Board, is responsible for identifying and screening potential director candidates and recommending qualified candidates to the Board for nomination. The Committee will also consider director candidates recommended by the shareholders in accordance with the Company’s Bylaws. For information on how to recommend a director candidate, refer to “Shareholder Proposals” in this proxy statement.
Qualifications
The Board codified standards for directors in SilverBow Resources’Resources' Principles for Corporate Governance. These principles provide that the Board should encompass a diverse range of talent, and perspectives,perspective, skill and expertise sufficient to provide sound and prudent guidance with respect to the Company’sCompany's operations and interests. The Principles for Corporate Governance also provide that at all times a majority of the Board must be “independent directors”"independent directors" as defined from time to time by the listing requirements of the NYSE and any specific requirements established by the Board. The Nominating and Strategy Committee has not established in any governing document a specific minimum or maximum age, in any governing document, education, years of business experience or specific types of skills for potential director candidates; but, in general, consideration is given to each candidate’s reputation, mature judgment, career specialization, relevant technical skills, diversity and the extent to which the candidate would fill a present need on the Board.
The Company’s Principles for Corporate Governance require that each director:
· | understand SilverBow Resources’ business and the marketplaces in which it operates; |
· | regularly attend meetings of the Board and of the Board committee(s) on which he or she serves; |
· | review the materials provided in advance of meetings and any other materials provided to the Board from time to time; |
· | monitor and keep abreast of general economic, business and management news and trends, as well as developments in SilverBow Resources’ competitive environment and SilverBow Resources’ performance with respect to that environment; |
· | actively, objectively and constructively participate in meetings and the strategic decision-making processes; |
· | share his or her perspective, background, experience, knowledge and insights as they relate to the matters before the Board and its committees; |
· | be reasonably available when requested to advise the CEO and management on specific issues not requiring the attention of the full Board but where an individual director’s insights might be helpful to the CEO or management; and |
· | be familiar and comply in all respects with the Code of Ethics and Business Conduct of the Company. |
We have not adopted a specific written policy with respect to diversity; however, the Nominating and Strategy Committee considers principles of diversity as a factor in evaluating nominees to recommend for service on our Board. As part of the Board’s succession planning and annual self-assessment process and in accordance with the terms of the then-applicable Nomination Agreement, the Board reviews the diversity of specific skills and characteristics necessary for the optimal functioning of the Board in its oversight of the Company overfor both the shortershort and longerlong term. The Board’s succession planning requires the Nominating and Strategy Committee and the Board to assessconsider the skill areas currently represented on the Board, and specifically those skill areas represented by directors expected to retire or leave the Board in the near futurefuture. Those skill sets are assessed against the target skill areas established annually by the Board as well asand the recommendations of directors regarding skills that could potentially improve the overall quality and ability of the Board to carry out its function. The Board then establishes the specific target skill areas or experiences that are to be the focus of a director search, when necessary. Specific qualities or experiences could include experience in the Company’sCompany's industry, financial or technological expertise, experience in situations comparable to the Company’s,Company's, leadership experience and relevant geographical experience. The effectiveness of the Board’sBoard's diverse mix of skills and experiences is also considered and reviewed as part of each Board self-assessment.
In determining whether to nominate a candidate, either from an internally generated, shareholder recommendation or an appointment under the terms of the then-existing Nominating Agreement, the Nominating and Strategy Committee will consider the composition and capabilities of existing Board members, as well as additional capabilities considered necessary or desirable in light of existing and future Company needs. The Nominating and Strategy Committee also exercises its independent business judgment and discretion in evaluating the suitability of any recommended candidate for nomination.
Part of the Company’s historical and ongoing corporate governance practices is the Company’s policy that requires officers, directors, employees and certain consultants of the Company are required to submit annual disclosure statements regarding their compliance with the Company’s Conflict of Interest Policy. A management representation letter is provided to the Nominating and Strategy Committee of the Board regarding the results of the annual disclosure statements and management’s assessment of any potential or actual conflict of interest. Based on this assessment and further discussion with management, the Nominating and Strategy Committee then directs management on what additional action, if any, the committee determines is necessary to be undertaken with regard to any potential or actual conflict of interest or related-party transaction.
The Company also requires that officers, directors, employees and certain consultants of the Company provide an annual reaffirmation of the Company’s Code of Ethics and Business Conduct. A copy of the Code of Ethics and Business Conduct is redistributed in connection with this requirement, and each personrequirement. Each required individual is asked to reaffirm and reacknowledge that they have reviewed and refreshed their knowledge of the provisions of the Code of Ethics and Business Conduct and will comply with such code. Theyall provisions therein. Each individual also reaffirmreaffirms their understanding that their continued service to the Company is dependent upon compliance with the Company’s Code of Ethics and Business Conduct. In addition, all officers, directors, employees and certain consultants are required to annually recertify their understanding of, and adherence to, the Company’s Insider Trading Policy. A copy of the Insider Trading Policy is also redistributed in connection with this requirement.
Each of the Audit, Compensation and Nominating and Strategy Committees has a committee charter. Each such charter is reviewed annually by the applicable committee, and all of the charters are reviewed by the Nominating and Strategy Committee. The committee charters, the Board-adopted Principles for Corporate Governance and the Code of Ethics and Business Conduct are applicable to all employees and directors, and to certain consultants, and are posted on the Company’s website at www.sbow.com. In addition, the Code of Ethics for Senior Financial Officers and Principal Executive Officer, as adopted by the Board, is posted on SilverBow Resources’ website, where the Company also intends to post any waivers from or amendments to this code within four business days following any such waiver or amendment.
Other than the Company’s Conflict of Interest Policy, the Company has not adopted a formal related-party transaction policy. As a matter of corporate governance policy and practice, all related-party transactions are presented to and considered by the Nominating and Strategy Committee of the Company’s Board of Directors. See the discussion set forth above under “Corporate Governance” regarding the Conflict of Interest Policy and related annual disclosure process used to identify and evaluate related-party transactions, if any, disclosed by our directors, officers, employees and certain consultants.
Director Nomination Agreement
Following the expiration of the initial terms of the Board after the effective date of the Nomination Agreement (April 22, 2016), our Charter and the Nomination Agreement require that the Company and the Consenting Noteholders shall take all necessary actions to cause the Board to consist of seven members as Executive Vice Presidentfollows:
(i) | the Chief Executive Officer of SilverBow Resources, which shall be a Class III director; | |
(ii) | two nominees designated by SVP (each an “SVP Designated Director”), which shall be one Class I director and one Class III director; provided, that (A) the number of nominees designated by SVP shall be reduced to one director, which shall be a Class III director, at such time as SVP and its affiliates (other than other Consenting Noteholders) (the “SVP Entities”) collectively beneficially own common stock representing an equity percentage of less than 15% and greater than or equal to 8%, with the understanding that such reduction to one director shall be permanent and despite any later increase in their equity percentage, and (B) SVP shall permanently, and despite any later increase in their equity percentage, no longer be entitled to designate a nominee at such time as the SVP Entities collectively beneficially own common stock representing an equity percentage of less than 8%; |
2019 Proxy Statement | SilverBow Resources, Inc. | 13 |
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(iii) | two nominees designated by the Consenting Noteholders as a group (excluding SVP until such time that SVP is no longer entitled to designate an SVP Designated Director) (the “Noteholder Designated Directors”), which shall be two Class II directors; provided, that (A) the number of nominees designated by the Consenting Noteholders shall be reduced to one director, which shall be a Class II director, at such time as the Consenting Noteholders and their affiliates (the “Noteholder Entities”) collectively beneficially own common stock representing an equity percentage of less than 15% and greater than or equal to 8%, with the understanding that such reduction to one director shall be permanent and despite any later increase in their equity percentage, and (B) except as set forth in item (iv) below, such Consenting Noteholders shall permanently, and despite any later increase in their equity percentage, no longer be entitled to designate a nominee at such time as the Noteholder Entities collectively beneficially own common stock representing an equity percentage of less than 8%; | |
(iv) | for the purposes of calculating the equity percentage in clauses (A) and (B) of item (iii) above, with respect to SVP’s ownership, the equity percentage shall only include the portion of SVP’s equity percentage that exceeds 15%, but shall contribute to the equity percentage described in (iii) above only up to a maximum of 7.9%, until such time that SVP is no longer entitled to designate an SVP Designated Director. At such time that SVP is no longer entitled to designate an SVP Designated Director, all of SVP’s ownership shall be included in the equity percentage calculations in clauses (A) and (B) of item (iii) above. For the purposes of item (iii) above, the designation right contained in such provision shall still be available at the time SVP is no longer entitled to designate an SVP Designated Director, if at such time, the equity percentage ownership threshold in clause (B) of item (iii) above is satisfied; and | |
(v) | one independent director (as such term is used solely for purposes of the Nomination Agreement) and one additional director (which will be the Chairman) nominated by the Nominating and Strategy Committee of the Board, which shall be designated a Class I director and a Class III director, respectively. |
So long as SVP is entitled to designate a nominee, SVP shall have the right to remove such nominee (with or without cause), from time to time and Chief Operating Officerat any time, from 2008 until November 2, 2017, when he ceased beingthe Board. Should a director designated by SVP be removed for any reason, whether by SVP or otherwise in accordance with the Charter and the Bylaws, SVP shall be entitled to designate an officerindividual to fill the vacancy created by such removal so long as SVP is entitled to designate a nominee on the date of such replacement designation, subject to the Charter and Bylaws of the Company.
In addition, if SVP loses the right to nominate any directors, it may not remove and replace their directors still on the Board. If the Consenting Noteholders lose the right to remove and replace any directors pursuant to the then-existing terms of the Nomination Agreement, the Consenting Noteholders will lose the right to remove and replace such directors.
The Nomination Agreement will terminate upon the earlier to occur of (a) such time as the Consenting Noteholders in the aggregate no longer beneficially own common stock representing an equity percentage equal to or greater than 8%, or (b) the delivery of written notice to SilverBow Resources and its subsidiaries. Effective October 7, 2016 through March 1, 2017, Mr. Banks was appointed interim Chief Executive Officer of SilverBow Resources along with maintaining his roles of Executive Vice President and Chief Operating Officer. From 2006 to 2008, he served as Vice President of International Operations and Strategic Ventures. Mr. Banks was also Presidentby all of the Company’s subsidiary, Swift Energy International,Consenting Noteholders, requesting the termination of the Agreement. Further, at such time as any particular Consenting Noteholder ceases to beneficially own any shares of common stock, all rights and had served as an officerobligations of such company since he joined the Company in 2004. He was an executive officer of SilverBow Resources when it filed for reliefConsenting Noteholder under the Bankruptcy CodeNomination Agreement will terminate.
The foregoing summary of the Nomination Agreement is qualified in its entirety by reference to the full text of the Nomination Agreement, which is included as Exhibit 4.7 to our Registration Statement on December 31, 2015, and throughout the Company’s reorganization and emergence from bankruptcyForm S-8 (File No. 333-210936), filed on April 27, 2016.
Emergence Registration Rights Agreement
We also entered into a registration rights agreement effective April 22, 2016. Mr. Banks has 402016 (the “Registration Rights Agreement”) with parties who received shares of common stock upon the effective date of the Registration Rights Agreement (the “Holders”) representing 5% or more of the common stock outstanding on that date. The Registration Rights Agreement provides resale registration rights for the Holders’ Registrable Securities (as defined in the Registration Rights Agreement).
14 | SilverBow Resources, Inc. | 2019 Proxy Statement |
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Pursuant to the Registration Rights Agreement, Holders have customary demand, underwritten offering and piggyback registration rights, subject to the limitations set forth in the Registration Rights Agreement. Under their demand registration rights, Holders owning at least 5% of the outstanding shares of common stock may request us to register all or a portion of their Registrable Securities, including on a delayed or continuous basis under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”). Each Holder is entitled to two demand registrations. Generally, we are required to provide notice of the demand request within five business days following the receipt of the demand notice to all additional Holders, who may, in certain circumstances, participate in the registration. Under their underwritten offering registration rights, Holders also have the right to demand us to effectuate the distribution of any or all of its Registrable Securities by means of an underwritten offering pursuant to an effective registration statement. Each Holder is entitled to two underwritten offering requests. We are not obligated to effect a demand notice or an underwritten demand notice within 180 days of closing either a demand registration or an underwritten offering. We are required to maintain the effectiveness of any such registration statement until the earlier of 180 days (or two years if a “shelf registration” is requested) after the effective date of experience in both U.S. and international exploration and production activities. His responsibilities have included exploration, development, exploitation and acquisition projects. Prior to joining SilverBow Resources, Mr. Banks held executive-level positions at Vanco Energy Company, Mosbacher Energy Company, and Kuwait Foreign Petroleum Company, and senior-level positions at Santa Fe International Corporation. His direct project responsibilities have included exploration and production operations in 13 different countries in North America, Africa, Asia, Europethe Registration Rights Agreement and the Pacific Rim. Mr. Banks holdsconsummation of the distribution by the participating Holders. Under their piggyback registration rights, if at any time we propose to register an offering of common stock for our own account, we must give at least five business days’ notice to all Holders of Registrable Securities to allow them to include a BSc degree from The Pennsylvania State University.
These registration rights are subject to certain conditions and Chief Financial Officerlimitations, including the right of the underwriters to limit the number of shares to be included in August 2000,a registration and servedour right to delay or withdraw a registration statement under certain circumstances. We will generally pay all registration expenses in such a role until his retirement on March 20, 2017. Up until his retirement, he was the Company’s principal financial officer and principal accounting officer under SEC guidelines. Mr. Heckaman previously served as Senior Vice President — Finance from August 2000 until November 2004, and served in other progressive positions of responsibility since joining the Company in 1982. He was an executive officer of SilverBow Resources when it filed for reliefconnection with our obligations under the Bankruptcy CodeRegistration Rights Agreement, regardless of whether a registration statement is filed or becomes effective. The registration rights granted in the Registration Rights Agreement are subject to customary indemnification and contribution provisions, as well as customary restrictions such as blackout periods and, if an underwritten offering is contemplated, limitations on December 31, 2015,the number of shares to be included in the underwritten offering that may be imposed by the managing underwriter.
The obligations to register shares under the Registration Rights Agreement will terminate with respect to us and throughouteach Holder on the Company’s reorganization and emergence from bankruptcyfirst date upon which the Holder no longer beneficially owns any Registrable Securities.
The foregoing summary of the Registration Rights Agreement is qualified in its entirety by reference to the full text of the Registration Rights Agreement, which is included as Exhibit 10.1 to the our Current Report on Form 8-K (File No. 001-08754) filed on April 22,28, 2016. Mr. Heckaman
PIPE Registration Rights Agreement
On January 20, 2017, we entered into a Share Purchase Agreement (the “Purchase Agreement”) with each of the purchasers listed on Schedule A thereto, including an affiliate of SVP (the “Purchasers”), pursuant to which the Purchasers agreed to purchase 1,403,508 shares of our common stock, at a price of $28.50 per share (the “Private Placement”). The Private Placement closed on January 26, 2017 (the “Closing Date”).
In connection with the closing of the Private Placement, we and the Purchasers entered into a registration rights agreement, dated January 26, 2017 (the “PIPE Registration Rights Agreement”). Under the PIPE Registration Rights Agreement, we agreed to (i) use our reasonable best efforts to file a registration statement on Form S-3 (or any equivalent successor form) with the Securities and Exchange Commission (the “Commission”) no later than 90 days following the Closing Date (such filing date, the “Mandatory Shelf Filing Date”) to register the offer and resale, on a continuous or delayed basis pursuant to Rule 415 under the Securities Act, of the shares sold in the Private Placement to the Purchasers; (ii) use our commercially reasonable efforts to cause such resale registration statement to be declared effective under the Securities Act by the Commission as soon as reasonably practicable after the Mandatory Shelf Filing Date, but in any event no later than the earlier of (A) if the registration statement is a Certified Public Accountantsubject to review by the Commission, 150 days following the Closing Date, and holds(B) if the degreesregistration statement is not subject to review by the Commission, five days following the date of Bachelorreceipt of Business Administration in Accountingsuch notice from the Commission (such earlier date, the “Effectiveness Deadline”); and Master(iii) use our commercially reasonable efforts to keep the registration statement continuously effective under the Securities Act until the earlier of Business Administration.
We also agreed to pay certain fees to each Purchaser if we fail to meet certain of our obligations under the PIPE Registration Rights Agreement, including our obligation to file the resale registration statement by the Mandatory Shelf Filing Date and our obligation to cause such resale registration statement to be declared effective by the Effectiveness Deadline.
The foregoing summary of the PIPE Registration Rights Agreement is providedqualified in “Compensation Discussion and Analysis” and “Potential Payments Upon Changeits entirety by reference to the full text of Control” of this proxy statement. Since Messrs. Banks and Heckaman served the Company as executive officers during 2017, they arePIPE Registration Rights Agreement, which is included as Named Executive Officers in this proxy statement.
The following table sets forth information concerning the shareholdings of each person who, to the Company’s knowledge, beneficially owned more than five percent of the Company’s outstanding common stock as of February 28, 2018:
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership (# of shares) | Percent of Class | ||||||
Strategic Value Partners, LLC 100 West Putnam Avenue Greenwich, CT 06830 | 4,460,319 | (1) | 38.4 | % | ||||
DW Partners LP and DW Investment Partners, LLC 590 Madison Avenue, 13th Floor New York, NY 10022 | 1,728,640 | (2) | 14.9 | % | ||||
BOF Holdings IV, LLC 1450 Brickell Avenue 31st Floor Miami, FL 33131 | 841,176 | (3) | 7.2 | % | ||||
Pentwater Capital Management, LP 614 Davis Street Evanston, IL 60201 | 806,921 | (4) | 6.9 | % |
Name and Address of Beneficial Owner |
| Amount and Nature of Beneficial Ownership (# of shares) |
|
| Percent of Class |
| ||
|
|
|
|
|
|
| ||
Strategic Value Partners, LLC 100 West Putnam Avenue Greenwich, CT 06830 |
|
| 4,476,462 | (1) |
|
| 38.2 | % |
DW Partners LP and DW Investment Partners, LLC 590 Madison Avenue, 13th Floor New York, NY 10022 |
|
| 1,820,053 | (2) |
|
| 15.5 | % |
UBS Group AG Bahnhofstrassse 45 P.O. Box CH-8098 Switzerland |
|
| 1,012,542 | (3) |
|
| 8.6 | % |
BOF Holdings IV, LLC 1450 Brickell Avenue 31st Floor Miami, FL 33131 |
|
| 840,147 | (4) |
|
| 7.2 | % |
Pentwater Capital Management, LP 614 Davis Street Evanston, IL 60201 |
|
| 639,750 | (5) |
|
| 5.5 | % |
______________
(1) | Based on a Schedule 13D/A dated January 22, 2017, and filed January 24, 2017, |
(2) | Based on a Schedule 13G/A dated December 31, |
(3) | Based on a Schedule 13G dated December 31, | ||
(4) | Based on a Schedule 13G/A dated December 31, 2018, and filed February 8, 2019, jointly filed in accordance with SEC Rule 13d-1(b) by BOF Holdings IV, LLC, H.I.G. Bayside Loan Opportunity Fund IV, L.P., H.I.G. Bayside Loan Advisors IV, LLC, H.I.G.-GPII, Inc., Sami W. Mnaymneh and Anthony A. Tamer (together, the “BOF Group”), the BOF Group holds shared voting and dispositive power with respect to all shares reported. BOF Group is a Consenting Noteholder under the Director Nomination Agreement as discussed above under “Continuing Members of the Board of Directors—Related-Party Transactions—Director Nomination Agreement.” |
(5) | Based on a Schedule |
The following table sets forth information concerning the common stock shareholdings of the members of the Board, the Named Executive Officers as defined later in this proxy statement, and all executive officers and directors as a group, as of February 28, 2018.March 1, 2019. The address of the individuals below, unless otherwise indicated, is 575 North Dairy Ashford, Suite 1200, Houston, Texas 77079.
Name of Beneficial Owner | Position | Amount and Nature of Beneficial Ownership(1) (# of shares) | Percent of Class | ||||||||
Marcus C. Rowland | Chairman of the Board | 46,357 | (2) | ||||||||
Michael Duginski | Director | 20,464 | (2) | ||||||||
Gabriel L. Ellisor | Director | 20,464 | (2) | ||||||||
David Geenberg(3) | Director | — | — | ||||||||
Christoph O. Majeske(3) | Director | — | — | ||||||||
Charles W. Wampler | Director | 20,464 | (2) | ||||||||
Sean C. Woolverton | Chief Executive Officer and Director | 11,775 | (2) | ||||||||
G. Gleeson Van Riet | Executive Vice President and Chief Financial Officer | 8,078 | (2) | ||||||||
Steven W. Adam | Executive Vice President and Chief Operating Officer | — | — | ||||||||
Christopher M. Abundis | Senior Vice President, General Counsel and Secretary | 27,849 | (2) | ||||||||
Robert J. Banks(4) | Former Executive Vice President and Chief Operating Officer; Former Interim Chief Executive Officer | 59,591 | (2) | ||||||||
Alton D. Heckaman, Jr.(4) | Former Executive Vice President and Chief Financial Officer | 61,912 | (2) | ||||||||
All executive officers and directors as a group (12 persons) | 276,954 | 2.4 | % |
Name of Beneficial Owner |
| Position |
| Amount and Nature of Beneficial Ownership(1) (# of shares) |
|
| Percent of Class |
| ||
|
|
|
|
|
|
|
|
| ||
Marcus C. Rowland |
| Chairman of the Board |
|
| 68,714 |
|
|
| — | (2) |
Michael Duginski |
| Director |
|
| 32,120 |
|
|
| — | (2) |
Gabriel L. Ellisor |
| Director |
|
| 32,120 |
|
|
| — | (2) |
David Geenberg(3) |
| Director |
|
| — |
|
|
| — | (2) |
Christoph O. Majeske(3) |
| Director |
|
| — |
|
|
| — | (2) |
Charles W. Wampler |
| Director |
|
| 32,120 |
|
|
| — | (2) |
Sean C. Woolverton |
| Chief Executive Officer and Director |
|
| 14,210 |
|
|
| — | (2) |
G. Gleeson Van Riet |
| Executive Vice President and Chief Financial Officer |
|
| 9,679 |
|
|
| — | (2) |
Steven W. Adam |
| Executive Vice President and Chief Operating Officer |
|
| 7,885 |
|
|
| — | (2) |
Christopher M. Abundis |
| Senior Vice President, General Counsel and Secretary |
|
| 42,888 |
|
|
| — | (2) |
All executive officers and directors as a group (10 persons) |
|
|
|
| 239,736 |
|
|
| 2.0 | % |
_________________
(1) | Unless otherwise indicated below, the persons named have sole voting and investment power or joint voting and investment power with their respective spouses over the number of shares of the common stock of the Company shown as being beneficially owned by them. None of the shares beneficially owned by our executive officers and directors are pledged as a security, with the exception of |
(2) | Less than one percent. |
(3) | Each of these directors is a member of the Board, as an SVP Designated Director under the Nomination Agreement. As employees of SVP, each (i) disclaims beneficial ownership of the shares owned by SVP and its affiliates, and (ii) has elected not to receive equity awards granted to other non-employee directors. |
In general, the Board appoints the executive officers of the Company annually. Information regarding Sean C. Woolverton, Chief Executive Officer and Director, is set forth previously in this proxy statement under “Continuing Members“Proposal 1 – Election of the Board of Directors,” and information regarding Robert J. Banks, former Executive Vice President and Chief Operating Officer and former Interim Chief Executive Officer, and Alton D. Heckaman, Jr., former Executive Vice President and Chief Financial Officer, is set forth previously in this proxy statement under “Former Executives.Directors.” Shown below is certain information, as of the date of this proxy statement, concerning the other executive officers of the Company.
Christopher M. Abundis
,Steven W. Adam
,G. Gleeson Van Riet
,In accordance with Section 14A of the Exchange Act, which was implemented by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, referred to herein as the Dodd-Frank Act, the Board is required to provide SilverBow Resources shareholders with a nonbinding advisory vote on the compensation of our NEOs, as reported in this proxy statement. This advisory vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the policies and practices described in this proxy statement. Shareholders are being asked to vote on the following resolution:
“RESOLVED, that the shareholders of SilverBow Resources, Inc. approve, on an advisory basis, the compensation of SilverBow Resources, Inc.’s named executive officers, as described in Compensation Discussion and Analysis, the compensation tables and accompanying narrative disclosures of this proxy statement.”
As disclosed in our “Compensation Discussion and Analysis,” 2018 was a year of business and operational performance for SilverBow Resources, positioning the Company for present and future success as a growth-oriented independent oil and gas company with a focus on acquiring and developing oil and gas assets in the Eagle Ford shale. Our executive compensation program in 2018 was designed to motivate our executive team to deliver strong operational and financial results and value for all shareholders, reward such performance and align our executives’ interests with the long-term interests of our shareholders by ensuring that a significant portion of an NEO’s compensation consisted of equity awards. A substantial portion of such equity awards is tied to the long-term shareholder growth through (i) PSUs with payout determined based on relative total shareholder return as compared to our peers and (ii) time-based stock options, with any value to be received directly correlated to an increase in our share price. The Company’s key performance indicators for 2018, which reward performance and are used to determine the amount of the annual cash bonus incentive earned by our NEOs, are further discussed in our “Compensation Discussion and Analysis.”
The following actions were taken during fiscal year 2018 with respect to the compensation of SilverBow Resources’ NEOs:
· | Our NEOs were all granted annual, long-term equity awards in February 2018, a significant portion of which equity awards are tied to the future performance of SilverBow Resources; |
o | For our CEO and all of our NEOs, the annual equity award consisted of 50% time-based RSUs and 50% PSUs; |
· | In order to further incentivize our NEOs, reward strong performance to-date, bring their long-term compensation in line with the median of our peers and allow our executives to realize value in the near-term, each NEO was also granted a special, one-time, additional equity incentive award in August 2018; |
o | For our CEO and all of our NEOs, this one-time, special equity award corresponded to a grant date fair value of approximately 84% time-based stock options and 16% time-based RSUs; | |
o | As further described in Proposal 3, the Compensation Committee has determined it to be in the best interest of the Company to more globally change our executive compensation program to update the targets for our long-term equity program going forward. This is designed to bring such targets in line with industry peers and ensure our NEOs’ compensation is tied to long-term shareholder growth, thereby, subject to shareholder approval, cancelling the stock options and RSUs awarded as part of this one-time August 2018 special grant; |
38 | SilverBow Resources, Inc. | 2019 Proxy Statement |
Table of Contents |
· | We performed at 103.75% of the target level for the 2018 annual cash bonus tied to our 2018 KPIs which included the following metrics: Production, Adjusted EBITDA, Relative TSR, Cost to Develop, Total Operating Expense, and HS&E TRIR; | |
· | We have historically limited perquisites for officers and, in 2018, no NEO had perquisites above the SEC disclosure threshold ($10,000); and | |
· | We are committed to continuing to align the interests of our NEOs with the interests of our shareholders; as such, each NEO’s employment agreement includes equity ownership requirements. |
We are asking for shareholder approval of the compensation of our NEOs as disclosed in this proxy statement, which includes the disclosures under “Compensation Discussion and Analysis,” the compensation tables and the accompanying narrative disclosures.
Because this vote is advisory, it will not be binding and the Compensation Committee of the Board of Directors ultimately has the responsibility for determining executive compensation. We believe that the Compensation Committee should retain discretion to make final compensation decisions that align with shareholder interests, which discretion has historically been exercised wisely. However, the Compensation Committee values the opinions of our shareholders and will consider the outcome of the advisory vote when making future decisions and recommendations about executive compensation. No determination has been made as to what action the Board of Directors may take if shareholders do not approve our executives’ compensation, but the Compensation Committee will consider voting results and how they should be addressed.
The affirmative vote of the holders of a majority of the shares present in person or by proxy at the meeting and entitled to vote on Proposal 2, is required to approve this advisory Proposal 2. Brokers do not have discretion to vote on this proposal without your instruction; therefore, if you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote. Abstentions will be considered as votes cast and will have the same effect as a vote against the proposal but broker non-votes will not affect the outcome of the voting on the proposal.
The Board of Directors unanimously recommends that shareholders vote “FOR” approving the compensation of SilverBow Resources’ Named Executive Officers as disclosed in this proxy statement. |
2019 Proxy Statement | SilverBow Resources, Inc. | 39 |
Table of Contents |
PROPOSAL 3 — APPROVAL OF THE EQUITY AWARD EXCHANGE PROGRAM
On April 2, 2019, our Board authorized a one-time grant of market-based awards in 2019 in exchange for the cancellation of special equity awards (both RSUs and stock options) made to our NEOs on August 9, 2018 (the “Equity Award Exchange”). As required under the terms of the SilverBow Resources, Inc. 2016 Equity Incentive Plan (the “2016 Plan”), this Equity Award Exchange is subject to shareholder approval, which we are seeking at our Annual Meeting. Pursuant to the Equity Award Exchange our NEOs would be given the opportunity to exchange out-of-the-money or “underwater” stock options that were granted in August 2018 and certain RSUs also granted in August 2018 (such stock options and RSUs collectively, the “August 2018 Special Equity Award Grant”) to receive a new equity award that consists of 50% time-based RSUs and 50% PSUs, granted under the 2016 Plan. The August 2018 Special Equity Award Grant is described in the “Compensation Discussion and Analysis” section of this Proxy under the heading “2018 Special Long-Term Equity Incentive.” Our Board is requesting that our shareholders approve the Equity Award Exchange at our Annual Meeting.
As of December 31, 2018, we had outstanding stock options held by employees to purchase 644,575 shares of common stock with a weighted average exercise price of $28.28 per share. The August 2018 Special Equity Award Grant that would be eligible for the Equity Award Exchange consists of stock options held by our NEOs to purchase 201,406 shares of common stock, with an exercise price of $31.14 per share, and 24,622 RSUs.
The Board believes that the Equity Award Exchange is in the best interests of shareholders and the Company, by allowing us to more closely align our executive compensation program with those of our industry peers and, with respect to the PSUs, further align the interests of NEOs and shareholders in our long-term performance.
Rationale for Equity Award Exchange
As discussed in more detail in the “Compensation Discussion and Analysis” of this proxy statement, the August 2018 Special Equity Award Grant was granted to reward our NEOs for their strong performance and to align their total compensation with the market. The award was granted with the intent that the NEOs would receive below market long-term incentive grants in 2019 (100% of base salary for our CEO, EVP and CFO, and EVP and COO, and 70% of base salary for the Senior Vice President, General Counsel and Secretary) before moving to market-based awards, consistent with the Company’s industry peers, in 2020.
40 | SilverBow Resources, Inc. | 2019 Proxy Statement |
Table of Contents |
In connection with a review of the Company’s business strategy, the Compensation Committee undertook a holistic evaluation of the Company’s entire compensation program. This included reviewing the Company’s compensation philosophy, the competitiveness of the Company’s historical long-term incentive grants, and the retentive value of outstanding long-term incentive awards. Following this review, the Compensation Committee elected to move to market-based equity awards in 2019 (i.e., a year earlier than originally anticipated). As consideration for moving to market-based awards earlier than anticipated, the Compensation Committee asked that the NEOs agree to the cancellation of the August 2018 Special Equity Award Grant. The rationale for undertaking this approach, includes:
1. | Allows SilverBow Resources to manage the dilution from our long-term incentive program by cancelling previously granted awards. These cancelled awards will be used to make the 2019 long-term incentive grants described later in this proposal. | |
2. | Enhances the retentive value of our long-term incentive program by replacing the underwater stock options with full value awards that will vest over the next three years. | |
3. | Aligns the program with shareholder interests by replacing 100% time-vested awards with a combination of 50% time-vested and 50% performance-based awards. |
Performance Incentives
We face significant competition for experienced personnel in our industry, and equity awards are an important part of our incentive compensation programs. The August 2018 Special Equity Award Grant, which represents a substantial component of each NEO’s total compensation for 2018, was intended to bring the compensation of our NEOs to a level that was competitive with our peers, while also incentivizing our NEOs to seek increased shareholder value. In the Equity Award Exchange, the August 2018 Special Equity Award Grant will be replaced, in part, with PSUs, the ultimate payment of which will be based on our performance, as measured based on relative total shareholder return compared to a pre-established performance peer group, over a three-year performance period. In the event that absolute total shareholder return is negative, payouts under the PSUs will be capped at target. As such, the PSUs will further align the interests of our shareholders with those of our NEOs.
Employee Retention
We have also designed the Equity Award Exchange to increase retention and motivation in a competitive labor market and further align our compensation practices with those of our industry peers. Through the Equity Award Exchange, we believe that we will be able to enhance long-term shareholder value by increasing our ability to retain experienced and talented executives. To the extent that our compensation programs do not provide compensation at levels and in forms that are competitive with our industry peers, we may face a considerable challenge in retaining our executives. The Equity Award Exchange is designed to address these concerns by further aligning the overall structure of our equity compensation programs with those of our industry peers.
As discussed in more detail below, none of the new equity awards issued under the Equity Award Exchange will be vested on the date of grant. The RSUs granted in the Equity Award Exchange will vest in one-third increments on each of March 5, 2020, March 5, 2021 and March 5, 2022, and the PSUs granted in the Equity Award Exchange will vest, if at all, at the end of a three-year performance period. The stock options and RSUs granted under the August 2018 Special Equity Award Grant were also subject to a three-year vesting schedule, with one-third of the options vesting each year on the first three anniversaries of the grant date. Our Compensation Committee believes that granting a mix of RSUs and PSUs with these vesting schedules is appropriate because it encourages retention of employees over the next three years, during an important period for the Company.
2019 Proxy Statement | SilverBow Resources, Inc. | 41 |
Table of Contents |
Structure of the Equity Award Exchange
The Board authorized the Equity Award Exchange on April 2, 2019, subject to shareholder approval. It is currently anticipated that the Equity Award Exchange will commence as soon as practicable following approval of this Proposal 3 by our shareholders (the “Commencement Date”). At the start of the Equity Award Exchange, the NEOs holding eligible stock options and RSUs from the August 2018 Special Equity Award Grant will receive a written exchange offer that will set forth the precise terms of the Equity Award Exchange. NEOs must choose to exchange their entire August 2018 Special Equity Award Grant and may not choose to exchange portions of the August 2018 Special Equity Award Grant. Set forth below is a description of the key features of the Equity Award Exchange.
Eligible Participants
The Equity Award Exchange will be available to our NEOs. As of March 1, 2019, eligible stock options and RSUs were held by all of our NEOs. Participants in the Equity Award Exchange must continue to be employed by and provide services to us on the date the surrendered options are cancelled and the replacement RSUs and PSUs are granted. Any NEO who elects to participate in the Equity Award Exchange but whose service with us terminates for any reason before the date the replacement RSUs and PSUs are granted, including a termination due to voluntary resignation, retirement, involuntary termination, layoff, death or disability, would retain his or her eligible options and RSUs subject to their existing terms and will not be eligible to receive new equity awards in the Equity Award Exchange.
Eligible Stock Options and RSUs
As of December 31, 2018, there were an aggregate of 201,406 shares of common stock underlying the options granted pursuant to the August 2018 Special Equity Award Grant at an exercise price of $31.14 per share, with an expected remaining life of approximately 9.5 years. These eligible stock options represent approximately 1.72% of the issued and outstanding shares of our common stock as of December 31, 2018. In addition, as of December 31, 2018, there were an aggregate of 24,622 shares of common stock underlying the RSUs that would be eligible for the Equity Award Exchange. These eligible RSUs represent approximately 0.02% of the issued and outstanding shares of our common stock as of December 31, 2018. For additional information about the August 2018 Special Equity Award Grant, see the “Compensation Discussion and Analysis” section of this Proxy under the heading “2018 Special Long-Term Equity Incentive” and the “Interests of Our Named Executive Officers in the Equity Award Exchange” section of this Proposal 3.
Replacement RSUs and PSUs
The Equity Award Exchange has been designed to provide our NEOs with long-term equity-based incentive compensation in the form of RSUs and PSUs that replace the August 2018 Special Equity Award Grant. The replacement RSUs and PSUs will be granted as part of our 2019 annual long-term incentive grants, which represent a percentage of each NEO’s 2019 salary, as set forth in the following table:
|
| 2019 Annual Long-Term Equity Grants |
| |||||||||||||||||||||||||
Named Executive Officer |
| Salary |
|
| Annual LTI Target (%) |
|
| Annual LTI Target ($) |
|
| RSUs (Target # of Shares) |
|
| RSUs (Maximum # of Shares) |
|
| PSUs (Target # of Shares) |
|
| PSUs (Maximum # of Shares) |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Sean Woolverton, CEO |
| $ | 590,000 |
|
|
| 400 | % |
| $ | 2,360,000 |
|
|
| 48,100 |
|
|
| 48,100 |
|
|
| 48,100 |
|
|
| 96,200 |
|
Gleeson Van Riet, EVP & CFO |
| $ | 390,000 |
|
|
| 200 | % |
| $ | 780,000 |
|
|
| 15,900 |
|
|
| 15,900 |
|
|
| 15,900 |
|
|
| 31,800 |
|
Steve Adam, EVP & COO |
| $ | 420,000 |
|
|
| 250 | % |
| $ | 1,050,000 |
|
|
| 21,400 |
|
|
| 21,400 |
|
|
| 21,400 |
|
|
| 42,800 |
|
Chris Abundis, SVP, GC & SEC |
| $ | 345,000 |
|
|
| 200 | % |
| $ | 690,000 |
|
|
| 14,100 |
|
|
| 14,100 |
|
|
| 14,100 |
|
|
| 28,200 |
|
42 | SilverBow Resources, Inc. | 2019 Proxy Statement |
Table of Contents |
The number of RSUs and PSUs granted for 2019 was determined by dividing the annual LTI Target by $24.55, the average of the closing price of our common stock in January 2019, and rounded to the nearest hundred. This aligns with the methodology that was used to make our long-term incentive grants to other employees. The maximum number of shares of common stock issuable upon vesting of the RSUs and PSUs (at target performance) would be 199,000, and the maximum number of common stock issuable upon vesting of the RSUs and PSUs (assuming stretch performance) would be 298,500. NEOs who elect not to participate in the Equity Award Exchange will not receive any replacement RSUs or PSUs.
Vesting Schedules for New Equity Awards
The RSUs and PSUs granted pursuant to the Equity Award Exchange will not be vested on the date of grant. The PSUs will vest, if at all, based on the Company’s total shareholder return performance relative to our peers during the three-year performance period beginning on January 1, 2019, and ending on December 31, 2021. The number of shares of common stock issuable upon vesting of the PSUs range from zero to 200% of the target number of shares. In the event that our absolute total shareholder return is negative, the PSUs will be capped at target. The RSUs vest in equal one-third increments on each of March 5, 2020, March 5, 2021 and March 5, 2022. The new types of equity awards with these vesting schedules recognize the prior services and contributions by eligible participants and provide us with valuable additional years of executive officer retention during an important time for the Company.
Intended Implementation of the Equity Award Exchange As Soon As Practicable Following Shareholder Approval
We expect that the Equity Award Exchange will begin as soon as practicable following shareholder approval, if received. Our Board, in its discretion, reserves the right to amend, postpone or, under certain circumstances, cancel the Equity Award Exchange once it has commenced, but the Equity Award Exchange will not be materially amended in a manner more beneficial to eligible participants without first seeking additional shareholder approval. If shareholder approval of the Equity Award Exchange is not received, the August 2018 Special Equity Award Grant will remain outstanding in accordance with their existing terms for our NEOs.
Treatment of Surrendered Awards under the Equity Award Exchange
All shares subject to the equity awards surrendered under the Equity Award Exchange, which number is estimated to be 226,028 shares (201,406 stock options and 24,622 RSUs) assuming 100% participation in the Equity Award Exchange, will be returned to the share reserve of the 2016 Plan and will be available for future grant of equity awards under the 2016 Plan.
Equity Award Exchange Process
Additional information about how we expect to conduct the Equity Award Exchange, if approved by shareholders, is set forth below. While the terms of the Equity Award Exchange are expected to conform to the material terms described above in this Proposal 3, we may find it necessary or appropriate to change the terms of the Equity Award Exchange to take into account our administrative needs, accounting rules, Company policy decisions or to comply with any comments we receive from the SEC. We may decide not to implement the Equity Award Exchange even if shareholder approval of the Equity Award Exchange is obtained, or we may delay, amend or terminate the Equity Award Exchange once it is in progress.
2019 Proxy Statement | SilverBow Resources, Inc. | 43 |
Table of Contents |
Overview of the Equity Award Exchange Process
Upon commencement of the Equity Award Exchange, NEOs will receive a written equity award cancellation agreement setting forth the terms of the Equity Award Exchange. Our NEOs who are employed by us on the Commencement Date, are still employed by us on the grant date of the new equity awards, and hold eligible stock option and RSU awards may participate in the Equity Award Exchange. Our NEOs will be given a limited time opportunity to surrender eligible stock options and RSUs in exchange for the replacement awards of RSUs and PSUs. Upon completion of the Equity Award Exchange, surrendered stock options and RSUs will be cancelled and new RSUs and PSUs will be granted. Shares underlying the cancelled options and RSUs will then be available for future grant under the 2016 Plan. The 2016 Plan will govern all terms or conditions of new RSUs and PSUs not specifically addressed by the Equity Award Exchange described in this proxy statement. For additional information regarding the 2016 Plan, including the proposed amendment to the 2016 Plan, see “Proposal 4 – Approval of the Second Amendment to the SilverBow Resources, Inc. 2016 Equity Incentive Plan to Increase the Number of Shares of Common Stock Available for Issuance Under the 2016 Plan.”
While we cannot predict how many executives will elect to participate in the Equity Award Exchange, assuming that all of our NEOs participate in the Equity Award Exchange, approximately 201,406 eligible stock options and 24,622 eligible RSUs would be surrendered and cancelled and 199,000 shares would be issued upon vesting of the RSUs and PSUs, assuming target performance with respect to the PSUs.
Interests of Our Named Executive Officers in the Equity Award Exchange
Our NEOs will be the only individuals participating in the Equity Award Exchange as they were the only executives to receive the August 2018 Special Equity Award. The following table shows the number of shares subject to eligible RSUs and stock options held by our NEOs as of December 31, 2018, and the number of shares subject to new equity awards that the NEOs may receive, assuming, for purposes of illustration only, that each NEO decides to exchange all of his eligible RSUs and stock options.
Named Executive Officer |
| Number of Eligible RSUs |
|
| Number of Shares Underlying Eligible Options |
|
| Weighted Average Exercise Price ($) |
|
| Number of RSUs that may be Granted in the Equity Award Exchange |
|
| Number of PSUs that may be Granted in the Equity Award Exchange |
| |||||
Sean Woolverton, CEO |
|
| 11,389 |
|
|
| 93,158 |
|
|
| 31.14 |
|
|
| 48,100 |
|
|
| 48,100 |
|
Gleeson Van Riet, EVP & CFO |
|
| 3,900 |
|
|
| 31,902 |
|
|
| 31.14 |
|
|
| 15,900 |
|
|
| 15,900 |
|
Steve Adam, EVP & COO |
|
| 4,000 |
|
|
| 32,720 |
|
|
| 31.14 |
|
|
| 21,400 |
|
|
| 21,400 |
|
Chris Abundis, SVP, GC & SEC |
|
| 5,333 |
|
|
| 43,626 |
|
|
| 31.14 |
|
|
| 14,100 |
|
|
| 14,100 |
|
44 | SilverBow Resources, Inc. | 2019 Proxy Statement |
Table of Contents |
The incremental compensation cost associated with the Equity Award Exchange will be measured as the excess, if any, of the fair value of each new equity award, measured as of the date the new equity awards are granted, over the fair value of the stock options and RSUs surrendered in exchange for the new equity awards, measured immediately prior to the cancellation. This incremental compensation cost will be recognized ratably over the vesting period or performance period, as applicable, of the new equity awards.
Material U.S. Federal Income Tax Consequences of the Equity Award Exchange
The exchange of August 2018 Special Equity Award Grant pursuant to the Equity Award Exchange should be treated as a non-taxable exchange. Neither the Company, nor participants in the Equity Award Exchange, should recognize any income for U.S. federal income tax purposes upon the grant of the new equity awards. Tax effects may vary in other countries; a more detailed summary of tax considerations will be provided to all participants in the Equity Award Exchange documents.
Our financial statements and other information required by Item 13(a) of Schedule 14A under the Exchange Act are incorporated by reference from our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on February 28, 2019.
Vote Required and Board Recommendation
The affirmative vote of the holders of a majority of the shares present in person or by proxy at the Annual Meeting and entitled to vote on Proposal 3, is required to approve this Proposal 3. Brokers do not have discretion to vote on this proposal without your instruction; therefore, if you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote. Abstentions will be considered as votes cast and will have the same effect as votes against the proposal, but broker non-votes will not affect the outcome of the voting on the proposal.
If you are both a shareholder and an NEO holding eligible stock options and RSUs, please note that voting to approve this program does not constitute an election to participate in the program.
The Board of Directors unanimously recommends that shareholders vote “FOR” approving the Equity Award Exchange Program. |
2019 Proxy Statement | SilverBow Resources, Inc. | 45 |
Table of Contents |
At the Annual Meeting, shareholders will be asked to approve the Second Amendment (the “Second Amendment”) to the SilverBow Resources, Inc. 2016 Equity Incentive Plan (the “2016 Plan”), which increases the number of shares available under the 2016 Plan by 825,000. As explained in greater detail below, we believe approval of the Second Amendment is advisable in order to ensure that we have an adequate number of shares available under the 2016 Plan for our compensation programs.
Background and Purpose of the Proposal
The 2016 Plan was effective April 22, 2016, and originally approved in connection with our reorganization by our majority shareholders, who were former holders of our cancelled senior notes prior to our reorganization, and who remain majority shareholders of the Company as of the date of this proxy statement. Upon the effectiveness of the Plan, there were 582,011 shares available for grant under the 2016 Plan. At the 2017 annual meeting, the Company’s shareholders approved the First Amendment to the 2016 Plan, which increased the shares available under the 2016 Plan by 600,000 shares.
The purpose of the Second Amendment is to increase the number of shares of the Company’s common stock (the “Common Stock”) that we may grant under the 2016 Plan by 825,000 shares. On April 2, 2019, our Board unanimously approved the Second Amendment, subject to shareholder approval at the annual meeting. If the Second Amendment is not approved by shareholders, the 2016 Plan will continue in effect in its present form. If the Second Amendment is approved by shareholders, we intend to file, pursuant to the Securities Act of 1933, as amended (the “Securities Act”), a registration statement on Form S-8 to register the additional shares of Common Stock available for issuance under the 2016 Plan.
We believe that approval of the Second Amendment will give us the flexibility to make stock-based awards and other awards permitted under the 2016 Plan over the next two years in amounts determined to be appropriate by the Committee (as defined below); however, this timeline is simply an estimate used to determine the number of additional common shares requested pursuant to the Second Amendment and future circumstances may require a change to expected equity grant practices. These circumstances include but are not limited to the future price of our Common Stock, award levels and amounts provided by our competitors and our hiring activity over the next few years. The closing market price of our Common Stock as of March 1, 2019, was $23.21 per share, as reported on the NYSE.
As of March 1, 2019, the total number of outstanding shares of Common Stock was 11,709,171. Following our annual equity awards made in March 2019, we have approximately 172,200 shares remaining in the 2016 Plan, which includes approximately 30,700 shares reserved for greater than target performance on PSU awards granted in 2018. If the Second Amendment is approved by shareholders, the potential dilution from issuances authorized under the 2016 Plan related to the 825,000 newly-approved shares will be approximately 6.0% on a fully diluted basis. The total potential dilution from the shares originally reserved for the 2016 Plan and approved and increased via the First Amendment to the 2016 Plan (1,182,011) and the newly-approved shares if the Second Amendment is approved (825,000) will be approximately 14.5% on a fully diluted basis. While we are aware of the potential dilutive effect of compensatory equity awards, we also recognize the significant motivational and performance benefits that may be achieved from making such awards.
Should the Company’s shareholders approve Proposal 3 in this proxy statement related to a one-time equity award exchange as described therein, the number of shares available for issuance noted in the immediately preceding paragraph would be reduced from approximately 172,200 to approximately 99,700.
Consequences of Failing to Approve the Proposal
Failure of our shareholders to approve this proposal will mean that we only have approximately 172,200 shares to grant equity awards under the terms of the 2016 Plan (or approximately 99,700 if Proposal 3 in this Proxy Statement is approved). As such, if this proposal is not approved, in order to incentivize our employees, we will have to develop non-equity, long-term compensation alternatives, likely in the form of cash-based awards. If the Second Amendment is not approved by shareholders, the 2016 Plan will remain in effect in its current form.
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Description of the SilverBow Resources, Inc. 2016 Equity Incentive Plan
A summary description of the material features of the 2016 Plan, as amended to reflect the Second Amendment, is set forth below. The following summary does not purport to be a complete description of all the provisions of the 2016 Plan and is qualified in its entirety by reference to (i) the 2016 Plan, a copy of which is incorporated by reference to Exhibit 4.4 to our Form S-8 (File No. 333-210936), filed on April 27, 2016, (ii) the Amendment to the 2016 Plan evidencing the Company’s rebrand and name change, a copy of which is incorporated by reference to Exhibit 10.1 to our Form 8-K (File No. 001-08754), filed on May 5, 2017, (iii) the First Amendment, a copy of which is incorporated by reference to Exhibit 10.1 to our Form 8-K (File No. 001-08754),filed on May 17, 2017, and (iv) the Second Amendment, which is attached as Appendix A to this proxy statement and incorporated by reference in its entirety.
Purpose of the 2016 Equity Incentive Plan
The purpose of the 2016 Plan is to further the growth and profitability of the Company by increasing incentives and encouraging Common Stock ownership on the part of employees, officers, non-employee directors, consultants and independent contractors of the Company and its subsidiaries. The Company seeks to achieve the 2016 Plan’s purpose primarily by providing grants of a variety of awards (collectively referred to as “Awards”), including but not limited to:
· | incentive stock options qualified as such under U.S. federal income tax laws (“Incentive Options”); | |
· | stock options that do not qualify as incentive stock options (“Nonstatutory Options” and, together with Incentive Options, “Options”); | |
· | stock appreciation rights (“SARs”); | |
· | restricted stock awards (“Restricted Stock”); | |
· | restricted stock units (“RSUs”); | |
· | cash incentive awards; | |
· | awards that are subject to or contingent upon certain performance measures (“Performance Awards”); and | |
· | other stock-based awards. |
The 2016 Plan is intended, in part, to qualify under the provisions of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), which governs Incentive Options. The 2016 Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended. No awards may be granted under the 2016 Plan after 10 years from the date the 2016 Plan was approved by the Board. The 2016 Plan shall remain in effect until all Awards granted under the 2016 Plan have been exercised, satisfied, forfeited or expired.
Administration of the 2016 Equity Incentive Plan
A committee of two or more members of the Board (the “Committee”) administers the 2016 Plan. Subject to the terms and conditions of the 2016 Plan, the Committee shall have the power from time to time to:
· | determine which Eligible Individuals (as defined below) shall receive an Award; | |
· | prescribe the form, amount, timing and other terms and conditions of each Award; | |
· | adopt procedures or rules as it deems necessary or appropriate for the 2016 Plan; and | |
· | make all other decisions and determinations that may be required pursuant to the 2016 Plan or any award agreement. |
The Board may alter or amend the 2016 Plan or any part thereof from time to time provided that no change in the 2016 Plan may be made that would materially and adversely alter or impair the rights or obligations under any Award theretofore granted without the consent of the Participant, and, provided further, that the Board may not, without the approval of our shareholders, amend the 2016 Plan to materially increase the benefits accruing to Participants under the 2016 Plan, materially increase the aggregate maximum number of shares of Common Stock that may be issued under the 2016 Plan, materially modify the requirements for participation in the 2016 Plan or take any other action that otherwise must be approved by shareholders in order to comply with the NYSE listing requirements.
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Shares Subject to the 2016 Equity Incentive Plan
The Second Amendment would increase the number of shares of Common Stock available for Awards under the 2016 Plan from the number authorized to be issued under the 2016 Plan by 825,000 shares. Accordingly, after giving effect to the Second Amendment, the maximum aggregate number of shares of Common Stock that may be granted for any and all Awards under the 2016 Plan may not exceed 2,007,011 shares of Common Stock. In addition, the 2016 Plan also includes individual limitations on the amounts of Awards that may be awarded. Specifically, (i) the maximum aggregate number of shares of Common Stock that may be issued upon the exercise of Incentive Options may not exceed 500,000 shares of Common Stock, (ii) the maximum aggregate number of shares of Common Stock that may be subject to Options or SARs granted to any one Participant during any calendar year may not exceed 200,000 shares of Common Stock, (iii) the maximum aggregate number of shares of Common Stock that may be subject to Awards, denominated in shares of Common Stock, intended to satisfy the requirements for qualified “performance-based compensation” under Section 162(m) of the Code granted to any one Participant during any calendar year may not exceed 200,000 shares of Common Stock, (iv) the maximum aggregate value of Awards, denominated in cash, intended to satisfy the requirements for qualified “performance-based compensation” under Section 162(m) of the Code granted to any one Participant during any calendar year may not exceed $3,000,000, and (v) the maximum aggregate value of Awards granted to any non-employee director during any calendar year may not exceed $500,000.
As of March 15, 2019, there were (i) awards issued relating to 1,009,851 shares of the Company’s Common Stock from the 2016 Plan, leaving (ii) approximately 172,200 shares of Common Stock available for future Awards (or approximately 99,700 shares if Proposal 3 in this Proxy Statement is approved).
The shares of Common Stock subject to an Award that are not issued or delivered by reason of expiration, cancellation, forfeiture or other termination of such Award or the settlement of all or a portion of such Award in cash shall again be available for issuance under the 2016 Plan. Notwithstanding the foregoing, shares of Common Stock withheld for the payment of an Award’s exercise price or to satisfy tax withholding obligations shall not again be available for issuance under the 2016 Plan. The shares of Common Stock issued under the 2016 Plan may be, in whole or in part, authorized but unissued shares, authorized and issued shares reacquired and held as treasury shares or a combination thereof.
Persons Who May Participate in the 2016 Equity Incentive Plan
Individuals eligible to receive Awards, or “Eligible Individuals,” under the 2016 Plan are employees of the Company or any of its subsidiaries or non-employee directors, officers, consultants and independent contractors who provide services to the Company or any of its subsidiaries. Eligible Individuals to whom an Award is granted under the 2016 Plan are referred to as “Participants.” As of March 1, 2019, we had approximately four executive officers, 84 other employees, and six non-employee directors who would be eligible to participate in the 2016 Plan. Although eligible, only one consultant or independent contractor currently participates in the 2016 Plan.
Awards under the 2016 Equity Incentive Plan
Stock Options. The Company may grant Options to Eligible Individuals including (i) Incentive Options that comply with Section 422 of the Code; and (ii) Nonstatutory Options. The exercise price of each Option granted under the 2016 Plan shall be determined by the Committee; however, the exercise price for an Option may not be less than the fair market value per share of Common Stock as of the grant date. Options may be exercised as the Committee determines, but not later than ten years from the grant date. The vested portion of an Option may be exercised, in whole or in part, at any time after becoming exercisable until its expiration or termination.
An Option agreement may provide, on such terms and conditions as the Committee in its sole discretion may prescribe, for the grant of an SAR in connection with the grant of an Option.
Except as permitted under the 2016 Plan in connection with a corporate transaction or event described in the 2016 Plan, Options and SARs may not be amended without the approval of the shareholders of the Company so as to (i) reduce the option price of any outstanding Options or SARs or cancel outstanding Options or SARs in exchange for cash, other Awards or Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs, as applicable.
Restricted Stock Awards. A Restricted Stock Award is a grant of shares of Common Stock subject to restrictions, terms and conditions imposed by the Committee in its discretion. Unless the Committee determines otherwise, upon the issuance of Restricted Stock, a Participant shall have all of the rights of a shareholder with respect to the shares of Common Stock represented by the Restricted Stock, including the right to vote such shares of Common Stock and to receive all dividends or other distributions made with respect to the shares of Common Stock.
Restricted Stock Units. An RSU Award represents a right to receive shares of Common Stock, cash, or a combination thereof, in the future in consideration of the performance of services, but subject to the fulfillment of conditions (which may include the achievement of performance goals) during a restricted period, as specified by the Committee. RSUs may be paid in shares of Common Stock, cash or a combination thereof.
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Stock Appreciation Rights. A SAR is the right to receive a share of Common Stock, or an amount equal to the excess of the fair market value of one share of Common Stock on the date of exercise over the base price of the SAR, as determined by the Committee. The base price of a SAR may not be less than the fair market value per share of Common Stock as of the grant date. The Committee has the discretion to determine other terms and conditions of a SAR.
Performance Awards. Performance Awards may be granted to Eligible Individuals on terms and conditions determined by the Committee and set forth in an Award agreement. A Performance Award shall be awarded to a Participant contingent upon one or more performance measures established by the Committee.
If an eligible individual is a Covered Employee, and the Committee determines that a contemplated Performance Award should qualify as “performance-based compensation” under Section 162(m), then the grant and/or settlement of such Award will be contingent upon achievement of one or more pre-established performance objectives based on the performance measures specified in the 2016 Plan.
With respect to any Performance Awards intended to constitute “performance-based compensation” within the meaning of Section 162(m), performance objectives shall be expressed in terms of: (a) revenue or oil and gas sales, (b) earnings per share of Common Stock (basic and diluted), (c) net income per share of Common Stock, (d) price per share of Common Stock, (e) pre-tax profits, (f) net earnings, (g) net income, (h) operating income and operating profit, (i) cash flow (including, without limitation, operating cash flow, free cash flow, discounted cash flow, net cash from operations, return on investment and cash flow in excess of cost of capital), (j) earnings before interest, taxes, depreciation and amortization, (k) earnings before interest and taxes, (l) sales, (m) total shareholder return relative to assets, (n) total shareholder return relative to peers, (o) financial returns (including, without limitation, return on assets, return on net assets, return on equity return on capital, return on operating revenue and return on investment), (p) cost reduction targets, (q) customer satisfaction, (r) customer growth, (s) employee satisfaction, (t) gross margin or gross profit, (u) revenue growth, (v) market share, (w) book value per share, (x) expenses and expense ratio management, (y) finding costs of oil and gas reserves, (z) volumes of oil and gas reserves or adjusted reserves or changes therein, (aa) percentage of reserves replaced, (bb) production or adjusted production or production exit rate, (cc) lease operating cost (“LOE”) measures, or adjusted LOE measures, (dd) general and administrative (“G&A”) or adjusted G&A measures, (ee) net asset value (“NAV”) or NAV per share, (ff) operating cost measures or reductions, (gg) earnings and earnings growth (including earnings per share and earnings before or after interest and taxes, earnings before taxes, EBITDA or net earnings), (hh) basic or diluted earnings per share or growth in earnings or earnings per share, (ii) stock price or change in stock price, (jj) total shareholder return, (kk) return on capital or change in working capital or return on capital employed, (ll) reduction of fixed costs, (mm) liquidity, (nn) health safety & environmental (“HS&E”) total recordable incident rate, or (oo) any combination of the foregoing. Performance goals may be related to the performance of the individual or in respect of the performance of the Company, one or more of its subsidiaries or any combination thereof on either a consolidated, business unit, departments, regions, functions, other organizational units or divisional level and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to results over a previous period or to a designated comparison group. Performance goals may be absolute or relative (to prior performance of the Company or to the performance of one or more other entities or external indices or to one or more of the performance goals themselves) and may be expressed in terms of a progression within a specified range. In addition, subject to any limitations under Section 162(m), such performance measures may be subject to adjustment by the Committee for changes in accounting principles, to satisfy regulatory requirements or for other specified extraordinary, unusual or infrequent items or events.
Following the end of the performance period, the holder of a Performance Award shall be entitled to receive payment of an amount not exceeding the number of shares of Common Stock subject to, or the maximum value of, the Performance Award, based on the achievement of the performance measure(s) for such performance period, as determined and certified in writing by the Committee. The Committee, in its sole discretion, may provide for a reduction in the value of a Participant’s Performance Award during the performance period. Payment of a Performance Award may be made in cash, Common Stock, other Awards or a combination thereof, as determined by the Committee.
Other Stock-Based Awards. The Committee may grant Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Common Stock or factors that may influence the value of such shares of Common Stock, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, purchase rights for Shares, awards with value and payment contingent upon performance of the Company or specified subsidiaries, affiliates or other business units thereof. The Committee may grant cash or unrestricted shares of Common Stock to an Eligible Individual on such terms and conditions as the Committee may determine at the time of grant. Awards of Common Stock may be made as additional compensation for services rendered by the Eligible Individual or may be in lieu of cash or other compensation to which the Eligible Individual is entitled from the Company.
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Other Provisions
Transferability of Awards. The 2016 Plan generally restricts the transfer of Awards, except for (i) transfer by will or the laws of descent and distribution, or (ii) to one or more members of a Participant’s immediate family. Notwithstanding the foregoing, Incentive Options will not, under any circumstances, be transferable other than by will or the laws of descent and distribution.
Changes in Capital Structure. In the event of any extraordinary dividend or other extraordinary distribution (whether in the form of cash, shares of Common Stock, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, change in control or exchange of shares of Common Stock or other securities of the Company, or other corporate transaction or event (each a “Corporate Event”) affects the shares of Common Stock, the Board shall, in its sole discretion, in such manner as it in good faith deems equitably required to prevent dilution or enlargement of the rights of Participants adjust any or all of (i) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or property) with respect to which Awards may be granted, (ii) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or property) subject to outstanding Awards, and (iii) the exercise price or base price with respect to any Award, or make provision for an immediate cash payment to the holder of an outstanding Award in consideration for the cancellation of such Award.
Substitute Awards. Awards may be granted in substitution or exchange for similar awards held by individuals who become Participants as a result of a merger, consolidation or acquisition of another entity by or with the Company or one of its subsidiaries.
Termination and Amendment. The Board may terminate the 2016 Plan at any time and from time to time alter or amend the 2016 Plan provided that no such change may be made that would materially adversely alter or impair the rights of a Participant with respect to an Award theretofore granted without the consent of such Participant; provided, further, that the Board may not, without approval of the shareholders of the Company, amend the 2016 Plan to materially increase the benefits accruing to Participants under the 2016 Plan, materially increase the aggregate maximum number of shares of Common Stock that may be issued under the 2016 Plan, materially modify the requirements for participation in the 2016 Plan or take any other action that otherwise must be approved by shareholders in order to comply with the NYSE.
Tax Withholding. Under the 2016 Plan, the Company may withhold taxes due or potentially payable with respect to an award granted under the 2016 Plan from shares of Common Stock (including shares of Common Stock otherwise issuable under an Award) at the maximum statutory withholding rate applicable to a Participant. The Company shall have the right to deduct or withhold, or cause to be deducted or withheld, from any Award, from any payment due or transfer made under any Award or from any compensation or other amount owing to a Participant, the amount (in cash, Common Stock (including Common Stock that would otherwise be issued with respect to such Award) or other property) of any applicable taxes required by law to be withheld and to require any payments required to enable it to satisfy its withholding obligations and to take such other action(s) as may be necessary in the opinion of the Company to satisfy its withholding obligations with respect to such Award.
Federal Income Tax Consequences
The following discussion is for general information only and is intended to summarize briefly the United States federal income tax consequences to Participants arising from participation in the 2016 Plan. This description is based on current law, which is subject to change (possibly retroactively). The tax treatment of a Participant in the 2016 Plan may vary depending on his particular situation and may, therefore, be subject to special rules not discussed below. No attempt has been made to discuss any potential foreign, state, or local tax consequences. In addition, Nonstatutory Options and SARs with an exercise price less than the fair market value of shares of Common Stock on the grant date, SARs payable in cash, RSUs, and certain other Awards that may be granted pursuant to the 2016 Plan, could be subject to additional taxes unless they are designed to comply with certain restrictions set forth in Section 409A of the Code and guidance promulgated thereunder.
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Tax Consequences to Participants
Options and SARs. Participants will not realize taxable income upon the grant of an Option or a SAR. Upon the exercise of a Nonstatutory Option or a SAR, a Participant will recognize ordinary compensation income (subject to withholding if an employee) in an amount equal to the excess of (i) the amount of cash and the fair market value of the shares of Common Stock received, over (ii) the exercise price of the Award. A Participant will generally have a tax basis in any shares of Common Stock received pursuant to the exercise of a Nonstatutory Option or SAR that equals the fair market value of such shares of Common Stock on the date of exercise. Subject to the discussion under “—Tax Consequences to the Company” below, the Company will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a Participant under the foregoing rules. When a Participant sells the shares of Common Stock acquired as a result of the exercise of a Nonstatutory Option or SAR, any appreciation (or depreciation) in the value of the shares of Common Stock after the exercise date is treated as long- or short-term capital gain (or loss) for federal income tax purposes, depending on the holding period. The shares of Common Stock must be held for more than 12 months to qualify for long-term capital gain treatment.
Participants eligible to receive an Option intended to qualify as an Incentive Option (i.e., under Section 422 of the Code) will not recognize taxable income on the grant of an Incentive Option. Upon the exercise of an Incentive Option, a Participant will not recognize taxable income, although the excess of the fair market value of the shares of Common Stock received upon exercise of the Incentive Option (“ISO Shares”) over the exercise price will increase the alternative minimum taxable income of the Participant, which may cause such Participant to incur alternative minimum tax. The payment of any alternative minimum tax attributable to the exercise of an Incentive Option would be allowed as a credit against the Participant’s regular tax liability in a later year to the extent the Participant’s regular tax liability is in excess of the alternative minimum tax for that year.
Upon the disposition of ISO Shares that has been held for the required holding period (generally, at least two years from the grant date and one year from the date of exercise of the Incentive Option), a Participant will generally recognize capital gain (or loss) equal to the excess (or shortfall) of the amount received in the disposition over the exercise price paid by the Participant for the ISO Shares. However, if a Participant disposes of ISO Shares that have not been held for the requisite holding period (a “Disqualifying Disposition”), the Participant will recognize ordinary compensation income in the year of the Disqualifying Disposition in an amount equal to the amount by which the fair market value of the ISO Shares at the time of exercise of the Incentive Option (or, if less, the amount realized in the case of an arm’s length disposition to an unrelated party) exceeds the exercise price paid by the Participant for such ISO Shares. A Participant would also recognize capital gain to the extent the amount realized in the Disqualifying Disposition exceeds the fair market value of the ISO Shares on the exercise date. If the exercise price paid for the ISO Shares exceeds the amount realized (in the case of an arm’s-length disposition to an unrelated party), such excess would ordinarily constitute a capital loss.
The Company will generally not be entitled to any federal income tax deduction upon the grant or exercise of an Incentive Option unless a Participant makes a Disqualifying Disposition of the ISO Shares. If a Participant makes a Disqualifying Disposition, the Company will then, subject to the discussion below under “—Tax Consequences to the Company,” be entitled to a tax deduction that corresponds as to timing and amount with the compensation income recognized by a Participant under the rules described in the preceding paragraph.
Under current rulings, if a Participant transfers previously held shares of Common Stock (other than ISO Shares that has not been held for the requisite holding period) in satisfaction of part or all of the exercise price of an Option, whether a Nonstatutory Option or an Incentive Option, no additional gain will be recognized on the transfer of such previously held shares of Common Stock in satisfaction of the Nonstatutory Option or Incentive Option exercise price (although a Participant would still recognize ordinary compensation income upon exercise of a Nonstatutory Option in the manner described above). Moreover, that number of shares of Common Stock received upon exercise which equals the number of previously held shares of Common Stock surrendered in satisfaction of the Nonstatutory Option or Incentive Option exercise price will have a tax basis that equals, and a capital gains holding period that includes, the tax basis and capital gains holding period of the previously held shares of Common Stock surrendered in satisfaction of the Nonstatutory Option or Incentive Option exercise price. Any additional shares of Common Stock received upon exercise will have a tax basis that equals the amount of cash (if any) paid by the Participant, plus the amount of compensation income recognized by the Participant under the rules described above.
The 2016 Plan generally prohibits the transfer of Awards other than by will or according to the laws of descent and distribution or pursuant to a qualified domestic relations order, but the 2016 Plan allows the Committee to permit the transfer of Awards (other than Incentive Options), in its discretion. For income and gift tax purposes, certain transfers of Nonstatutory Options should generally be treated as completed gifts, subject to gift taxation.
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The Internal Revenue Service has not provided formal guidance on the income tax consequences of a transfer of Nonstatutory Options (other than in the context of divorce) or SARs. However, the Internal Revenue Service has informally indicated that after a transfer of Options (other than in the context of divorce pursuant to a domestic relations order), the transferor will recognize income, which will be subject to withholding, and FICA/FUTA taxes will be collectible at the time the transferee exercises the Options. If a Nonstatutory Option is transferred pursuant to a domestic relations order, the transferee will recognize ordinary income upon exercise by the transferee, which will be subject to withholding, and FICA/FUTA taxes (attributable to and reported with respect to the transferor) will be collectible from the transferee at such time.
In addition, if a Participant transfers a vested Nonstatutory Option to another person and retains no interest in or power over it, the transfer is treated as a completed gift. The amount of the transferor’s gift (or generation-skipping transfer, if the gift is to a grandchild or later generation) equals the value of the Nonstatutory Option at the time of the gift. The value of the Nonstatutory Option may be affected by several factors, including the difference between the exercise price and the fair market value of the shares of Common Stock, the potential for future appreciation or depreciation of the shares of Common Stock, the time period of the Nonstatutory Option and the illiquidity of the Nonstatutory Option. The transferor will be subject to a federal gift tax, which will be limited by (i) the annual exclusion of $15,000 per donee (for 2019, subject to adjustment in future years), (ii) the transferor’s lifetime unified credit, or (iii) the marital or charitable deductions. The gifted Nonstatutory Option will not be included in the Participant’s gross estate for purposes of the federal estate tax or the generation-skipping transfer tax.
This favorable tax treatment for vested Nonstatutory Options has not been extended to unvested Nonstatutory Options. Whether such consequences apply to unvested Nonstatutory Options or to SARs is uncertain and the gift tax implications of such a transfer is a risk the transferor will bear upon such a disposition.
Other Awards: Cash Awards, RSUs, Restricted Stock and Common Stock Awards. A Participant will recognize ordinary compensation income upon receipt of cash pursuant to a cash Award or, if earlier, at the time the cash is otherwise made available for the Participant to draw upon. Individuals will not have taxable income at the time of grant of an RSU Award, but rather, will generally recognize ordinary compensation income at the time he or she receives cash or shares of Common Stock in settlement of the RSU Award, as applicable, in an amount equal to the cash or the fair market value of the shares of Common Stock received.
A recipient of Restricted Stock or an Award of unrestricted Common Stock generally will be subject to tax at ordinary income tax rates on the fair market value of the shares of Common Stock when received, reduced by any amount paid by the recipient; however, if the shares of Common Stock are not transferable and are subject to a substantial risk of forfeiture when received, a Participant will recognize ordinary compensation income in an amount equal to the fair market value of the shares of Common Stock (i) when the shares of Common Stock first become transferable and are no longer subject to a substantial risk of forfeiture, in cases where a Participant does not make a valid election under Section 83(b) of the Code, or (ii) when the Award is received, in cases where a Participant makes a valid election under Section 83(b) of the Code. If a Section 83(b) election is made and the shares of Common Stock are subsequently forfeited, the recipient will not be allowed to take a deduction for the value of the forfeited shares of Common Stock. If a Section 83(b) election has not been made, any dividends received with respect to Restricted Stock that are subject at that time to a risk of forfeiture or restrictions on transfer generally will be treated as compensation that is taxable as ordinary income to the recipient; otherwise the dividends will be treated as dividends.
A Participant who is an employee will be subject to withholding for federal, and generally for state and local, income taxes at the time he recognizes income under the rules described above. The tax basis in the shares of Common Stock received by a Participant will equal the amount recognized by the Participant as compensation income under the rules described in the preceding paragraph, and the Participant’s capital gains holding period in those shares of Common Stock will commence on the later of the date the shares of Common Stock are received or the restrictions lapse. Subject to the discussion below under “—Tax Consequences to the Company,” the Company will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a Participant under the foregoing rules.
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Tax Consequences to the Company
Reasonable Compensation.In order for the amounts described above to be deductible by the Company (or a subsidiary), such amounts must constitute reasonable compensation for services rendered or to be rendered and must be ordinary and necessary business expenses.
Golden Parachute Payments. The ability of the Company (or the ability of one of its subsidiaries) to obtain a deduction for future payments under the 2016 Plan could also be limited by the golden parachute rules of Section 280G of the Code, which prevent the deductibility of certain excess parachute payments made in connection with a change in control of an employer-corporation.
Performance-Based Compensation. The ability of the Company (or the ability of one of its subsidiaries) to obtain a deduction for amounts paid under the 2016 Plan could be limited by Section 162(m). Section 162(m) limits the Company’s ability to deduct compensation, for federal income tax purposes, paid during any year to a “covered employee” (within the meaning of Section 162(m)) in excess of $1,000,000. However, an exception may apply to this limitation in the case of certain “performance-based compensation” that was granted prior to November 2, 2017. In order to exempt “performance-based compensation” from the $1,000,000 deductibility limitation for applicable compensation agreements, the grant, vesting, exercise or settlement of the Award must be based on the satisfaction of one or more performance goals selected by the Committee and certain other requirements must be met, including shareholder approval requirements. Although the 2016 Plan was drafted to satisfy the requirements for the “performance-based compensation” exception for awards granted prior to November 2, 2017, there is no guarantee that the exception will continue to apply at the time that such awards become vested and are settled.
The Awards, if any, that will be made to Eligible Individuals under the 2016 Plan are subject to the discretion of the Committee; therefore, the Company cannot currently determine the benefits or number of shares subject to Awards that may be granted in the future. Accordingly, no New Plan Benefits Table is provided.
The following table sets forth, for the Named Executive Officers and certain other groups, all shares of Common Stock underlying outstanding Options previously awarded under the 2016 Plan. This table is inclusive of certain awards that will be cancelled in connection with the Equity Award Exchange. For additional information on the Equity Award Exchange, see Proposal 3. No associate of any of the Named Executive Officers, non-employee directors or director nominees set forth below holds or has held options to purchase our common stock.
Name and Principal Position | Number of Shares Issued or Underlying Options | |||
Sean Woolverton, CEO | 180,239 | |||
Gleeson Van Riet, EVP & CFO | 84,546 | |||
Steve Adam, EVP & COO | 91,632 | |||
Chris Abundis, SVP, GC & SEC | 77,957 | |||
All executives as a group (4 total) | 434,374 | |||
Non-executive director group(1) | 101,304 | |||
Non-executive officer group | 9,740 | |||
Total | 545,418 |
_________________
(1) | All members of the Board who are not also our executive officers. |
2019 Proxy Statement | SilverBow Resources, Inc. | 53 |
Table of Contents |
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth certain information regarding our equity compensation plans as of December 31, 2018.
|
| Equity Compensation Plan Information(1) |
| |||||||||
Plan category |
| Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) |
|
| Weighted-average exercise price of outstanding options, warrants and rights (b) |
|
| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
| |||
Equity compensation plans approved by security holders |
|
| 414,118 |
|
| $ | 27.52 |
|
|
| 253,269 |
|
Equity compensation plans not approved by security holders |
|
| 230,457 |
|
| $ | 29.63 |
|
|
| 24 |
|
Total |
|
| 644,575 |
|
|
|
|
|
|
| 253,293 |
|
_____________
(1) | Includes equity compensation plan information for both the 2016 Plan and the SilverBow Resources, Inc. Inducement Plan (“Inducement Plan”). The Inducement Plan is incorporated by reference to Exhibit 4.4 to our Form S-8 (File No. 333-215235), filed on December 21, 2016, and a copy of the amendment to the Inducement Plan, evidencing the Company’s rebrand and name change, is incorporated by reference to Exhibit 10.2 to our Form 8-K (File No. 001-08754), filed on May 5, 2017. As described more fully in Proposal 3, subject to shareholder approval, certain equity awards (201,406 stock options and 24,622 RSUs) included in the above table will be cancelled and replaced with increased targets for long-term equity grant awards with a 50/50 mixture of RSUs and PSUs starting in 2019. |
Vote Required and Board Recommendation
The affirmative vote of the holders of a majority of the shares entitled to vote on, and that voted for or against or expressly abstained with respect to, Proposal 4, is required to approve this Proposal 4. Brokers do not have discretion to vote on this proposal without your instruction; therefore, if you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote. Abstentions will be considered as votes cast and will have the same effect as votes against the proposal, but broker non-votes will not affect the outcome of the voting on the proposal.
The Board of Directors unanimously recommends that shareholders vote “FOR” approving the Second Amendment to the SilverBow Resources, Inc. 2016 Equity Incentive Plan to increase the number of shares of common stock that may be issued under the 2016 Plan. |
54 | SilverBow Resources, Inc. | 2019 Proxy Statement |
Table of Contents |
Selection of BDO USA, LLP as Independent Auditor
The Audit Committee of the Board of Directors has selected BDO USA, LLP as the independent registered public accounting firm for the Company to audit its consolidated financial statements and internal control over financial reporting for 2018.2019. BDO USA, LLP has served as SilverBow Resources’ independent auditor since June 8, 2016. See “Audit Committee Disclosure” following this proposal for more information related to BDO USA, LLP.
Shareholder approval or ratification is not required for the selection of BDO USA, LLP, since the Audit Committee of the Board of Directors has the responsibility for selecting the Company’s independent registered public accounting firm. However, the selection is being submitted for ratification at the Annual Meeting as a matter of good corporate practice. No determination has been made as to what action the Board of Directors would take if shareholders do not approve the appointment, but the Audit Committee may reconsider whether or not to retain the firm. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the selection of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the Company’s and its shareholders’ best interests.
Voting on Independent Auditor Proposal
The affirmative vote of holders of a majority of the shares present in person or by proxy at the Annual Meeting and entitled to vote on Proposal 5, is required to approve this Proposal 5. Brokers have discretion to vote this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker may still vote on this proposal.
The Board of Directors unanimously recommends that shareholders vote “FOR” the ratification of the selection of BDO USA, LLP as the Company’s independent auditor. |
The charter of the Audit Committee provides that the Audit Committee shall approve, in its sole discretion, any services to be provided by the Company’s independent registered accounting firm, including audit services and significant non-audit services (significant being defined for these purposes as non-audit services for which fees in the aggregate equal 5% or more of the base annual audit fee paid by the Company to its independent auditor), before such services are rendered, and consider the possible effect of the performance of such latter services on the independence of the auditor. The Audit Committee may delegate preapproval authority to a member of the Audit Committee. The decisions of any Audit Committee member to whom preapproval authority is delegated must be presented to the full Audit Committee at its next scheduled meeting. All of the services described below for 20172018 and 20162017 were preapproved by the Audit Committee before BDO USA, LLP was engaged to render services. As detailed further above, Ernst and YoungBDO was the Company’s independent auditor from 2002 through June 8, 2016, when BDO USA, LLP wasnot engaged to render the services.
BDO USA, LLP began serving as the Company’s independent registered public accounting firm in June 2016. The Audit Committee, with ratification of the shareholders, engaged BDO USA, LLP to perform an annual audit of the Company’s financial statements for the fiscal year ended December 31, 2017.2018. A representative from BDO USA, LLP will be present at this year’s Annual Meeting. Such representative will have the opportunity to make a statement if he or she desires to do so and is expected to be available to respond to appropriate questions.
The following table presents fees and expenses billed by BDO USA, LLP for its auditintegrated audits of the Company’s annual consolidated financial statements and internal control over financial reporting and for its review of the financial statements included in the Company’s Quarterly Reports on Form 10-Q for 20172018 and 2016, and for its audit of internal control over financial reporting for 2017 and 2016.
2017 | 2016 | |||||||
Audit Fees | $ | 559,600 | $ | 546,041 | ||||
Audit-Related Fees | $ | — | $ | — | ||||
Tax Fees | $ | — | $ | — | ||||
All Other Fees | $ | — | $ | — | ||||
Totals | $ | 559,600 | $ | 546,041 |
|
| 2018 |
|
| 2017 |
| ||
|
|
|
|
|
|
| ||
Audit Fees |
| $ | 607,727 |
|
| $ | 559,600 |
|
Audit-Related Fees |
| $ | — |
|
| $ | — |
|
Tax Fees |
| $ | — |
|
| $ | — |
|
All Other Fees |
| $ | — |
|
| $ | — |
|
Totals |
| $ | 607,727 |
|
| $ | 559,600 |
|
The audit fees for 20172018 and 20162017 for BDO USA, LLP were for professional services rendered in connection with the integrated audits of our consolidated financial statements and internal control over financial reporting and reviews of our quarterly consolidated financial statements within such years. These fees also include the issuance of comfort letters, consents and assistance with review of various documents filed with the SEC.
In connection with the financial statements for the fiscal year ended December 31, 2017,2018, the Audit Committee has:
· | reviewed and discussed the audited financial statements and internal control over financial reporting with management; |
· | discussed with BDO USA, LLP, the Company’s independent registered public accounting firm (the “Auditor”), the matters required to be discussed by the AS |
· | obtained the written disclosures and the letter from the Auditor in accordance with the applicable requirements of the Public Company Accounting Oversight Board regarding the Auditor’s communications with the Audit Committee concerning independence, and has discussed with the Auditor the Auditor’s independence. |
Based on the reviews and discussion referred to above, we recommended to the Board of Directors that the Company’s audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2017,2018, filed with the Securities and Exchange Commission.
AUDIT COMMITTEE Gabriel L. Ellisor (Chair) Michael Duginski Charles W. Wampler |
56 | SilverBow Resources, Inc. | 2019 Proxy Statement |
Named Executive Officer | 2016 Base Salary | 2017 Base Salary | % Change | |||||||||
Sean Woolverton, CEO | N/A | $ | 550,000 | N/A | ||||||||
Gleeson Van Riet, EVP & CFO | N/A | $ | 370,000 | N/A | ||||||||
Steve Adam, EVP & COO | N/A | $ | 390,000 | N/A | ||||||||
Chris Abundis, SVP, GC & SEC* | $ | 281,000 | $ | 315,000 | 12 | % |
Net Sales (MMCFE/D)(1) | EBITDA ($MM)(2) | Relative TSR(3) | Inventory Adds (Wells)(4) | CTD ($/MCF)(5) | Scorecard Payout | HS&E (TRIR) Scaler)(6) | Overall Bonus Payout | ||||||||||||||||||||||
Weighting | 20 | % | 20 | % | 20 | % | 20 | % | 20 | % | 0.9 - 1.1 | ||||||||||||||||||
Threshold | 140 | $ | 100 | Top 6 of 10 | 125 | $ | 0.81 | No Cat. Event | |||||||||||||||||||||
Expected (Target) | 150 | $ | 110 | Top 4 of 10 | 200 | $ | 0.71 | 1 | |||||||||||||||||||||
Stretch | 165 | $ | 130 | Top 2 of 10 | 250 | $ | 0.61 | 0.39 | |||||||||||||||||||||
SilverBow 2017 Performance | 154 | $ | 115 | 4 of 10 | 228 | $ | 0.73 | 0.21 | |||||||||||||||||||||
Payout | 25.1 | % | 24.8 | % | 20.0 | % | 31.2 | % | 18.0 | % | 119.1% | x | 110.0 | % | = | 131% |
Named Executive Officer | 2017 Target Bonus | 2017 Actual Bonus | Payout (as a % of Target) | |||||||||
Sean Woolverton CEO | $ | 458,332 | $ | 600,277 | 131 | % | ||||||
Gleeson Van Riet, EVP & CFO | $ | 215,756 | $ | 282,576 | 131 | % | ||||||
Steve Adam, EVP & COO | $ | 49,725 | $ | 65,125 | 131 | % | ||||||
Chris Abundis, SVP, GC & SEC | $ | 220,500 | $ | 288,789 | 131 | % |
2017 Long-Term Equity Incentive Grants | ||||||||||||||||||||||||
(as a % of Common Stock Outstanding) | Grant Date Value of Shares Granted | |||||||||||||||||||||||
Executive | RSUs | Stock Options | Total | RSUs | Stock Options | Total | ||||||||||||||||||
Sean Woolverton, CEO | 0.50 | % | 0.75 | % | 1.25 | % | $ | 1,602,562 | $ | 1,695,467 | $ | 3,298,029 | ||||||||||||
Gleeson Van Riet, EVP & CFO | 0.30 | % | 0.50 | % | 0.80 | % | $ | 943,205 | $ | 892,999 | $ | 1,836,204 | ||||||||||||
Steve Adam, EVP & COO | 0.34 | % | 0.51 | % | 0.85 | % | $ | 862,872 | $ | 823,935 | $ | 1,686,807 |
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2)(3) | Option Awards ($)(2) | Non-Equity Incentive Plan Compen- sation ($)(4) | All Other Compen- sation ($)(5) | Total ($) | ||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (i) | (j) | ||||||||||||||||||||||
Sean C. Woolverton Chief Executive Officer and Director | 2017 | $ | 435,417 | $ | — | $ | 1,695,467 | $ | 1,602,561 | $ | 600,277 | $ | 156,362 | $ | 4,490,084 | |||||||||||||||
G. Gleeson Van Riet Executive Vice President and Chief Financial Officer | 2017 | $ | 274,931 | $ | — | $ | 943,205 | $ | 892,999 | $ | 282,576 | $ | 16,943 | $ | 2,410,654 | |||||||||||||||
Steven W. Adam Executive Vice President and Chief Operating Officer | 2017 | $ | 44,318 | $ | — | $ | 862,872 | $ | 823,935 | $ | 65,125 | $ | 6,145 | $ | 1,802,395 | |||||||||||||||
Christopher M. Abundis Senior Vice President, General Counsel and Secretary | 2017 | $ | 306,264 | $ | — | $ | 308,095 | $ | 357,970 | $ | 288,789 | $ | 17,860 | $ | 1,278,978 | |||||||||||||||
Robert J. Banks Former Executive Vice President and Chief Operating Officer; Former Interim Chief Executive Officer | 2017 | $ | 515,000 | $ | — | $ | 369,719 | $ | 429,571 | $ | — | $ | 22,569 | $ | 1,336,859 | |||||||||||||||
2016 | $ | 495,952 | $ | — | $ | 615,079 | $ | 267,478 | $ | 386,250 | $ | 19,695 | $ | 1,784,454 | ||||||||||||||||
2015 | $ | 461,540 | $ | — | $ | 125,247 | $ | — | $ | — | $ | 22,345 | $ | 609,132 | ||||||||||||||||
Alton D. Heckaman, Jr. Former Executive Vice President and Chief Financial Officer | 2017 | $ | 134,776 | $ | 300,000 | $ | — | $ | — | $ | — | $ | 893,227 | $ | 1,328,003 | |||||||||||||||
2016 | $ | 462,090 | $ | — | $ | 615,079 | $ | 267,478 | $ | — | $ | 5,300 | $ | 1,349,947 | ||||||||||||||||
2015 | $ | 462,090 | $ | — | $ | 125,247 | $ | — | $ | — | $ | 7,950 | $ | 595,287 | ||||||||||||||||
Woolverton | Van Riet | Adam | Abundis | Banks | Heckaman | ||||||||||||||||||||
Vacation Buyback | 2017 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 55,873 | ||||||||||||
2016 | $ | — | $ | — | |||||||||||||||||||||
2015 | $ | — | $ | — | |||||||||||||||||||||
Savings Plan Contributions* | 2017 | $ | — | $ | 16,200 | $ | — | $ | 16,200 | $ | 16,200 | $ | — | ||||||||||||
2016 | $ | 5,300 | $ | 5,300 | |||||||||||||||||||||
2015 | $ | 7,950 | $ | 7,950 | |||||||||||||||||||||
Life Insurance Premiums** | 2017 | $ | 784 | $ | 743 | $ | 545 | $ | 660 | $ | 4,356 | $ | 4,045 | ||||||||||||
2016 | $ | 14,395 | $ | — | |||||||||||||||||||||
2015 | $ | 14,395 | $ | — | |||||||||||||||||||||
HSA Employer Contribution*** | 2017 | $ | — | $ | — | $ | — | $ | 1,000 | $ | 1,000 | $ | — | ||||||||||||
2016 | $ | — | $ | — | |||||||||||||||||||||
2015 | $ | — | $ | — | |||||||||||||||||||||
Perquisites**** | 2017 | $ | 94,654 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
2016 | $ | — | $ | — | |||||||||||||||||||||
2015 | $ | — | $ | — | |||||||||||||||||||||
Tax Reimbursements***** | 2017 | $ | 60,924 | $ | — | $ | — | $ | — | $ | 1,013 | $ | — | ||||||||||||
2016 | $ | — | $ | — | |||||||||||||||||||||
2015 | $ | — | $ | — | |||||||||||||||||||||
Severance****** | 2017 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 758,430 | ||||||||||||
2016 | $ | — | $ | — | |||||||||||||||||||||
2015 | $ | — | $ | — | |||||||||||||||||||||
Consultant Payments******* | 2017 | $ | — | $ | — | $ | 5,600 | $ | — | $ | — | $ | 74,879 | ||||||||||||
2016 | $ | — | $ | — | |||||||||||||||||||||
2015 | $ | — | $ | — | |||||||||||||||||||||
Totals | 2017 | $ | 156,362 | $ | 16,943 | $ | 6,145 | $ | 17,860 | $ | 22,569 | $ | 893,227 | ||||||||||||
2016 | $ | 19,695 | $ | 5,300 | |||||||||||||||||||||
2015 | $ | 22,345 | $ | 7,950 |
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | ||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | All Other Option Awards: Number of Securities Under-lying Options (#)(2) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards(3) | ||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (i) | (j) | (k) | (l) | ||||||||||||||||||||||
Sean C. Woolverton | 3/1/2017 | $ | — | $ | — | $ | — | 58,054 | — | $ | — | $ | 1,695,467 | |||||||||||||||||
3/1/2017 | $ | — | $ | — | $ | — | — | 87,081 | $ | 29.21 | $ | 1,602,562 | ||||||||||||||||||
$ | — | $ | 458,332 | $ | 916,664 | — | — | $ | — | $ | — | |||||||||||||||||||
G. Gleeson Van Riet | 3/22/2017 | $ | — | $ | — | $ | — | 35,096 | — | $ | — | $ | 943,205 | |||||||||||||||||
3/22/2017 | $ | — | $ | — | $ | — | — | 52,644 | $ | 26.96 | $ | 892,999 | ||||||||||||||||||
$ | — | $ | 215,756 | $ | 431,512 | — | — | $ | — | $ | — | |||||||||||||||||||
Steven W. Adam | 11/6/2017 | $ | — | $ | — | $ | — | 39,275 | — | $ | — | $ | 862,872 | |||||||||||||||||
11/6/2017 | $ | — | $ | — | $ | — | — | 58,912 | $ | 21.97 | $ | 823,935 | ||||||||||||||||||
$ | — | $ | 49,725 | $ | 99,450 | — | — | $ | — | $ | — | |||||||||||||||||||
Christopher M. Abundis | 3/22/2017 | $ | — | $ | — | $ | — | 11,464 | — | $ | — | $ | 308,095 | |||||||||||||||||
3/22/2017 | $ | — | $ | — | $ | — | — | 21,103 | $ | 26.96 | $ | 357,970 | ||||||||||||||||||
$ | — | $ | 220,500 | $ | 441,000 | — | — | $ | — | $ | — | |||||||||||||||||||
Robert J. Banks | 3/22/2017 | $ | — | $ | — | $ | — | 13,757 | — | $ | — | $ | 369,719 | |||||||||||||||||
3/22/2017 | $ | — | $ | — | $ | — | — | 25,324 | $ | 26.96 | $ | 429,571 | ||||||||||||||||||
Alton. D. Heckaman, Jr. | $ | — | $ | — | $ | — | — | — | $ | — | $ | — |
Option Awards | Stock Awards | |||||||||||||||||||||||||||
Name and Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||||
(a) | (b) | (c) | (e) | (f) | (g) | (h) | (i) | (j) | ||||||||||||||||||||
Sean C. Woolverton Stock Options | ||||||||||||||||||||||||||||
3/1/2017 | — | 87,081 | (2) | $ | 29.21 | 3/1/2027 | ||||||||||||||||||||||
Restricted Stock Units | ||||||||||||||||||||||||||||
3/1/2017 | 58,054 | (3) | $ | 1,725,365 | — | — | ||||||||||||||||||||||
G. Gleeson Van Riet Stock Options | ||||||||||||||||||||||||||||
3/22/2017 | — | 52,644 | (2) | $ | 26.96 | 3/22/2027 | ||||||||||||||||||||||
Restricted Stock Units | ||||||||||||||||||||||||||||
3/22/2017 | 35,096 | (3) | $ | 1,043,053 | — | — | ||||||||||||||||||||||
Steven W. Adam Stock Options | ||||||||||||||||||||||||||||
11/6/2017 | — | 58,912 | (2) | $ | 21.97 | 11/6/2027 | ||||||||||||||||||||||
Restricted Stock Units | ||||||||||||||||||||||||||||
11/6/2017 | 39,275 | (3) | $ | 1,167,253 | — | — | ||||||||||||||||||||||
Christopher M. Abundis Stock Options | ||||||||||||||||||||||||||||
6/8/2016 | 4,409 | 8,819 | (4) | $ | 23.25 | 6/8/2021 | ||||||||||||||||||||||
3/22/2017 | — | 21,103 | (4) | $ | 26.96 | 3/22/2027 | ||||||||||||||||||||||
Restricted Stock Units | ||||||||||||||||||||||||||||
6/8/2016 | 11,023 | (5) | $ | 327,604 | — | — | ||||||||||||||||||||||
3/22/2017 | 11,464 | (5) | $ | 340,710 | — | — | ||||||||||||||||||||||
Robert J. Banks(6) Stock Options | ||||||||||||||||||||||||||||
6/8/2016 | 7,054 | 14,110 | (4) | $ | 23.25 | 6/8/2021 | ||||||||||||||||||||||
3/22/2017 | — | 25,324 | (4) | $ | 26.96 | 3/22/2027 | ||||||||||||||||||||||
Restricted Stock Units | ||||||||||||||||||||||||||||
6/8/2016 | 17,637 | (5) | $ | 524,172 | — | — | ||||||||||||||||||||||
3/22/2017 | 13,757 | (5) | $ | 408,858 | — | — | ||||||||||||||||||||||
Alton D. Heckaman, Jr. Stock Options | ||||||||||||||||||||||||||||
6/8/2016 | 21,164 | — | $ | 23.25 | 4/22/2019 |
Stock Awards | ||||||||
Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||
(a) | (d) | (e) | ||||||
Christopher M. Abundis | 5,511 | $ | 158,937 | |||||
Robert J. Banks | 8,818 | $ | 254,311 |
Equity Acceleration | ||||||||||||||||||||
Cash Payments | Benefit Cost(1) | Time- Based Stock Options | Time-Based RSUs | Total | ||||||||||||||||
Sean C. Woolverton | ||||||||||||||||||||
Termination by Employee for Good Reason or by Company Without Cause | $ | 1,650,000 | $ | 25,449 | $ | — | $ | — | $ | 1,675,449 | ||||||||||
Termination by Employee for Good Reason or by Company Without Cause Following Change in Control(2) | $ | 2,200,000 | $ | 25,449 | $ | 44,411 | (3) | $ | 1,725,365 | (3) | $ | 3,995,226 | ||||||||
Death or Disability | $ | — | $ | 25,449 | $ | — | $ | — | $ | 25,449 | ||||||||||
Change of Control | $ | — | $ | — | $ | (4) | $ | (4) | $ | — | ||||||||||
G. Gleeson Van Riet | ||||||||||||||||||||
Termination by Employee for Good Reason or by Company Without Cause | $ | 647,500 | $ | 9,263 | $ | — | $ | — | $ | 656,763 | ||||||||||
Termination by Employee for Good Reason or by Company Without Cause Following Change In Control(2) | $ | 971,250 | $ | 9,263 | $ | 145,297 | (3) | $ | 1,043,053 | (3) | $ | 2,168,864 | ||||||||
Death or Disability | $ | — | $ | 9,263 | $ | — | $ | — | $ | 9,263 | ||||||||||
Change of Control | $ | — | $ | — | $ | (4) | $ | (4) | $ | — | ||||||||||
Steven W. Adam | ||||||||||||||||||||
Termination by Employee for Good Reason or by Company Without Cause | $ | 721,500 | $ | 19,329 | $ | — | $ | — | $ | 740,829 | ||||||||||
Termination by Employee for Good Reason or by Company Without Cause Following Change In Control(2) | $ | 1,082,250 | $ | 19,329 | $ | 456,568 | (3) | $ | 1,167,253 | (3) | $ | 2,725,400 | ||||||||
Death or Disability | $ | — | $ | 19,329 | $ | — | $ | — | $ | 19,329 | ||||||||||
Change of Control | $ | — | $ | — | $ | (4) | $ | (4) | $ | — | ||||||||||
Christopher M. Abundis | ||||||||||||||||||||
Termination by Employee for Good Reason or by Company Without Cause | $ | 535,500 | $ | 25,449 | $ | 76,277 | (3) | $ | 440,034 | (3) | $ | 1,077,260 | ||||||||
Termination by Employee for Good Reason or by Company Without Cause Following Change In Control(2) | $ | 803,250 | $ | 25,449 | $ | 115,303 | (3) | $ | 668,314 | (3) | $ | 1,612,316 | ||||||||
Death or Disability | $ | — | $ | 25,449 | $ | 76,277 | $ | 440,034 | $ | 541,760 | ||||||||||
Change of Control | $ | — | $ | — | $ | (4) | $ | (4) | $ | — | ||||||||||
Robert J. Banks(5) | $ | 1,108,523 | $ | 25,449 | $ | 114,245 | $ | 660,458 | $ | 1,908,675 | ||||||||||
Alton D. Heckaman, Jr. (6) | $ | 1,297,540 | $ | 19,239 | $ | 121,693 | $ | 767,195 | $ | 2,205,667 |
Named Executive Officer | 2017 Base Salary | 2017 Target Bonus | 2017 Target Long-Term Equity Awards (RSUs and stock options) | 2017 All Other Compensation (Excludes One- time Onboarding Expenses) | Total Expected 2017 Target Compensation | |||||||||||||||
Sean Woolverton, CEO | $ | 550,000 | $ | 550,000 | $ | 550,000 | $ | 784 | $ | 1,650,784 |
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers, and persons who own more than 10% of the Company’s common stock to file reports with the SEC regarding their ownership of, and transactions in, the Company’s common stock. SEC regulations require SilverBow Resources to identify anyone who filed a required report late during the most recent fiscal year. Based on a review of the Forms 3 and 4 filed during the 20172018 fiscal year and written certifications provided to the Company, the Company believes that all of these reporting persons timely complied with their filing requirements during 2017,2018, with the exception of Mr.our four NEOs (Messrs. Woolverton, Van Riet, Adam and Abundis), whose transactionaward grant transactions of April 17, 2017, under his 10b5-1 Plan, wasFebruary 20, 2018, were filed on April 20, 2017,March 6, 2018 and March 7, 2018, due to an administrative error.
Pursuant to various rules promulgated by the SEC, a shareholder who seeks to include a proposal in the Company’s proxy materials for the annual meeting of the shareholders of the Company to be held in 20192020 must timely submit such proposal in accordance with SEC Rule 14a-8 to the Company, addressed to the Secretary, SilverBow Resources, Inc., 575 North Dairy Ashford, Suite 1200, Houston, Texas 77079, no later than December 3, 2018,17, 2019, unless the date of our 20192020 annual meeting is more than 30 days before or after May 15, 2019,21, 2020, in which case the proposal must be received a reasonable time before we begin to print and send our proxy materials. Further, a shareholder may not submit a matter for consideration at the 20192020 annual meeting, unless the shareholder shall have timely complied with the requirements in the Company’s Bylaws.
Advanced Notice of Nominations or Proposed Business for the Company’s 20192020 Annual Meeting of Shareholders
Our Bylaws require advanced written notice from any shareholder seeking to present nominations of persons for election to the Board and other proposed business (other than proposals submitted in accordance with Rule 14a-8 for inclusion in our proxy materials) for consideration at our 20192020 annual meeting of shareholders. Notice of such nominations or proposals must be delivered to or mailed and received by the Secretary, SilverBow Resources, Inc., 575 North Dairy Ashford, Suite 1200, Houston, Texas 77079, not less than ninety (90) days nor more than one hundred and twenty (120) days prior to the date of the one-year anniversary of the immediately preceding year’syear's annual meeting. Based on the anniversary date of our 20182019 Annual Meeting, a shareholder must send advanced written notice of any such nomination or other proposed business such that the notice is received by us no earlier than the close of business January 15, 2019,22, 2020, and no later than the close of business February 14, 2019.21, 2020. In the event the 20192020 annual meeting of shareholders is convened on a date more than 30 days before, or more than 60 days after, such anniversary date, such notice by the shareholder must be so received not later than the close of business on the one hundred twentieth (120th) day prior to the date of such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meetingmeeting; or, if the first public announcement of the date of such annual meeting is less than one hundred (100) days prior to the date of such annual meeting, such notice by the shareholder must be so received not later than the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by SilverBow Resources.
Any such nomination or proposal must be made in writing, indicate certain information about the shares of SilverBow Resources stock (or other derivative instrument) which are owned by the shareholder and beneficial owner, if any, and comply with the then-applicable terms of the Nomination Agreement and requirements set forth in the Company’s Bylaws. A nomination of persons for election to the Board (each, a “nominee”) must also include certain information about the nominee, certain information regarding affiliations between the nominee and the shareholder, a completed and signed questionnaire by the nominee, and all other information about the nominee required under SEC Rule 14A and the Company’s Bylaws. A proposal of business must also include a brief description of the business desired to be brought before the meeting, the text of the proposal, a description of all agreements, arrangements and understandings between the shareholder, and beneficial owner, if any, and any other persons in connection with the proposal. Nominations or proposals must be addressed as follows in order to be considered for the next annual meeting:
Secretary | |
SilverBow Resources, Inc. | |
575 North Dairy Ashford, Suite 1200 Houston, Texas 77079 |
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Shareholders who wish to nominate an individual to the Board must also follow the requirements of the Company’sCompany's Bylaws, then-existing terms of the Nomination Agreement, and applicable SEC and NYSE rules and regulations. For more information on shareholders’ nomination of directors, refer to “Nominations of Directors,” in this proxy statement.
With respect to business to be brought before the 20182019 Annual Meeting, the Company has not received any notices, proposals, or nominees from shareholders that the Company is required to include in this proxy statement.
The Board of Directors welcomes questions or comments about the Company and its operations. Any communications that shareholders or other interested parties may wish to send to the Board of Directors or the non-management independent directors may be directed to the following address:
Chairman of the Board | |
SilverBow Resources, Inc. | |
575 North Dairy Ashford, Suite 1200 | |
Houston, Texas 77079 | |
ATTN: Secretary |
Historically, the Company’s annual meeting of its Board of Directors was held to coincide with the annual meeting of its shareholders and a majority of the directors would attend the annual meeting of shareholders; however, with the increased responsibilities and time requirements in connection with the Board meeting, the Board’s annual meeting is now held two to three weeks before the shareholders’ annual meeting. Therefore, while the Company encourages members of the Board to attend, the Company does not have a policy with regard to Board members’ attendance at its annual meetings of shareholders. Although some of the members of the Board will attend the 20182019 Annual Meeting, it is not expected that a majority will be in attendance. Those in attendance will be available to address shareholder questions. TwoThree directors attended the 20172018 annual meeting.
Certain statements set forth in this proxy statement that are not historical are “forward-looking statements” as that term is defined in Section 21E of the Exchange Act. These statements include estimates of future amounts payable under awards, plans or agreements or upon the occurrence of certain events, such as a change of control, the present value of such awards, and the estimated value of awards, the vesting of which will depend on performance over future periods. In order to estimate amounts that may be paid in the future, we made assumptions as to a number of variables which may, and in many cases will, differ from future actual conditions. These variables include the price of our common stock, the dates of termination of employment, final pay, interest rates, applicable tax rates and other assumptions. The Company will not update these forward-looking statements unless required to do so by applicable law. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. Management cautions all readers that the forward-looking statements contained in this proxy statement are not guarantees of future values or payments, and we cannot assure any reader that such statements will be realized or that the events and circumstances that they describe will occur.
Upon written request, SilverBow Resources will provide any shareholder of the Company, at no charge, a copy of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017,2018, as filed with the SEC, including the financial statements and schedules, but without exhibits. Direct requests should be made by mail to SilverBow Resources, Inc., Investor Relations Department, 575 North Dairy Ashford Road, Suite 1200, Houston, Texas 77079; by telephone at (281) 874-2700 or (800) 777-2412; or by email to info@sbow.com.
By Order of the Board of Directors, | ||
Christopher M. Abundis | ||
Senior Vice President, General Counsel and Secretary | ||
Houston, Texas April 15, 2019 |
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SECOND AMENDMENT TO THE
SILVERBOW RESOURCES, INC.
2016 EQUITY INCENTIVE PLAN
This Second Amendment (the “Second Amendment”) to the SilverBow Resources, Inc. 2016 Equity Incentive Plan (the “Plan”), is made effective as of April 2, 2019 (the “Amendment Effective Date”), subject to approval by the shareholders of SilverBow Resources, Inc., a Delaware corporation (the “Company”). Capitalized terms used but not defined herein shall have the meanings assigned to them in the Plan.
WHEREAS, the Company previously adopted the Plan;
WHEREAS, Section 13.1 of the Plan provides that the Board may amend, modify or suspend the Plan, except that any amendment to increase the number of securities which may be issued under the Plan is subject to approval by the shareholders of the Company; and
WHEREAS, the Board desires to amend the Plan in order to increase the number of Shares available for issuance under the Plan by 825,000.
NOW, THEREFORE, BE IT RESOLVED, that, the Plan shall be amended as of the Amendment Effective Date, subject to approval by the Company’s shareholders, as set forth below:
Section 4.1.1 of the Plan shall be deleted in its entirety and replaced with the following:
“Subject to adjustment as provided in Section 4.3, the number of Shares available for delivery pursuant to (a) Options or SARs, (b) Restricted Stock, (c) Restricted Stock Units, (d) Performance Awards, and (e) awards contemplated by Article XI of this Plan granted under the Plan shall be, in the aggregate, 2,007,011 Shares. Shares awarded under the Plan may be authorized but unissued Shares, authorized and issued Shares reacquired and held as treasury Shares or a combination thereof. Shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any Subsidiary or Affiliate shall not reduce the Shares available for grants of Awards under this Section 4.1. The aggregate number of Shares available under this Section 4.1 will be reduced by one Share for every Share subject to an award granted under this Plan.”
FURTHER RESOLVED, that, as amended hereby, the Plan is specifically ratified and reaffirmed.
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