SOUTHWESTERN ENERGY COMPANY 2013 INCENTIVE PLAN

PERFORMANCE UNIT AWARD AGREEMENT

 

 

SOUTHWESTERN ENERGY COMPANY, a Delaware corporation (“Southwestern”), has on
this [___], [___] (the “Award Date”) granted to [_______________], (the
“Participant”) an award in the form of units (the “Award”), the value of which
depends on the financial performance of the Company over a specified time period
(the “Performance Units”).  This Award is subject to the terms of this
Performance Unit Award Agreement (the “Agreement”) and is made pursuant to the
Southwestern Energy Company 2013 Incentive Plan (the “Plan”) and the
Southwestern Energy Company Guidelines for Performance Unit Awards (the
“Guidelines”) thereunder, both of which are incorporated into this Agreement by
reference. Any capitalized terms used herein that are otherwise undefined shall
have the meaning provided in the Plan or the Guidelines.

1.

Acceptance of Terms and Conditions.  By acknowledging and accepting this Award,
you agree to be bound by the terms and conditions of this Agreement, the Plan
(including without limitation, Section 12 of the Plan), the Guidelines and all
conditions established by Southwestern in connection with Awards issued under
the Plan and in accordance with the Guidelines, and you further acknowledge and
agree that this Award does not confer any legal or equitable right (other than
those rights constituting the Award itself) against Southwestern or any
Subsidiary (collectively, the “Company”) directly or indirectly, or give rise to
any cause of action at law or in equity against the Company. To vest in the
Performance Units described in this Award, you must accept this Award. If you
fail to accept this Award prior to the first Vesting Date, the Award will be
cancelled and forfeited.

2.

Award.  Subject to the restrictions, limitations, terms and conditions specified
in the Plan, Guidelines and this Agreement, effective as of the Award Date,
Southwestern hereby grants the Participant [______] Performance Units.

3.

Performance Period. The Performance Units granted hereunder will become payable
based on the satisfaction of the Performance Measures described in Section 6
over the Performance Period, which shall be the period beginning January 1,
[___] and ending December 31, [___].

4.

Unit Value. Each Performance Unit will have a “Target Value” of one (1) share of
Common Stock. Based upon actual performance during the Performance Period
against the Performance Measures set forth in Section 6 below, the Payment Value
of each Performance Unit may range from a minimum of 0 shares to a maximum of
two (2) shares as determined in Section 7 below. 

5.

Vesting.  Subject to Section 9 and Section 11 below, on each of the dates set
forth below (each a “Vesting Date”), subject to the Participant’s continued
employment with the Company, the Participant will become vested in the
below-stated percentage of his or her Award of Performance Units:

--------------------------------------------------------------------------------

 

 

 

 

Percentage of Performance Units

Vesting Date

[___]%

[___]

[___]%

[___]

[___]%

[___]

 

6.

Performance Measures.  The Performance Measures, the weight that each
Performance Measure carries with respect to the determination of the Payment
Value of each Performance Unit and the Performance Targets for each Performance
Measure are set forth below:

 

Performance Measures

Weight

 

 

Comparison

 

Performance Targets

Threshold

Target

Maximum

TSR

   [___]%

Peer Ranking

[___]%  

[___]%

[___]%  

PVI

   [___]%

Goal

[___]

[___]

[___]

Total

100%

 

 

 

 

 

 

(a) For purposes of this Agreement, “Relative Total Shareholder Return” or “TSR”
shall be determined by tracking the change in Southwestern’s stock price over
the Performance Period, plus dividends on the Common Stock paid over the entire
Performance Period, in comparison with each peer company, as determined by the
Committee on the Award Date.  The Relative Total Shareholder Return shall be
equal to the average relative percentile ranking relative to such peer group
over the Performance Period.

(b) For purposes of this Agreement, “Present Value Index” or “PVI” shall be
determined by measuring long-term growth of the net asset value of
Southwestern’s business. PVI shall be based on economic analysis for each
investment opportunity based upon the expected present value added for each
dollar to be invested.

(c) The peer group of companies for purposes of this Agreement is as follows:

[___]

--------------------------------------------------------------------------------

 

7.

Calculation of Payment Value. 

(a) Southwestern shall use Southwestern’s year-end audited financial statements
in determining the extent to which the Performance Targets were achieved during
the Performance Period for each Performance Measure and shall certify in writing
whether and the extent to which Performance Targets under the Performance
Measures for the Performance Period have been met.

(b) The Committee will determine a “Payment Value” for each Performance Unit,
expressed in shares of Common Stock, at the end of the Performance Period
contingent upon the actual performance against the Performance Measures, as
determined by the Committee.  Actual performance for all Performance Measures
(i) at Target would result in a Payment Value per Performance Unit of one (1)
share of Common Stock , (ii) at Threshold, one-half (1/2) share of Common Stock
and (iii) at Maximum, two (2) shares of Common Stock.  For actual performance
below Threshold, between Threshold and Target, and between Target and Maximum,
the Payment Value will be determined by linear extrapolation, with a minimum of
0 and a maximum of two (2) shares of Common Stock per Performance Unit.  Actual
performance over maximum will not result in a Payment Value per Performance Unit
greater than two (2) shares of Common Stock.  Notwithstanding the foregoing, in
the event that the change in Southwestern’s stock price over the Performance
Period plus dividends on the Common Stock paid over the entire Performance
Period (i.e, Southwestern’s absolute total shareholder return) is a negative
value, the Payment Value shall not exceed one (1) share of Common Stock per
Performance Unit. The total payout to the Participant will be determined by
multiplying the Payment Value per Performance Unit determined by the Committee
based on the Company’s actual performance against, and weighting of, each
Performance Measure by the number of vested Performance Units held by the
Participant.

8.

Payout. 

(a) Subject to Section 8(b) below and Section 11 of this Agreement, Southwestern
shall deliver to the Participant a number of shares of Common Stock, less
applicable tax withholdings (as set forth in Section 14), equal to the total
payout under the Participant’s vested Performance Units determined by the
Committee under Section 7(b) at the conclusion of the Performance Period on such
date following the certification of performance against the Performance Measures
as the Committee shall designate, but in no event later than two and one-half
months following the last day of the Performance Period. No fractional shares
will be issued.  If the calculation of the total payout under the Participant’s
vested Performance Units results in a fractional share, it will be rounded up to
the nearest whole share.

(b) Notwithstanding the foregoing, to the extent that Southwestern determines
that the delivery of shares of Common Stock in settlement of the Performance
Units (together with the issuance of shares of Common Stock subject to then
outstanding stock-settled awards under the Plan) would result in the issuance of
shares of Common Stock in excess of the limit on the maximum number of shares
that may be issued pursuant to awards granted under the Plan, the Performance
Units shall, in lieu of payment in shares of Common Stock under Section 8(a)
above, be paid out in cash in accordance with the terms hereof.  To the extent
that the Performance Units are paid in cash pursuant to this Section 8(b), the
amount payable shall be determined by multiplying the closing price of a share
of Common Stock

--------------------------------------------------------------------------------

 

on the date immediately prior to the date of such payment by the number of
shares of Common Stock that would otherwise be payable in respect of the
Performance Units hereunder, less applicable tax withholdings.

9.

Termination of Employment. 

(a) Termination for Cause.  If the Participant’s employment with the Company is
terminated by the Company for Cause, all outstanding vested and unvested
Performance Units granted to the Participant shall expire at the commencement of
business on the date of such termination, and no payment shall be made to the
Participant with respect thereto.

(b) Termination due to Death, Disability or Retirement.  If the Participant’s
employment with the Company is terminated as a result of the Participant’s
death, Disability, or Retirement, a portion of the unvested Performance Units
(to the extent not forfeited or cancelled on or prior to such termination
pursuant to any provision of this Agreement, the Plan or Guidelines), shall vest
on the date of such termination and the remaining unvested Performance Units
shall expire at the commencement of business on the date of such termination,
and no payment shall be made to the Participant with respect thereto.  The
number of unvested Performance Units which shall vest will be equal to the
product of (i) the total number of Performance Units granted pursuant to this
Agreement and (ii) a fraction, the numerator of which is the total number of
days that have elapsed between the Award Date and the date such Participant’s
employment terminated and the denominator of which is the total number of days
between the Award Date and the final Vesting Date under this Agreement, and
shall be paid out in accordance with Section 8 of this Agreement. 

(c) Termination Other than for Cause, Death, Disability or Retirement.  In the
event that the employment of the Participant with the Company shall terminate
for any reason other than Cause, Disability, Retirement or death, all unvested
Performance Units granted to such Participant shall expire at the commencement
of business on the date of such termination, and no payment shall be made to the
Participant with respect thereto.  Except as otherwise provided herein or in the
Plan or Guidelines, any vested Performance Units shall be paid out in accordance
with Section 8 of this Agreement.

10.

Subsidiaries.  Unless the Committee determines otherwise, any unvested
Performance Units held by a Participant employed by an entity that is a
Subsidiary will terminate and be forfeited immediately on the date such entity
ceases to be a Subsidiary of Southwestern.

--------------------------------------------------------------------------------

 

11.

Change in Control.  Upon a Change in Control, all unvested Performance Units
shall fully vest and each vested Performance Unit will be paid out at the
greater of (i) Target Value and (ii) the projected Payment Value if the
Performance Period had been completed, as determined by the Committee in its
sole discretion. Any shares of Common Stock (or, if applicable pursuant to
Section 12 of the Plan and Section 8 of this Agreement, other securities or
cash) payable under this Section 11 shall be delivered to the Participant within
five (5) business days following the Change in Control. 

12.

Limitations on Transfer.  During the lifetime of a Participant, each Performance
Unit granted to the Participant shall only be exercisable by such Participant.
 No Performance Unit shall be assignable or transferable otherwise than by will
or by the laws of descent and distribution.

13.

Adjustment.    Pursuant to Section 9 of the Plan and the Guidelines, the
Committee will (in the case of a Covered Employee) and may (with respect to
other Participants) adjust the Performance Targets for the relevant Performance
Period to exclude the impact of charges for restructurings, discontinued
operations, extraordinary items, all non-cash charges resulting from any
write-down of oil and gas properties and all other non-cash components of
Accumulated Other Comprehensive Income (AOCI), other unusual or non-recurring
items, and the cumulative effect of accounting changes, each as defined by
generally accepted accounting principles and as identified in Southwestern’s
audited financial statements, including the notes thereto.

14.

Responsibility for Taxes.  The Participant shall be solely responsible for any
applicable taxes (including, without limitation, income and excise taxes) and
penalties, and any interest that accrues thereon, which he or she incurs in
connection with the vesting, or payment of this Award, in accordance with
Section 16 of the Plan.  However, upon the settlement of any Performance Units
in shares of Common Stock, the Company shall have the right to withhold a number
of such shares having a Fair Market Value determined to be sufficient to satisfy
the minimum federal, state, local and/or non-U.S. withholding tax requirements,
if any, attributable to such settlement.

15.

Conformity with the Plan. This Agreement is intended to conform in all respects
with, and is subject to, all applicable provisions of the Plan. If there is any
conflict between the terms and conditions of the Plan and this Agreement the
terms of the Plan, as interpreted by the Committee in accordance with the
Guidelines, shall govern.

16.

Performance-Based Compensation.  Pursuant to Section 9 of the Plan, if this
Award of Performance Units is intended to qualify as Performance-Based
Compensation, any amounts payable with respect to this Award shall be determined
in a manner permitted by Section 162(m) of the Code.

17.

No Rights to Continued Employment. Nothing in this Agreement or in the Plan
shall confer upon the Participant any right with respect to the continuation of
the Participant’s employment by or service to the Company or interfere in any
way with the right of the Company at any time to terminate the Participant’s
employment or service or to increase or decrease the compensation of the
Participant from the rate in existence at the time of the grant of this Award.

--------------------------------------------------------------------------------

 

18.

Consent to Transfer Personal Data. The Participant acknowledges and consents to
the collection, use, processing and transfer of personal data as described in
this Section 18. The Company holds certain personal information about the
Participant for the purpose of managing and administering the Plan (the “Data”).
The Company may transfer Data to any third parties assisting the Company in the
implementation, administration and management of the Plan. The Participant
authorizes the Company and any third parties to receive, possess, use, retain
and transfer the Data, in electronic or other form, for the purposes of
implementing, administering and managing the Participant’s participation in the
Plan, including any requisite transfer of such Data as may be required for the
administration of the Plan and/or the subsequent holding of shares of Common
Stock on the Participant’s behalf to a broker or other third party with whom the
Participant may elect to deposit any shares of Common Stock acquired or received
pursuant to the Plan.

19.

Confidentiality. The Participant agrees not to disclose the existence or terms
of this Award to any other employees of the Company or third parties with the
exception of the Participant’s accountants, attorneys, or spouse, and shall
ensure that none of them discloses such existence or terms to any other person,
except as required to comply with legal process.

20.

Failure to Comply; Recoupment. 

(a) In addition to the remedies provided for in the Plan, if the Participant
fails to comply with any of the terms and conditions of the Plan, the Guidelines
or this Agreement, unless such failure is remedied within ten (10) days after
the Participant is notified of such failure by the Committee, such failure to
comply shall be grounds for the cancellation and forfeiture of this Award, in
whole or in part, as the Committee may determine.

(b) Notwithstanding anything herein to the contrary, the Company will be
entitled to the extent permitted or required by applicable law or Company policy
as in effect from time to time to recoup compensation of whatever kind paid by
the Company at any time to a Participant under the Plan, including any benefits
the Participant may receive in connection with the grant or vesting of
Performance Units pursuant to this Agreement.

21.

Modification. This Agreement and the Plan constitute the entire agreement of the
parties with respect to the subject matter hereof.  The Committee may amend,
modify or terminate this Agreement in accordance with Section 17 of the Plan,
provided that no such amendment or modification shall adversely affect the right
of the Participant under this Agreement without the Participant’s written
consent other than as set forth in Section 17(b) of the Plan.

22.

Section 409A of the Code.  The benefits provided hereunder shall be paid in such
a manner as to satisfy Section 409A of the Code or an exception to the
application of Section 409A of the Code. To the extent that these benefits
become subject to Section 409A of the Code, this Agreement, the Guidelines and
the Plan shall be interpreted and construed to the fullest extent allowed under
Section 409A of the Code and the applicable guidance thereunder to satisfy the
requirements of an exception or to comply with Section 409A of the Code and the
applicable guidance thereunder and to avoid any additional tax thereunder. 
Notwithstanding the foregoing or any provision of this Agreement, the Guidelines
or the Plan to the contrary, in no event shall the Company be liable to a
Participant on account of an Award’s failure to (i) qualify for favorable U.S.
or non-U.S. tax treatment or (ii) avoid adverse tax treatment under U.S. or
non-U.S. law, including, without limitation, Section 409A of the Code.    

--------------------------------------------------------------------------------

 

23.

Governing Law. All matters arising under this Agreement, including matters of
validity, construction and interpretation, shall be governed by the internal
laws of the State of Delaware, without regard to any state’s conflict of law
principles.

24.

Electronic Delivery and Acceptance.  The Company may, in its sole and absolute
discretion, decide to deliver any documents related to current or future
participation in the Plan by electronic means and/or require the Participant to
accept this Award or any future Award by electronic means.  The Participant
hereby consents to receive such documents by electronic delivery and agrees that
acceptance of this Award and any future Award may be through an on-line or
electronic system established and maintained by Southwestern  or a third party
designated by the Southwestern.

25.

Severability.  Whenever feasible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.

26.

Waiver.  The waiver by the Company with respect to your compliance with any
provision of this Agreement shall not operate or be construed as a waiver of any
other provision of this Agreement, or of any subsequent breach of such party of
a provision of this Agreement.

27.

Participant Acknowledgment.  By accepting this Agreement, the Participant agrees
to be bound to all of the terms and conditions of this Agreement and the Plan as
the same may be amended from time to time.

IN WITNESS WHEREOF, Southwestern has caused this Agreement to be executed by its
undersigned duly authorized officer as of the [___] day of December, [___].

 

ATTEST:SOUTHWESTERN ENERGY COMPANY

 

 

By:  _________________________________

 

By:  _______________________________

 

On this [___] day of [___], [___], the undersigned hereby acknowledges, accepts,
and agrees to all terms and provisions of the foregoing Agreement.

 

______________________________________

[Employee]

 

 

--------------------------------------------------------------------------------